Arnold Kling vs. Paul Romer vs. Bruno Leoni
Arnold Kling writes:
Paul Romer, in presenting his idea for charter cities, makes it sound as though we can take rules “manufactured” in, say, Canada, and export them anywhere in the world. Leoni would say that instead most law is embedded in social customs In fact, my daughter who just spent the summer in Tanzania, says that the custom of seeing law as something that ought to be obeyed is not nearly as natural there as it is here.
Not quite. Romer seems quite cognizant of the fact that you can’t just take Senegal’s legal code, replace it with Canada’s, and expect things to be peachy. If you’ve watched Romer’s TED talk, you’ll recall the image of those African students, all of whom probably have cell phones, studying under streetlights. The reason these students don’t have power in their homes is because of price controls that disincentivize power companies from supplying more people with power . And Romer notes that the political class in these countries is aware that these laws suck, but can’t change them because there are existing, entrenched interests that benefit from the existence of these laws.
Deng Xiaoping was facing the same situation. He went to places like Singapore, and saw that Communism didn’t work. But rather than replace communism with another system in one fell swoop, he created special economic zones where people could self-select to try a new system, and over time, there was incremental reform throughout the country in the direction of more economic freedom and respect for private property. Customs may not interchangeable, but they can evolve over time.
Romer wants charter cities to be built on uninhabited land for a number of very good reasons. One of them is that he sees them as a kind of intentional community – a city in which people self-select to try and live under a new set of rules. It’s because laws cannot be easily exported that Romer is trying to create new jurisdictions to experiment with new laws, rather than trying to convince leaders in established jurisdictions to adopt better laws.
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But if part of these rules include generous European-style social safety nets, then selection may be adverse instead of advantageous. Romer manages to defend charter cities as not being neo-colonialism, but unless some serious positive selection for migrants takes place, I am not certain that they can succeed in creating foreign institutions any better than the colonizers did.