17-minute Tyler Cowen talk on charter cities

This was for Mark Lutter’s Center for Innovative Governance Research.

Comments

Looks like TC is pounding the table with conviction.

Bonus trivia: the first charter cities were, like the theory of the quantity theory of money (Copernicus), a medieval invention. Cities were catalysts of change and eventually brought down feudalism.

I can't hear the audio, reading the closed caption only, but @1:00 or so TC pronounces the tricky African country of "Niger". Brave man! How did he manage, anybody? Ny-GER, or Ny-JER? It's not pronounced how it looks, that's for sure.

The institutions without culture are not enough. And the change of culture works if a certain tipping point is reached, otherwise the new culture just get diluted and coopted by the old. This is why Alaska is anglosaxon, while Puerto Rico is totally Latin and poor. As you mentioned, immigration is key, even when immigrants come from a "wrong" culture. That is because they choose the new culture in the new place. I think that explains while Singapore grew, and Calcutta did not. Neither place was full of English, but the Asians that went to the former went there because they wanted the British institutions, it was a self-selecting mechanism. They were Asians, but culturally British. This is why, I think, start-up cities work so well compared to the attempts of changing an existing city simply grafting to it the right institutions.

BTW, this opens a fairly politically incorrect issue. Charter cities will very likely have a lower level of diversity, either because the owners will specialise in catering to a specific group and they will select the would-be citizens, or because would-be immigrants will self-select themselves. The States will use this lack of diversity as an excuse to fight against the creation of private charter cities, although the real reason for the backlash will be that they will lose the most valuable captive resources, their brightest and most industrious people.

You realize your Michael Porter "culture" thesis, like Max Webber's Protestant thesis, is unproven don't you? But you speak with such conviction! Pounding the table. That's the theme BTW, since I was first on this comments thread. POUNDING THE TABLE WITH CONVICTION. Please try to reference it into all of comments, dear readers. Thanks.

Bonus trivia: the 'real' reason the south is so poor relative to the north is Jared Diamond's geography thesis. All good habitable land (fertility, disease) lies between 30 degrees to 45 degrees latitude. Look at any world map, and notice where this land lies: USA, Europe, parts of China, Japan that are not in mountains (Tibet) or desert (Middle East). Russia, a basket case, is too far north. Now look at this band in the south hemisphere: it's all ocean except the parts of Australia that have Sydney and Melbourne, South Africa (the country, and only the very south tip of it), and parts of South America (sorry TR, but Brazil falls outside this band) like Argentina (why are they always so poor, they should be rich?), Paraguay, Chile. Nuff said...case closed.

I think Diamond gives a good explanation of why the ancient civilizations developed where they did. But I doubt that the Malthusian trap was vanquished in Western Europe because this is where goats come from, or because that weird theory about the Atlantic.

I am with McCloskey here, it was because of a cultural change built upon the Scientific Revolution and the Enlighnement.

Yeah. That's why so many Indians and Filipino are poor. You just can't grow anything there. Norway, Sweden, Denmark, Iceland, Finland. Basket cases, too far north. Case closed.

@The Anti-Gnostic - do read a map. India, PH are outside the 30-45N latitude lines. As for your exceptions to the rule, the Scandinavian countries got rich being parasites to England, also outside the zone, due to England's jump start on industrialization. And where are these countries now? Behind the USA and China, case closed.

You can't get anything to grow in India!

https://upload.wikimedia.org/wikipedia/commons/a/aa/Green_Beds%2C_farmlands_India.jpg

Or the Phillipines!

https://www.tripzilla.ph/farm-experiences-near-manila/614

Canada - basket case. Nuff said.

the Scandinavian countries got rich being parasites to England, also outside the zone, due to England's jump start on industrialization.

Huh. It's like, there's some other factor out there besides location in 30 - 45 degrees north.

...."Calcutta did not."
A poor example . Lack of growth in calcutta has very little to do with immigration.

I think it's all about institutions, but they don't exist in a vacuum, they are contingent on culture. For example, the US has many good institutions, such as constitutionally protected free speech. But if culture shifts to a point where they are no longer affirmed by the general public - e.g. physically attacking or censoring journalists is seen as a good thing - the institutions will fail in practice.

