Paul Romer on what happened in Honduras

Paul sends me the following, which he describes as “a personal statement to the news media”:

Qn: Prof. Romer, are you still working with the government of Honduras on the creation of a RED – a Region Especial de Dessarrollo?  Or on what some have called a model city? 

Ans: I and the other people who were named to the Transparency Commission wrote a public letter to President Lobo stating that we have no ongoing role in the project. Personally, I have also resigned from the CORED advisory committee.

Qn: In the beginning, you were an active supporter of the RED project. What changed? 

Ans: From recent newspaper reports, I learned that the Honduran agency responsible for public-private partnerships had signed an agreement about a RED with a private company. When I asked for information, I was told that I could not see this agreement.

This was a departure from the standards of transparency that the administration had led me to expect. It was also a departure from the role for the Transparency Commission outlined in the Constitutional Statute passed by the Honduran Congress.

Qn: How can it be that a member of the Transparency Commission could not see such an agreement? Under the process set out in the Constitutional Statute, doesn’t the Transparency Commission have to give an opinion about any proposed RED? 

Ans: In December 2011, President Lobo signed a decree naming me and four other internationally respected individuals to the Transparency Commission. At the time, these appointments were reported in the international news media, in particular by the The Economist. However, the government never completed the process of publishing this decree in the Gazette. The administration’s current position is that because the decree was never published, the Transparency Commission does not exist in the eyes of the law and the five named members have no legal basis for reviewing any agreements.

Qn: Can the government create a RED if the Transparency Commission does not  yet exist? 

Ans: If the Transparency Commission does not yet exist, the administration can propose a RED directly to the Congress. The RED will then come into existence if the Congress passes an act describing its geographical boundaries. Passing an act that specifies boundaries may seem like a minor detail, but under the Constitutional Statute, it has important legal consequences.

Qn: Does the administration have to disclose the terms of any agreement that it signs with a company that will invest in or manage a RED? Does the company have to disclose the identities of its financial backers? Does the company have to disclose anything about its experience or qualifications? 

Ans: The law states that the Transparency Commission must be given all the information needed to evaluate any proposed RED. If there is no Transparency Commission, the Congress is the only remaining protection. To make sure that it is comfortable with the identities of the investors and the governance structure that the investors have negotiated in their agreements, the Congress could insist on full disclosure before it votes a RED into existence. The Congress might also want to insist that it have a separate right to approve any agreement related to a proposed or existing RED that could place a financial burden on the Honduran government. This kind of burden could arise, for example, through an agreement that lets a private party bring a claim for damages against the government.

Qn: Do you know how the misunderstanding about the legal status of the Transparency Commission came about?  

Ans: Various explanations have been offered, but I cannot be certain why the decree naming the members of the commission was never published in the Gazette. Nor can I be certain why the administration did not disclose its decision not to publish the decree.

Whatever the reasons for these decisions, the result was an important failure of transparency. The public perception, that the Transparency Commission was in operation, differed from the reality. This gave the wrong impression about the checks and balances that would be operating as the first RED came into existence.

From the very beginning, I made a commitment to the citizens of Honduras, to the members of the Honduran Congress, and to the many people around the world who wish Honduras well. I committed that I would work for their benefit and do so transparently. This means that at a time such as this I have to be willing to state to the public what I know to be true.

Paul also sends along these links (in Spanish):


Land grab? Popular in the Philippines, which I am familiar with, southeast Asia (Thailand historically, Cambodia today, Burma tomorrow). Ho-hum, routine.

Cutting to the chase, Romer's take-away is that Honduras is still plagued by the same old problems of corruption and cronies that plague most of Latin America

Considering that Romer's erstwhile partner, the current government of Honduras, came to power in 2009 in what was more or less a military coup, what exactly was he expecting to find? That Norman Rockwell painting of a town meeting in New England?

Clearly, it couldn't possibly have been related to something like this:

Here's the beginning of the news story:

A leading human rights lawyer who represented several Honduran agrarian groups in disputes with large landowners was killed by gunmen on Sunday, a land rights organization said.

Antonio Trejo Cabrera, 41, was shot five times while attending a wedding in the capital, Tegucigalpa, the Peasant Movement of the Valley of Bajo Aguan said in a statement.

Trejo was a lawyer from three peasant co-operatives in the Bajo Aguan, a fertile farming area plagued by violent conflicts between agrarian organizations and land owners. More than 60 people have been killed in such disputes over the past two years. The lawyer had recently helped farmers gain legal rights to several plantations.

Trejo had also helped prepare motions declaring unconstitutional a proposal to build three privately run cities with their own police, laws and tax systems.

Just hours before his murder, Trejo had participated in a televised debate in which he accused congressional leaders of using the private city projects to raise campaign funds.

