Tuesday, May 19, 2009

Paul Romer's Many Hong Kongs

I just got this from Stewart Brand, who organizes lectures at San Francisco's Fort Mason. Romer is suggesting that less developed countries contract with capitalist nations to set up Hong Kong's for them. What about the alternative, having capitalist nations let us set up little socialist republics to demonstrate an alternative system.

This talk was the first public launch of an idea that Romer has been working on for two years.

His economic theory of history explains phenomena such as the constant improvement of the human standard of living by looking primarily at just two forms of innovative ideas: technology and rules.

Technologies rearrange materials with ingenious recipes and formulas. More people create more technologies, which in turn generates more people. In recent decades technology has enabled the "demographic transition" which lowers birthrates and raises income per person even higher as population levels off.
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Rules structure the interactions between people. As population density increased, the idea of ownership became an important rule. A supporting rule for managing violations replaced the old idea of deadly vengeance with awarding damages instead: simply shifting value replaced destroying value. For the idea of open science, recognition replaced ownership as the main event, which means that whoever publishes first is most rewarded, and that accelerates science.

Rules can amplify or stifle technological progress. China was the world leader in inventing new technologies until about a thousand years ago, when centralized dynastic rules slowed innovation almost to a stop.

Romer notes that business keeps evolving as new companies introduce new rule sets. The good ideas are copied, and workers migrate from failing companies to the new and old ones where the new rules are working well. The same goes for countries. Starting about 1970, China took some of the effective rules of Hong Kong (which was managed from afar by England) and set up four special economic zones along the coast operating as imitation Hong Kongs. They worked so well that China rolled out the scheme for the whole country, and its Gross Domestic Product took off. "Hong Kong was the most successful economic development program in history."

Romer suggests that we rethink sovereignty (respect borders, but maybe import administrative control); rethink citizenship (support residency, but maybe import voice in political affairs); and rethink scale (instead of focusing on nations, focus on cities---on city states like Hong Kong and Singapore.)

Paul Romer proposes that developing countries could invite instant Hong Kongs---new cities in new locations run by experienced governments such as Canada or Finland. They would enrich the country where they are built as special economic zones while also rewarding the distant government that makes the investment of building the new city state and installing a set of fair and productive rules. Over time, as with Hong Kong, the new city is turned over to the host country.

The idea is getting some traction in the developing world. This summer Romer is going public with a Bridge Cities Institute website for further exploration and eventual application of the idea.

One miracle of cities is that they sometimes renew themselves brilliantly. This could be a whole new form of that.


8 comments:

hapa said...

i had a similar idea a few years ago to cure brain drain by (carefully and thoroughly) franchising fancy rich-world colleges into poorer countries -- with distance learning, even! and the same admissions standards! -- so, i think the cities idea will work.

Anonymous said...

"Romer is suggesting that less developed countries contract with capitalist nations to set up Hong Kong's for them."Hong Kong? Where the state owned all the land? With public housing, education, medical, and social welfare services? And, on the less positive side, it was a (liberal) dictatorship in which business interests had a predominant influence in advising the bureaucracy...

C.12 Doesn't Hong Kong show the potentials of "free market" capitalism?"What about the alternative, having capitalist nations let us set up little socialist republics to demonstrate an alternative system."I doubt it, as they will not even support co-operatives within the capitalist economy. Why should they fund experiments which show they are not needed?

More to the point, I think its significant that they do not fund little free-market capitalist regions. After all, if laissez-faire capitalism benefits everyone they should make massive profits from being the landlords of such an experiment....

Iain
An Anarchist FAQ

Shag from Brookline said...

Is this colonialism disguised as globalization? Is this a win-win or zero sum game? Is this a globalization of Joseph Schumpeter's creative destructionism of capitalism? Is this the downfall of nationalism? And what might be the impact on global warming?

kevin quinn said...

Michael: is there a link to a paper or talk on this by Romer that you could supply?

Michael Perelman said...

I do not have a link, only the email.

I appreciate it when people expose themselves with outrageous ideas.

Brenda Rosser said...

"new cities in new locations run by experienced governments such as Canada or Finland. Experience is one thing. Competence is another.

rethink citizenship (support residency, but maybe import voice in political affairs)This is what we have in Tasmania today. Tell Romer it doesn't work!

Richard H. Serlin said...

"Paul Romer proposes that developing countries could invite instant Hong Kongs---new cities in new locations run by experienced governments such as Canada or Finland. They would enrich the country where they are built as special economic zones while also rewarding the distant government that makes the investment of building the new city state and installing a set of fair and productive rules.This reminds me a lot of franchising in business, where a small and/or lone entrepreneur gets badly needed aid in a well established and successful system and ingredients, and vast and sophisticated support network, but the motivated and energetic entrepreneur provides the bulk of the work on the ground.

This has been an extremely beneficial relationship for a great number of entrepreneurs. It's a powerfully synergystic concept.

In the case of Romer's idea, though, you need to be very smart and careful in structuring the details so as not to cause huge opposition due to sovereignty and nationalism issues.

Richard H. Serlin said...

"Paul Romer proposes that developing countries could invite instant Hong Kongs---new cities in new locations run by experienced governments such as Canada or Finland. They would enrich the country where they are built as special economic zones while also rewarding the distant government that makes the investment of building the new city state and installing a set of fair and productive rules.This reminds me a lot of franchising in business, where a small and/or lone entrepreneur gets badly needed aid in a well established and successful system and ingredients and vast and sophisticated support network, but the motivated and energetic entrepreneur provides the bulk of the work on the ground.

This has been an extremely beneficial relationship for a great number of entrepreneurs. It's a powerfully synergystic concept.

In the case of Romer's idea, though, you need to be very smart and careful in structuring the details so as not to cause huge opposition due to sovereignty and nationalism issues.