Rethinking the city means rethinking economics 

We have become accustomed to talking about economic disruptions in recent years. 

Disruption of the taxi industry by Uber and of the hotel industry by Airbnb. Before that, we had the disappearance of film processing stores and music record stores with the arrival of digital photography and music. With digital technology the marginal cost of producing music or photos is effectively zero. After the capital outlay, there are no ongoing costs apart from maintenance. 

Renewable energy and electric vehicles are zero marginal cost technologies. What would a zero marginal cost economy look like? 

Imagine a global network of 3D printers creating any product or part that was needed on demand. This would eliminate the need for mass production, warehousing, complex global distribution chains and retail outlets. The sale would occur online, with the blueprints then securely transferred directly to the consumer’s nearest 3D printer. 

Sounds fanciful? This is how Amazon disrupted the book publishing industry.

Conversations in relation to economics are often quite abstract. We hear highly technical concepts applicable at national or global scales to be acted on by governments or central banks. 

Actions open to individuals or communities appear limited and we might imagine that our role is limited to advocacy, hoping that someone with the power to act will listen to us.

Yet, at its most basic level, economics is about how we organise ourselves to satisfy our needs and wants. This is not an abstract concept. It relates to the structure and arrangement of our cities; the spatial relationship between living spaces, work spaces and their connection to food, water, energy and other resources needed for surviving and thriving. 

This article describes how the organisation of economic activities and the choice of what activities are necessary determines the organisation of our cities, towns and villages. 

A question of size

These different scales – cities, towns and villages – are one aspect of the question of organisation. 

What is the optimal scale of settlements? A shift from an economy dependent on industrial scale mass production to a zero marginal cost economy enables a corresponding shift from large scale cities in which individuals and communities are powerless, to a much smaller scale at which individuals and communities are connected and empowered. 

This means that human settlements ought to be smaller, with a discrete community that negotiates, collaborates and works together.

Great complexity can still be achieved by replicating these regenerative settlements to create a network, rather than by increasing their size and power relative to other settlements. Complexity is best achieved through organic networking, not excessive growth. 

This idea of a network of regenerative settlements could also be imagined as a network of cells within a body. The cells of the current city structure are households fenced off from each other. 

If instead the cells or building blocks are local communities, then the body of the larger society would be made up of networked cells that are structured as regenerative settlements.

Leaving the extractive mindset behind

Beyond the question of scale, we also need a shift from an extractive to a regenerative mindset. 

An extractive mindset translates into a centralised city structure. According to this mindset, the centre is more important than the areas outside the city. Resources are drawn from the natural environment outside the city to support the city economy and to build its structures and infrastructure. 

Waste is discarded outside the city. Labour is drawn in from the outer suburbs and surrounding areas, also to work in, and grow, the city economy. Any impacts on the rural communities, other communities on the periphery and the environment are referred to as unfortunate externalities and are not properly accounted for.

A new economy must be regenerative and distributed. Human settlements should therefore also be distributed in the landscape and designed to work within the limits of the local environment of each place. Whereas an extractive mindset simply implies taking what you need, a regenerative mindset requires that we take no more than we give – this is the circle of life.

This vision of future cities as a network of regenerative settlements may be interesting but the real challenge is getting from where we are now, to where we want to be. 

So what are our options?

The New Economy Network Australia (NENA) brings together many diverse perspectives of people interested in creating a new economy. 

There are many different critiques of the current system and even more suggested solutions. I argue that the various critiques simply identify different symptoms of a failed system, while the various solutions contribute different aspects of the design of a new system. 

Somehow, we need to synthesise these ideas and bring their advocates together.

Let’s begin with what I consider to be the two most important critiques of the current economic system – ecological economics and feminist economics. 

Ecological economics argues that ecosystem “services”, which are used as resource inputs and as waste sinks, are not properly valued in our current economic system. 

Feminist economics argues that services provided by people within the household and within local communities are not valued. These services, including household management, care services and community volunteering, underpin the entire economic system. 

Both of these critiques indicate that mainstream economics is too narrow and fails to acknowledge and value the contributions of certain essential parts of the whole system. 

Environmental degradation and social inequality are therefore not separate issues but two symptoms of a systemic problem. We need a new system that is designed for social equality and also acknowledges our dependence on ecological systems. 

We are not just all connected, we are all part of one system. 

The creation of a new economy must be about thinking in systems, including connections between people and activities. It must also work at different scales; at the individual, local community, bioregional and global scales. 

This brings us back to our vision for a network of regenerative human settlements. How do we design such places?

Start local and scale outwards

Literature by Herman Daly in relation to the steady state economy suggests that to work within ecological limits implies that we must “sustain a constant, sufficient stock of real wealth and people for a long time”. 

