Age of Human Capital

“In creating city success, we human beings have created marvels, but we left out feedback. What can we do with cities to make up for this omission?”
— Jane Jacobs, The Death and Life of Great American Cities

In 2016 we saw a welcome reassessment of Jane Jacobs’ work, on the occasion of the 100th anniversary of her birth. Unlike previous re-assessments (e.g., on the 50th anniversary of The Death and Life of Great American Cities, as noted in the last chapter) this reassessment did not seem to have much of a revisionist momentum. Instead it seemed to take seriously the idea that there is still a lot more to unpack, and to take forward.

In part, this may be because the occasion of her birthday was an unseemly moment to join in the ill-informed revisionism that had previously painted her as a libertarian ideologue, or a quixotic warrior against inevitable “modern” progress, or a closet racist, or an elitist who happily encouraged gentrification— depictions that were all pernicious fantasies spun by the targets of her own past criticisms. (I commented on these issues earlier.)

Perhaps, though, the greater insight on offer this time reflects a genuine maturing of the discourse, recognizing some commonality in our understanding of the nature of our challenges today, and Jacobs’ helpful role in clarifying them. In this consilience we can see strong parallels to the works of many others, including Christopher Alexander, whose work we will take up in the next section. One can also find (as I have noted elsewhere) parallels to Bruno Latour, René Thom, Alfred North Whitehead, Henry George, and a number of others.

To that list we should make the notable addition of Elinor Ostrom, whose work on commons-based economics (and culture) won her a Nobel Prize, among other accolades. Her model can best be described as a network of polycentric organizations whose business is managing a resource commons. There are strong parallels to Jacobs’ “web way of thinking” and to Christopher Alexander’s attack on modernist planning for creating “cities as trees”, mathematically speaking. (I will discuss this idea in much more detail in the next section.) Following Alexander’s work, we might summarize Ostrom’s insights as “commons governance is not a tree”.

Ostrom did express a debt to Jacobs’ insights for her own work, and the philosophical connection between them is easy to see. Aside from the web-network approach to problem-solving, both acknowledged that economic productivity is not simply about the linear transformations of inert resources within a commons, but about how human beings interact within that physical and urban commons to create and manage the transformations, whose structure is quite complex, intricate and differentiated. Jacobs’ less well known books on that economic topic are marvels of insight, building on the more directly urban insights of Death and Life.

Ostrom, too, pointed to the dangers of an overly rigid approach, a model of “governance as a tree,” and its increasing institutional, economic, and ecological failures. Like Jacobs she articulated some of the failings of current economic theory as an underlying problem for other fields — cities for Jacobs, resource commons management for Ostrom. Both of them pointed to the need for a more web-like, “polycentric” approach to governance, not only top-down, and not only bottom-up, but also “side to side” as it were, and overlapping too. This is what I discussed earlier as the “web way of thinking”, and acting. Each of us is a responsible steward of our environment, but none of us has sovereign power. On the contrary, we must share this power, and allow it to overlap at times. Occasionally it will conflict with others’ power — and then we will have to sort things out, patiently and often repeatedly.

Here is an example from a city. On a given city street, a police officer may apply top-down government by enforcing laws and citing offenders — say, a young person who is in the process of vandalizing property. But a shop owner might also be providing governance by chastising the same young person and reminding them that their parents might be informed of the misbehavior. Still other young people might bring peer pressure to bear, reminding their friend not to misbehave. The person in question might also have some reservations about the actions being considered, a form of self-governance.

All of these actions are overlapping forms of governance: formal and informal, top-down and bottom-up. At the same time, all of them are exercises of responsibility by the people involved — complementary, shared, aiming for the improvement of the condition of the parts of the city. It is the exercise of responsibility because it is literally the ability to respond — to take action as agents of the welfare of the city, at various subsidiary (and often overlapping) levels.

Jacobs argued that this kind of “polycentric governance” (Ostrom’s term) goes on all the time in cities. It is at the heart of the way a street or a neighborhood functions, forming a tissue of governance as well as interaction. Of course this kind of overlapping process is not without conflict, and it can be messy — and often is. But it is an effective process that in part relies on the spontaneous self-organizing actions of the people involved, with the aim of solving local problems and adapting to local needs. While there is an important place for top-down formal actions, that is only the beginning of the story. (I also discussed this point in the last chapter.)

This kind of overlapping structure is visible within economic processes too, as both Ostrom and Jacobs observed. The influences on the price of a good might include (overlapping) national, state and local tax structures, local market demand, demand from export markets, the capacity of local suppliers, and of course, the competition from other suppliers. Some of these actions are purely local assessments of value by purchasers and consumers. Others are broader assessments by communities and political entities — tax policy, for example. Again, these factors form an overlapping network of valuations, from which emerges a “price” at a point of exchange, i.e. within a market.

To these factors we could add so-called “externalities,” that is, costs or benefits (or other impacts on our assets) that aren’t taken into account in the current price structure, but impact someone else at some other time. Negative externalities might include future maintenance costs, government servicing costs (police, fire, streets, infrastructure etc.), damage to ecosystems, the impacts of resource depletion, impacts of pollution and greenhouse gas emissions, and many other negative impacts.

The study of externalities and how they might be better reflected in transaction costs is an enormous subject, and a very important one. It is also an old subject, going back at least to the political economist Henry George in the 19th Century. George argued that resources like land should be held in common, and their use should be taxed according to the impact on the community (i.e. the externality cost). On the other hand, human creativity should be rewarded, implying a shift away from taxation on creativity and greater taxation of resources like land. The result, many “Georgists” argue, would be to penalize depletion and waste, and reward doing more with less.

One implication is in the phenomenon of sprawl, or low-density, car-dependent development. At present, sprawl development carries many unaccounted externality costs — ecological impacts, pollution, greenhouse gas emissions, and much else. Yet the current set of economic incentives and disincentives actually rewards this sprawling form of development, and in part this results from the fact that externality costs are not taxed.

A developer who tries to redevelop, say, an urban parking lot, facies an immediate disincentive in the increased property taxes on the value the developer creates — whether or not the project returns any profit. On the other hand, a developer who goes out to the suburban fringe where land is cheap faces a much lower tax burden, and hence a lower risk. The result is that the urban parking lot stays, and the new development occurs in the (artificially cheap) suburban site. The externality costs are not well represented.

For Jacobs, this was a matter of establishing accurate feedback within the system. As she said in Death and Life, we have “left out feedback” — and this was a crucial omission. The result was that we were too focused on dead-end approaches on systems that are incapable of renewal and revitalization — systems that destroy the basis of their own ability to endure. This was, in a word, unsustainable.

Before she died, Jacobs was known to be working on a book with the subject of “the coming age of human capital”. By that she seemed to mean, an age in which we will replace the stripping of massive quantities of natural resources out of the Earth at unsustainable rates, with a no less prosperous time—indeed a more prosperous time, because it will focus on true prosperity: the ability to live a fulfilling life of creative richness, which is no longer coupled to an endless cycle of dead-end consumption. This was possible, she was convinced, because we now understood the processes required to bring it about.

The apparent optimistic tone of this work was in stark contrast to the gloomy outlook of what would stand as her last book, Dark Age Ahead. In that earlier volume (2004) she warned of the dire consequences of a technocracy run amok, and a slow collapse of the problem-solving capacities of critical human institutions. In their place would come ideologically driven retreats into simplistic approaches that were doomed to fail. This was a prophecy, but not a fatalistic one: Her point was that we do have a choice of the path ahead. But first we must understand it.