On Monday March 15, Paul Romer gave an impassioned presentation here of his proposal that donor countries add a new tool to their toolkit for helping the world’s poorest – the establishment of “charter cities”. As you can learn in more detail here, such cities are conceived as contracts between three parties: a poor country which provides the land, one or more rich countries which establish the rules and norms and invest in the infrastructure and entrepreneurs/residents/workers who would choose to move in to have access to opportunities for investment or work that, because of the rules, are superior to those outside the city.While many people at the luncheon seemed intrigued by Romer’s proposal, it was passionately rejected by a few on several grounds. First, the host country would be jealous of its land and its workers. Second, the cities would fill up with young male risk-takers, with no benefits going to women or children. Third, those entering such cities would not have a long-term stake and thus would seek only short-term payoffs. And fourth, such cities would deprive individuals of their human rights by forcing them to live to a set of rules they had not chosen. These critics dismissed Romer’s point that residency in the city is optional, saying that in the 21st century, city residents would eventually attain the power to change the rules. These critics seemed to believe that the possibility of eventual popular influence on the rules is a fatal flaw, which condemns any charter city to fail.First, Romer provides many analogies to his idea from the real world, including Singapore, Hong-Kong and the industrial zones of China and Madagascar. I think of how private investors and the Philippine government converted the US military base Subic Bay into a successful economic zone called Subic Bay Freeport and I wonder whether Cuba, the Caribbean Region and the US will someday benefit from a Guantanamo Freeport. The persistent success of these experminets, despite the potential that any of them could fail for one of the four cited reasons, already demonstrates that the idea is plausible.Second, think of the charter city as a multi-player game, in real time, in which the norms/rules can be changed by the players either by voting, or more plausibly by a drifting consensual change in behavior. The structure will persist provided that no player or collective of players gains more from behavior contrary to the rules, than from observing them. This will be true if the rules are self-reinforcing or if some other feature of the system rewards their observance. (The most trivial example of a self-reinforming rule would be the convention that we drive on one side of the road and not the other. Any individual driver choosing to drive on the opposite side is unlikely to survive long enough to be emulated.)As an analogy that is closer to (our) home, though admittedly a bit flippant, consider the establishment of “Open-source chess” here at the CGD. One day a chess board and chess pieces appeared in the lunch area of CGD. On the board was a set of rules which read as follows:Rules for CGD Open-Source Chess
- This chess board is reserved for group or “open-source” chess. People wanting to play an individual game should use their own board.
- Anyone can play.
- Any individual player can make a move no more than once a day.
- Once an individual player has moved a White or Black piece, that player is honor-bound to play only on that same “team” until the end of the game.
- A card next to the chess set indicates whether the next move is for the Black team or the White team. After you move a piece for the designated team, TURN THE CARD OVER.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.