Ecological limits, though, are dependent on the geographic and climatic conditions of a locality. To apply this approach in a vast continent like Australia, with its dramatic ecological variations, would be near impossible.

 If we were to tackle the task, the first step would be to divide the continent into its many bioregions and then determine the ecological carrying capacity of each. 

The task could be dramatically simplified if we reversed the problem. Rather than building a different economy from the top down, or from the grand scale to determine local implications, we could build it from the local scale outwards. 

Rather than asking how settlements would be structured in a different economic system, we ask the opposite question. How might a disruptive and replicable model for building regenerative settlements enable the development of a new economic paradigm? 

If the building blocks of our society are regenerative and designed as systems, then that should be the character of the larger economy. 

As the goal of a steady state economy is to sustain a constant, sufficient stock of real wealth and people for a long time, the goal of our land development process would therefore be to create places that sustain a discrete population in their local environment for a long time.

A steady state economy refers to a balanced system that does not depend on economic growth. 

This zero-growth economy can give the unfortunate implication of a flat-lining society where nothing is happening. Steady and stable with no opportunity for growth and aspiration. 

While the vision of a steady state economy is precisely what we should strive for, the narrative is counter-productive. The literature does include suggestions that a steady state economic system would be dynamic, just like ecological systems, yet the term itself – steady state – is unappealing. 

The circular economy is more compelling terminology

In contrast, the circular economy has captured the popular imagination. 

It expresses the dynamic character of the economy proposed by steady state economists, while the principles of the circular economy – systems thinking, life-cycle planning and striving for zero waste – are entirely consistent with a steady state economy. 

The circular terminology is useful because there is growing momentum among business groups and various mainstream institutions around a suggested transition from a linear to a circular economy, also providing a clear and concise narrative for the transition. 

Community scale regenerative settlements also respond to the critique of feminist economics. 

By expanding the basic units of society from the scale of the household to the scale of a community, we can take down the fences and be more deliberate about designing for spaces where people can connect. 

By integrating food, water and energy systems with living and work spaces, we create places in which people can work together to satisfy their basic needs. By designing for a discrete population, say 150 people, it is possible to estimate demand and plan for an abundance. 

This should be distinguished from visions of simple living offered in sufficiency economy literature, although determining how much food, water and energy is sufficient for this population is the necessary first step. It is essential that we shift away from a scarcity mindset that fosters fear, to a mindset of abundance.

As we regenerate the land, enhance the water cycle, improve soil volume and health, while also building up ecosystem diversity, we create abundance. 

This abundance also implies an oversupply of these basic needs, driving their local price towards zero, effectively creating a local gift economy for these basic needs. 

This is a zero marginal cost society. Instead of offering a universal basic income as a response to the loss of jobs due to automation, we could instead create places where our basic needs are provided in exchange for work but not for money.

Changes in our economic system will inevitably continue. Protecting the old system is not an option as it is less efficient. 

The only question is whether we fear change or embrace it and, consequently, whether we are disrupted by change or manage the transition to a zero marginal cost society; an economy, society and environment that works for all, while resonating with the rhythms of the living planet.

Steven Liaros is a town planner and director of PolisPlan. He is currently undertaking a PhD project to create a new model for regenerative land development based on a circular economy and as an organisational principle for building resilient and globally connected, local communities.

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  1. Thanks Philip,
    Before the 20th century, economics was called Political Economy, indicating the interdependence of economics and politics. As such, systems of governance are a central consideration. Both Adam Smith and Karl Marx wrote about Political Economy.
    Similarly, the city consists of public and private spaces in relationship with each other, while public investment supports private development and private contracts are couched within a public legal system.
    In Ancient Greece, the term economia, meant ‘management of the household’, the private domain where natural needs were satisfied, while the politia, the political domain, required citizens to step outside their household, think beyond their natural needs to consider the collective good.

  2. Great article highlighting the importance of economics in shaping our cities. At the same time governance (political) needs to be brought into the discussion. Like the US, our federal/ state political structure ties economics and politics together.

    In our case the so called ‘fiscal imbalance’ (as highlighted by Marcus Spiller and others – refer Australia’s Metropolitan Imperative CSIRO 2018) is even more pronounced as only the Commonwealth can impose income tax. This gives the federal level very significant influence over city infrastructure funding etc. This tends to focus attention on very large infrastructure projects rather than say funding many local projects that could have a similar or superior cumulative impact.

    So regardless whether one supports ‘static state’ or circular economy models, it’s fundamental that alternative models consider all three dimensions of our cities; economics, governance, and urban planning/ design – or to put it more crudely – Money, Politics and Design