Henry George and Jane Jacobs on the Sources of Economic Growth

• Published date: 01 May 2015
• DOI: http://doi.org/10.1111/ajes.12103
• Author: William S. Peirce
• Date: 01 May 2015

Henry George and Jane Jacobs on the

Sources of Economic Growth

By WILLIAM S. PEIRCE*

ABSTRACT. Henry George and Jane Jacobs shared a remarkably similar

vision of the economic functioning of cities and of the sources of the

economic growth of cities, despite having differing primary objectives.

George wrote Progress and Poverty and subsequent works to persuade

the public of the equity and eff‌iciency of public capture of economic

rents of land and other natural resources and elimination of taxes on

labor and capital. Jacobs acquired fame for The Death and Life of Great

American Cities in which she challenged the prevailing orthodoxy of

the urban planning profession. Both saw the density and diversity of

economic and cultural activities in cities as a facilitator of innovation

and entrepreneurship in all aspects of civilization. Both also recognized

the power of the price system in coordinating the activities of

independent decision makers and the importance of trade for

economic growth.

Introduction

Jane Jacobs did not read Henry George’s most famous book, Progress

and Poverty, but apparently she relied on misleading secondary sour-

ces. Had she read Henry George, the intelligent and perceptive Jacobs

would not have said:

Henry George, reasoning from the premise that land is basic capital and

basic wealth, asserted that all prof‌its made in cities derive from the value

of city land. Of course the peculiarly high value of city land does not

derive from anything inherent in the land, but from the concentrations of

work upon city land. (Jacobs 1970:119)

*Professor Emeritus of Economics, Case Western Reserve University. Peirce has

taught and published widely, including books on technological change, bureaucratic

behavior, and energy economics, and has served on the boards of the American Insti-

tute for Economic Research and the Robert Schalkenbach Foundation.

American Journal of Economics and Sociology, Vol. 74, No. 3 (May, 2015).

DOI: 10.1111/ajes.12103

V

C2015 American Journal of Economics and Sociology, Inc.

She would have learned that George, after discussing the growth of

economic and intellectual power in a city as population grows, observed:

The most valuable lands on the globe, the lands which yield the highest

rent, are not lands of surpassing natural fertility, but lands to which a

surpassing utility has been given by the increase of population.

(George [1879] 1956:242, BK IV, Ch 2)

She would also have learned that her view of the sources of eco-

nomic growth had much in common with those of Henry George.

George devoted his career to advancing social justice. In his view this

meant leaving in the hands of individuals the fruits of their own labors,

while devoting to common purposes the economic rents attributable to

land and other natural resources. George is bestknown for his goal and

technique of socializing land rents by imposing a single tax on the

value of land. Casual readers of George’s best seller, Progress and Pov-

erty (1879), as well as anyone relying on the bulk of the secondaryliter-

ature, might not grasp that the solid economic reasoning on which

George built his support for land value taxation relied crucially on an

understanding of economic growth that is consistent with that of Jane

Jacobs and the modern economists studying technological change. The

formal marginal analysis that was emerging as George wrote, and that

came to dominate American economics during the following century,

left little space for the study of technological change, so many of Geor-

ge’s insights on economic growth went uncelebrated by the profession.

Jane Jacobs gained fame for her analysis of cities and how they func-

tion. Her f‌irst book, The Death and Life of Great American Cities

(1961), was a best seller that generated enormous controversy in urban

planning circles and among others interested in cities. Her battles

against the “bulldozer renewal” of Robert Moses and the “city beautiful”

school of urban planning attracted much attention. Her stress on the

physical structure of cities, on the length of blocks, the width of streets,

and the density of population was motivated not just by concerns for

livability and safety, but also by an analysis of the economic functioning

of cities. Her detailed analysis of how innovation happens and the con-

sequences for cities and nations provides the f‌ine-grained detail that

complements George’s focus on the macroeconomic results. Both point

to the same characteristics of cities in advancing technology.

George and Jacobs on the Sources of Economic Growth 511