Sunday, May 10, 2015

Charter city rules

Paul Romer has long argued the case for "charter cities". There is a growing (and unmet) demand for urban living, especially in poor countries. How can "start-up cities" help?  If they are able to offer and enforce rules that respect private enterprise and property, they are likely to attract labor and capital -- and to thrive.

It is important that these rules allow the operation of flexible land markets. Cities can be "engines of growth" as long as labor and capital are able to seek and find propitious locations. What does this mean? We are used to simplistic definitions of location, e.g, journey-to-work, distance from CBD, etc. But these will not do. People and business interact with many others. And they interact in complex ways. including via physical and electronic access. Physical access can by via a variety of transportation modes.

People and businesses manage a variety of networks -- and they choose sites and networks simultaneously. Flexible land markets are the only way to accommodate all this.

In fact, transactions costs evolve -- as networking options expand. Networking and location choices will change accordingly.

The current mode of land use planning is quite the opposite.  It s guided by top-down "visions" of how land use arrangements ought to look and evolve. Any such visions are clearly inappropriate.  The complexity to be managed is far beyond the ken of top-down planners.