An interesting question is whether good institutions can perpetuate on a small scale without broad cultural affirmation. On a large scale, I don't think this is possible, but a local autocrat could plausibly implement a radically free society on a small scale, e.g. with surveillance and codified liberties for everyone. Of course, most real-world autocrats would not use it to facilitate the interests of others.

A place I find interesting that Tyler might consider a charter city of sorts is Barbados. It is a fairly prosperous place with a population of mostly African ancestry and English culture.

The "Hegemon style charter city" seems limited to colony relationships. I am proposing a guarantor style charter city:

While my model has not to my knowledge been tried, it seems like a viable economic model, and it is not clear Romer proposed this, however unless there is an enforceable long term hands off agreement, investors would be naive to invest:

1. The hegemon gets replaced by a guarantor.
2. The guarantor is not a colonizer, rather there is a contractual relationship where a formerly unreliable partner (nation) is buying reliability.
3. The charter city is expected to generate high profits, that get taxed at a moderate rate. The host nation and the guarantor share this tax revenue. The guarantor shares its legal system, and collects an insurance premium for enforcing the rules governing interactions between charter city and host country.
4. The host country benefits from foreign and domestic investment in the charter city, something that previously would not happen, because of a history of nationalization of businesses.
5. Furthermore, economic activity in host country beyond the charter city might increase from supplying the charter city with physical goods, utilities and/or services.

This seems like a win/win, and if colonialism/hegemon charter cities is like rape, then this guarantor charter city is like prostitution, something non religious libertarians defend.

The key is that an international framework that effectively punish the guarantor as well as host country if they try to exploit businesses or population of charter city beyond the terms of the charter. For this to work, guarantors need to be regional powers weaker than USA, Russia or China, and recognized as more reliable than the host country.

For this to work, guarantors need to be regional powers weaker than USA, Russia or China, and recognized as more reliable than the host country.

I think we've been there and done that with imperial rivals before. Any way, why wouldn't I want my guarantor to be the ones with the most nukes? And why would the ones with the most nukes cede any such role to weaker powers?

Charter cities align governance with ownership instead of democracy. Skin in the game. The CIGR needs to just drop the "democracy" talk. If democracy were this magical, universalist principle then Tyler wouldn't be at a podium talking about charter cities.

I've been predicting for some time that billionaires will start buying their own countries. Thanks to the CIGR for their efforts to prove me right.

"I think we've been there and done that with imperial rivals before. Any way, why wouldn't I want my guarantor to be the ones with the most nukes? And why would the ones with the most nukes cede any such role to weaker powers?"

As an investor, I want the guarantor to be able to kick the host country's butt if the host country doesn't follow the agreement, but I want the guarantor to be weak enough that they don't turn the charter city into a regular tribute paying colony (in violation of agreement, tributes above agreed share of tax revenues), as they risk getting swatted by one of the big tree nuclear powers.

"And why would the ones with the most nukes cede any such role to weaker powers?" It's expensive to be policeman of the world. This is not a proposed neocolonialism, this is a proposal for a regional power offsetting their military budget by charging insurance premiums to charter city investors. When everything works well, the regional power gets money for nothing. The host country gets some tax revenue it would not otherwise get. When the host country tries to renege on the agreement, by increasing taxes or nationalizing businesses, the the guarantor acts as an insurer, with the investors as clients, using might to make right. In insurance, when your company first pays you, but the other party was wrong, that is called abrogation. That is what the guarantor would do if needed.

This voluntary guarantor agreement is a way for a country to mend its past, if that past includes behaving like Argentina and its ilk that confiscates foreign businesses, and don't pay their debts.

1. By sacrificing total sovereignty over some territory, the host nation signals it is serious about not cheating foreign and domestic investors. This could be after a change from a leftist to a right of center government.
2. The investor wouldn't be rational to come, if their investment got nationalized as soon as a leftist government or a coup happened.
3. If the regional power is too strong, then it would be a bigger threat to the investment than the host country, as the guarantor is not bound by international norms.

What about Rojava as a third-type, imported culture style of charter city? It seems to be trying to implement a Bookchinian kind of libertarian socialism.

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