Thursday, December 15, 2011

Breaking the logjam

I mentioned some of the writers who have investigated the success of the West in my Monday post.  The importance of culture and institutions shows up in each one of their studies.  But public choice economics points to obstacles such as the likelihood of predation and we see crony capitalism all around us.  Paul Romer has taken up the challenge of trying to break this logjam by elaborating his Charter Cities idea.  He has also devoted considerable energy promoting the idea in order to bring it to fruition.

The Economist (December 10) describes the current state of Romer's quest in "City building: Hong Kong in Honduras -- An ambitious development project aims to pull a Central American country out of its economic misery.  Can it work?"

The piece describes an effort to develop a Charter City in Honduras.  This involves setting up an international "transparency commission" charged with establishing something like a Nightwatchman State and a credible barrier to normal political predation.  If that works (a very tall order), nature will take its course and labor and capital will move in.  No five-year plan required.

If it works, there could be imitators.  It could be quite thrilling.  There is nothing like tangible small steps towards a better world.  The bonus is a test of the power of ideas, free institutions and free markets.