Charter Cities, Economic Incubators from the Ground Up

The charter city concept is a model of urban development seeking to start new cities within developing countries that foster rapid economic growth. By establishing autonomous zones that operate outside the normal policies and regulations of a given nation, the hope is that these environments would create unprecedented opportunities for business and government to experiment with forward-thinking solutions to the common problems faced by cities today – distribution of wealth and funding, smarter infrastructure, environmental concerns and security. Think of them as incubators for innovation on a large-scale.

While the idea is rather radical theory, it is not completely without precedent. The city of Hong Kong when under British rule is one early example put forth by proponents that provides compelling evidence for potential success.

Economist Paul Romer recently left his tenured position at Stanford to devote his time to this challenge full-time. He recently sat down with the NY Times to offer his thoughts on this different approach to development.  We felt this was one of the more telling exchanges:

Q: You have argued that new cities can speed up growth in the developing world. Aren’t the cities that the world needs springing up naturally? Why do we need the construct of a charter city to encourage faster or better urbanization?

A: Economists tend to assume that societies will naturally adopt good rules. If that were true, societies would put in place the rules needed to get the gains from a city and well-run cities would indeed spring up.

The evidence suggests to the contrary that many societies are stuck with bad rules. Moving from bad rules to better ones may be much harder than most economists have allowed. The construct of a charter city is a suggestion about how we can change the dynamics of rules. It is a way to speed up the rate of improvement in the rules.

Romer’s recent TED Talk on the subject follows below:

NY Times: Can “Charter Cities” Change the World? A Q&A With Paul Romer

[image via skyseeker on Flickr]