Posted by: graemebird | December 9, 2006

Business Incubators

Hernando De Soto… Talking about something entirely different said this at the Heritage foundation:

“Third, it means looking at other disciplines besides economics, because it’s also our feeling that a lot of economics has become very number-oriented, very statistically oriented, and other disciplines might give us a lead as to where we could go and where we should go.

One of the things that captured our imagination was the question “Where was life born? Where did organic evolution begin?” That opened our eyes to a variety of things that we found useful for thinking about the origins and evolution of markets, because, essentially, what Einstein and even Darwin have told us is that the universe can be a sort of mindless vacuum.

…. It can be very overwhelming. The universe itself doesn’t produce life—that is essentially what Darwin said; life, on the contrary, is produced in enclosures. The universe is too big. The second law of thermodynamics, which is probably the clearest law in physics, actually says that the universe is gradually deteriorating into disorder; it’s decaying.

The only places where you can put life and get organization going, get complexity into place, Darwin said, were small places. He talked about “warm little ponds.” Probably life, he said in a letter to a friend, was born in a warm little pond.

Somewhere along the line somebody said, “It may have been, actually, not a warm little pond; it could have been an oily bubble on the shallow waters of the ocean.” Somebody else says, “No, maybe it could have been cracks in the subterranean rock or geothermal vents on the sea floor.”

Even Aristotle ventured into that field. He had two hypotheses, which didn’t actually work out. He said that fleas were born in accidental pockets of dirty laundry and that mice were born, probably, in little heaps of wheat. But the common idea was that the beginning of life requires small spaces.

In other words, humanity or life requires degrees of concentration. We see it from an enclosure, from a smaller place, and that’s how we put it together. This inspired us to think of the origins of markets differently, that you catch the market from a smaller enclosure. You catch the market from something more encapsulated.”

You can also get the entire seminar on video at the Heritage foundation archive.

Now it is usually better just to stop what you are reading now and listen to whatever Hernando has to say. But I want you to compare the above to a link Rafe left at Catallaxy:

“In other words, Sandy’s work shows that markets, the division of labor, and the division of knowledge originate in cities. Many abstractions that we study in economics are spatially related to the development of urban centers.

“The existence of trust and its link to the development of market relationships is also crucially dependent on the emergence of cities. Moreover, as Jacobs said, cities are to be seen as incubators for new ideas, i.e. entrepreneurship. Only cities offered the mix of institutions, social capital, and networks that would enable individuals to discover and exploit opportunities for investment and trade.”

And now here is something that I wrote at Catallaxy, which will show what I’m driving at here:

“I think its your fixed costs that force you to work more then you otherwise might.
Whereas your marginal revenues might incentivise you to work more.
Fixed costs might include your mortgage or rent, your food.

Marginal revenue is going to depend somewhat on your marginal tax rate.
If we raise the income tax threshold some folks might choose to work less hours.
If we cut the top brackets some folks might choose to work more hours.

If we aren’t in so much debt and our housing costs are a lot less a lot more couples might be able to get by on 1 full-time job or one full-time and 1 part-time job.

If there is a greater availablility of part-time work and a freer labour market, and as well we have brought fixed living costs way way down then many people might choose to work part-time when working on some project or studying, or work full-time when accumulating funds and they may be easily able to jump from the one situation to the other.

For social, artistic, business and scientific innovation what we need is massive spaciousness in high-rise.

So that massively spacious apartments are eventually so cheap that people can sustain them and work part-time.

This is when you can have two spare rooms just for one business project.
Or some part-timer can have a recording studio.
Or a make-shift lab.

Maybe he puts it altogether on a full-time wage.

Then he goes to work with all this extra space and second-hand gear that he’s hoarded-like-Smorg.

And he can sustain it with a part-time wage.
This is when we can get to a massively innovative society such that we might look at ourselves against the Athenians and not feel like total crap in comparison.”

I see cheap and spacious high-rise in the context of being close to all the things a city can bring as the ultimate business incubator. For this and other reasons, while one would normally want as much authority to go to local government as possible I say that here we have an exception.

I think there ought to be a total nationwide ban on height restrictions to buildings. Height restrictions on buildings are a form of cold evil that cannot be tolerated.

I can remember as a kid our class being put on buses and taken out to see the forestry. These guys showed us how they were reclaiming sandy land with lupins. And then at another section they had tied with string a fast-growing plant against the pine sapling.

And the idea was that this would force the little pine to compete for the light. And the two tiny trees would grow upanup trying to outcompete eachother for the light.

Now without government and especially local governent mandated restrictions on buildings maybe we can manipulate just this sort of competition between neighbours.

The anger that a neighbour gets when you try and build on your place can subside when he realises that:

1. All that nastiness is not going to get him anywhere and he ought give it up before he starts.

2. He gets a land-tax reduction if your building expansion affects his land value.

3. It is generally regarded as his social duty to respond by outcompeting you to see who can get a clear view of the surrounds. That is to say who has the highest Penthouse.

Now it might be something in the way of things that high-rise would naturally have become chronically over-supplied by this sort of process.

But it has to come out of this sort of thing. It cannot come out of a government-sponsored gigantism. That would wreck everything.

But eventually big spacious sky-houses may become the normal thing under such a competitive regime.

These are the ponds of innovation that we might have in the big city.

And if a new Eli Whitney arrives in town on the bus there ought to be no reason why he cannot have a part-time job and a workshop with second-hand-gear on the 30th floor within two or three years.

And still have enough room for the table-tennis table and to shoot a basketball through a hoop when he’s trying to think.

We don’t need any government-subsidised business incubators. We just need to do the right thing. And follow JUSTICE in all our social decisions.



  1. we need some height restrictions. Graeme. What about aeroplane flight paths?

  2. btw Graeme
    are you turning up to the dinner for skeptic or the blogbash after or both or neither? you dissing us, fella? not even a reply.

  3. Thats a feeble excuse.

    In any case thats not a restriction on the basis of height. Thats a restriction on the basis of the idea that the plane might crash.

    Where would such a thing be applicable?

    It might be applicable in some very minor areas.

    But it ought to be disregarded in most cases. And the land tax for the airport reduced if it affects the value of their land just like everyone else.

  4. Don’t know about the Blogbash yet.

    I said something to skeptic about it.

    Might show up at the hotel later on.

    Not likely to show up to dinner.

  5. It’s on a Saturday. You’re working? Too bad, the dinner is the one where all the libertarians will likely turn up. Though you’re more likely to meet Edney at the bash.

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