More on Romer’s Great Folly

"You too can have this city, if you just purchase a simple, easily applied set of rules. Retails at $49.99"

Reader Adam alerted me to a piece in The Atlantic on Charter Cities. Long-time readers will know I’m profoundly critical of Paul Romer’s ahistorical, acultural thinking on the idea, which reveals a basic lack of understanding about how cities, migration and laws actually arise and work.

The article is full of badly reasoned logic, too. It says that Romer has been criticized for his Charter Cities idea, but then defends him by saying that he came up with New Growth Theory. So what? Clever people have stupid ideas sometimes, and people who are expert in one field might turn out to be ordinary or worse in another.

A lot else in the piece, some of which comes direct from the mouth of Romer worries me. Here are a few quotes, the first of which Adam pointed out in his e-mail:

“In a sense, Britain inadvertently, through its actions in Hong Kong, did more to reduce world poverty than all the aid programs that we’ve undertaken in the last century,” Romer observes drily.

This is the closest that Romer comes out advocating colonialism outright. Never mind that my earlier criticism pointed out some of the hundreds of holes in his story about how Hong Kong came to be so successful, Romer is decided: Britain made Hong Kong successful by importing new rules. The fact that Hong Kong’s legal code took something close to half a century to evolve, and a further 20 years to be enforced correctly, is completely ignored. I know – my family are all lawyers, and some have been key players in the evolution of that legal code and witnesses to the creation of a police force and institutional structure to enforce it.

“Anything that involves land can be manipulated by people who want to rise up against a leader,” [Romer] began. “You have to find a place where there’s a strong enough leader with enough legitimacy to do this knowing that he’s going to get attacked. It narrows the options quite a bit. But we shouldn’t give up without trying a few more places.” In short, a disappointment with one client is no excuse for failing to pitch other ones. Any entrepreneur knows that.

So, in other words, the only kind of places where a Charter City might actually work are where the Government is strong, has a legitimate leader, and able to resist opposition. Sounds like the kind of Government that least needs a foreign power to come in and govern a city for them.

When you listen carefully, you realize that much of what Romer is saying should not be controversial. A few development economists argue that geography is destiny, but most share Romer’s conviction that decent rules are paramount.

Another worrying statement. The problem is not that economists think that rules are important. The problem is that they are not independent entities. They do not exist in a vacuum, apart from the culture, history, geography, and so on they relate to. Romer’s approach is wrong not because he thinks rules are important or that countries should invite rich Governments to enforce them, but because Romer thinks he already knows the rules, and that they can be imported anywhere. That’s not how it works. In a recent post I pointed out how different rich countries are from each other. That’s partly because their rules, evolved over hundreds of years in some cases, are specific to each of their own contexts. Romer doesn’t see this. He just sees the rules of today, and imagines that they can be peeled off a society and pulled over a new one, like a one size fits all t-shirt.

Finally, one of the old clichés:

But when African teenagers do their homework under streetlights, isn’t Romer right to think the unthinkable?

Romer is right to think outside of accepted conventions, of course. But when his ideas are so misshapen, so at odds with the reality of the world, no amount of poverty in the world justifies their continued advancement.

7 thoughts on “More on Romer’s Great Folly

  1. Justin Kraus

    June 14, 2010 at 12:04pm

    I too am extremely skeptical that Romer’s idea would work. Simply following the “rules,” even if we take for granted the dubious assumption that there is a one-size-fits-all set of them, almost never works. And the apparent parallels to colonialism are disturbing.
    However charter cities wouldn’t be neo-colonialism because they would only occur with the buy-in of a national government. And that is not a trivial distinction.
    I figure if Romer is able to find an interested country, and perhaps more challenging, and interested governor, then it will be an interesting experiment that shouldn’t be shot down before its even tried. There are moral issues when starting any development project, and Charter Cities would be no exception, but I don’t see them as drastically more serious compared to many of the other Aid projects we do. Let a thousand flowers bloom….

  2. Adam

    June 14, 2010 at 12:30pm

    Justin – that presumes that governments fairly and accurately express and carry out the wishes of a country’s people. Which is a pretty long shot, even in democratic developing countries and let alone the rest. That’s precisely why, according to the Atlantic piece, the Madagascan government got overthrown: because people objected to the Daewoo deal, undertaken by the government and without broad consent.

  3. Justin Kraus

    June 14, 2010 at 1:28pm

    Adam- There is no presumption. The Aid industry already works with, makes deals with, corrupt and unrepresentative governments all the time. You have to if you want to help the people in those countries. Charter cities are just another development idea, one that I think has a low chance of success, but not one that is uniquely morally troublesome.

  4. Ranil Dissanayake

    June 15, 2010 at 7:13am

    Justin – I quite agree it isn’t colonialism, since it’s requested rather than imposed. This is completely correct. However, Romer’s reasoning seems to be very sympathetic to colonial ideals, among them the same sort of patronising attitude that the quaint, incompetent (Africans/South Asians/South Americans – delete as appropriate) can’t quite keep the side up and they need the steady, even hand of the Brits, Americans or whoever. There’s also the very strong implication in the Atlantic piece that it’s the power of compulsion of the ‘lawgiver’ in the Charter City that provides its strength. Sovereignty will be removed from the areas under question, and that also holds colonial overtones, regardless of the process through which the foreign power arrives. Don’t forget, in many colonized countries some of the leaders welcomed foreign entry, either for want of options or to shore up their own power. The same could easily happen again.

    For example, had Daewoo had already secured the land and started work on it before the Government was overthrown, how likely is it that South Korea would have given him significant military support to protect their investment?

    Adam / Justin – On principle, I think Justin is right on this one, but it’s not a matter of principle, but scale. Most aid projects, if failed, will not make people much worse off, and affect only a small number of people. Charter Cities are quite likely to go horribly wrong in my opinion, and also will involve the uprooting of many hundreds of thousands of people to provide the workforce. Migration is not easily undone, so he needs a *far* higher burden of proof than normal.

  5. Adam

    June 15, 2010 at 6:26pm

    Ranil – agreed, which is precisely why it’s neo colonialism and not straight up colonialism!

  6. Sam Gardner

    June 15, 2010 at 10:42pm

    When I first heard about charter cities, I thought is was too looney to give it a second thought. Time is limited, and you must pick your fights. However, sometimes ideas get traction and it is too late to denounce the naked emperor.

    Indeed, plenty of simple, straightforward ideas that work in development, so there is no need to resort to high risk ideas. Why not simply start with more local autonomy and build the capacity to manage it? I quite like the idea of city states.

  7. D. Watson

    June 22, 2010 at 6:56pm

    I haven’t looked into the details, [but/and so] the migration issue seems to concern you more than it does me. I viewed at it as a “build it and they will come” issue – to the extent it works, more people will move in and to the extent it flops, people move back out. Could you please comment a bit more about your migration concerns?

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