Paul Romer talks about Charter Cities at TED

Paul Romer shows how "bad rules" (price fixing, subsidies, and other gov't interventions in the market) will limit growth and progress.

Inspired by how Hong Kong has influenced China into having a more liberalized market economy, he talks about "charter cities" where we can eliminate bad rules. Its progress and benefits will eventually be so attractive that the idea of the free market will inevitably spread itself.

It is a much slower and workable transition solution. I understand what he means by being in a "trap". It is really hard to change bad rules when people are already used to it and when they already have a mentality against having less government.

It does remind of how it's the opposite of the economic "shock therapy" that Milton Friedman and the Chicago Boys used to liberalize the market of Chile in 1975. Friedman compared it to cutting a dog's tail: cut it piece by piece and it'll be more painful and harder to manage so it must be cut at one instance.

I was thinking that if something like that were to be implemented in the Philippines, I fear it could get all dirty and even violent. So I guess I'm starting to really like this charter cities idea. I am very interested in this and see how it can really work and spread pro-market reforms and ideas gradually and peacefully.


  1. Good article. You are not alone in liking the idea. The present set up of mankind, that of rigidly defined sovereign states, is becoming increasingly unsustainable. Perhaps unstable as well. I think that's why this idea is so compelling; because it takes a step outside that.

    Are you saying that if a charter city was attempted in the Philippines people would protest? I'm following events in Honduras very closely (and blogging about it BTW). It seems that the people who would benefit from a charter city the most are most resistant to it, precisely because they see it coming from their own government.

  2. No, I meant if it was a faster transition like the shock therapy people would protest. Charter cities would be gradual and therefore peaceful, I suppose.


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