Read more:

Evidently, land policy in Honduras is serious stuff. Did Dr. Romer really know what he was getting into?

And to think I posted about death squads when this little item bubbled up a couple of weeks. Of course, it must have been just another one of those coincidences.

Q: Why are some countries poor?
A: Bad Institutions.
Q: What do we do about bad institutions?
A: Build some good institutions.
Q: What happens when a government presiding over a country with bad institutions creates new institutions?
A: More Bad Institutions?

Not necessarily but...

I wonder what leverage the private company had!

Wow, that was fast. This might be a land-speed record for corruption.

Here is an interview with Michael Strong about his vision of free cities.

Don't know if it's true, but the buzz I hear is that in Romer's dealings with Honduras, he has acted arrogantly, has had naive and unrealistic understanding of what resources an initial project would require, and has been increasingly sidelined by the government once they realized he's an academic who cares more about his own institutional prestige than actually getting something done. This passive-aggressive posturing about Transparency Commissions is good evidence that the government was correct in estimating him as an ultimately unserious participant.

Tyler - What is your take on this?

Maybe the committee should have formed an army as a first step?

A previous American intellectual who had big plans for meddling in Honduras, William Walker, was executed by Honduran firing squad in 1859.

Dr. Romer should be glad he's out of Honduras with his life.

Land in Central America is serious stuff. The locals kill each other in land disputes not infrequently (remember "death squads"?). Naive American theoreticians should beware of how much they don't know about land disputes because it is only whispered about by the locals.

Mi casa es su casa, pero mi tierra es * mi * tierra!

This has turned into another fiasco for fashionable economics, a miniature version of how the Harvard econ department helped the oligarchs steal much of Russia's assets in the 1990s.

It's time for some soul-searching and self-criticism among economists.

I'm not holding my breath though.


Once again the world has failed to live up to the Economic models.

Mencius Moldbug's analysis of Romer's Charter Cities idea is a must read:

"What Professor Romer is proposing is exactly colonialism. What's worse - he says that like it's a bad thing. In one breath, he steals the idea and slanders its real authors. Unbelievable.

The Jedi mind trick is revealed. Professor Romer is digging up ancient chestnuts from the graveyard of history, repainting them slightly, and selling them to Davos Man as his own work. Nice job if you can get it. Would you trust this man with your daughter?

The fundamental observation of colonialism is that non-European societies thrive under normal European administration, at least in comparison to their condition under native rule. This observation was obvious during the colonial period. Since, it has only grown more so - at least, to those who can handle the truth."

I read that MM blog and it's a waste. The author writes a "War and Peace" length blog about the dangers of colonialism. Actually, nationalism probably killed more people than colonialism, and that includes King Leopold's genocide in Congo. Yes I know what I'm talking about--I travel outside the US all the time. Truth is, Romer may be arrogant, etc, but he just fell in with the wrong crowd in Nicaragua, a one-time CIA haven and strongman loving Latin Am. country, who double dealt him a bad hand. Better luck next time, and as a high-profile economist I'm sure, like a Silicon Valley serial entrepreneur, he'll just move on.

Oh wow you travel? outside of the US? All the time?! I mean this is the strongest factual based argument on the Colonialism vs. Nationalism debate I've ever read in my whole life. Thank god that the one person who is allowed to travel outside of the United States is here to crack the knowledge all over us.

I have read every word by MM on that blog and I agree that his length is excessive for the value of the ideas transmitted. But you've gotten his argument about colonialism vs nationalism precisely backward! He agrees with you!

Dude I have a hard time imagining that you actually read MMs blog considering he's an arch-reactionary who thought colonialism was just fine and dandy. What have you been reading? or rather..smoking?

@ Ray Lopez,

Moldbug is arguing that colonial government worked very well (relative to what was in place before or after). He specifically addresses the Congo - noting the development post Leopold but while still under Belgium governance. He provides some interesting links to some Time Magazine & NY Times articles which are worth reading.

He's critical of the suggestion Charter Cities are a new idea - they're essentially re-packaging the basic ideas of colonialism, which Moldbug notes was far more successful than is often portrayed.

Moldburg is arguing for a new colonialism?

So basically, total vindication of Bryan Caplan's views on charter cities to date...


Isn't it a little humiliating to have to hang out in the comment sewer with losers like Sailer, trying to get a little more attention for your demented rants?

Meng Ke

Well this was expected. And this will be the case elsewhere. In fact, one could say that there is an adverse selection problem with government motivations. Given the practically far-fetched nature of the project, governments which would agree to embrace such projects are more likely than not be motivated by desires other than national economic development. The stakes are simply too high and incentives too misaligned for the final outcome to be anything different.

More here

I am totally agree with your thoughts. Keep doing these type of work.

Comments for this post are closed