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Out with the Old and In with the New

May 8, 2010

While the number of jobs increased last month, the unemployment rate increased probably as a result of discouraged workers seeking employment again. How can we increase the number of jobs to lower the unemployment rate?

Perhaps we can take a page out of Jane Jacobs’ book, The Economy of Cities. In it she puts forward the idea that new work comes from old work.

The example of Ida Rosenthal illustrates what Ms. Jacobs means by new work coming from old work. Mrs. Rosenthal was a seamstress in New York City. She found that by having her customers wear a brassiere, the dresses fit them better. As a result, she started making brassieres instead of reinventing the way dresses are made.

Jane Jacobs argues that new work is a result of innovation or of emerging as someone is trying to solve a problem with old work.

A city that is diverse in many industries flourishes because there are more opportunities for new work to come from old work, i.e. more jobs and economic growth. A city that is concentrated in just a few industries will stagnate because it doesn’t have much new work coming from old work. I guess you could say it puts all its eggs in one basket, so if the dominant industry fails, the city will experience an economic downturn.

New work increases basic local employment and the propensity to consume locally produced goods (“import replacement“), which results in explosive city growth because the total local employment has increased. Anyone can create new work from old work, so if everyone starts creating new work from old work, we should all be in good shape!

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