Jeune Street

Paul Romer's TED talk is now up:



Romer provides the gist of Charter Cities idea on his blog:

Imagine that the United States and Cuba agree to disengage by closing the military base and transferring local administrative control to Canada. Canada works with Cuba to draft a charter for this special zone and promises to enforce its terms. Under this charter, a new city blossoms. ...

To help the city flourish, the Canadians encourage immigration. It is a place with Canadian judges and Mounties that happily accepts millions of immigrants. Some of the new residents could be Cuban émigrés who return from North America. Others might be Haitians who come work in garment factories that firms no longer feel safe bringing into Haiti. The new city gives the Haitians their only chance to choose to live under a system of law that offers safety and opportunity.

Initially, the government of Cuba lets some of its citizens participate by migrating to the new city. Over time, it encourages citizens to move instead to a new city that it creates in a special economic zone located right outside the charter city...

With clear rules spelled out in the charter and enforced by the Canadian judicial system, all the infrastructure for the new city is financed by private investment. The Canadians pay for the government services they provide (the legal, judicial, and regulatory systems, education, basic health care) out of the gains in the value of the land in the administrative zone. This, of course, creates the right incentives to invest in education and health. Growth in human capital makes income grow very rapidly, which makes the land in the zone even more valuable.

The whole idea is based on two assumptions about economic growth that are increasingly influential. The first is that market economies need strong, fair, predictable, and preferably democratic institutions. The second is that knowledge and human capital are the true mainsprings of economic growth.

What I find especially appealing about the proposal is that it assumes that nationalism is in decline and that the power dynamics of international relations can be put aside in the name of rationality and economic pragmatism. I only wish this were the case. But somehow I think that without a multilateral regulatory institution there would not be a sufficient level of public trust to sustain these economic experiments. Furthermore, people just don't like being governed by foreigners.