Why private cities?

I have been interested in the creation of private cities for some time. A recent email exchange with Paul Romer (who I want to say was kind and clearly communicated with me which I very much appreciate as I have been critical of his work and he is a person whose time is very valuable) has led me to realize that I should write up a 15-minute pitch explaining my beliefs.

First, why care about laws at all? Romer’s TED talk is still probably the best introduction. Basically, rich countries are rich because they have good governments, poor countries are poor because they have predatory governments. A good government is one that allows private property, contract, exchange, rule of law, and organization. A bad government is one that prevents those things. With private property, contract, exchange, rule of law, and organization people learn to produce wealth, trade and have a higher standard of living. This is not just my opinion, it has become close to a consensus among economists who study the issue (see here for the best introduction, here, here, and here for econometrics, and here for a more advanced “why” analysis).

So basically, laws, or institutions, which can be thought of as the power structures which determine laws, determine the wealth or poverty of nations. So, why care about institutionally autonomous cities, institutional autonomy meaning having substantively different laws from the rest of the country? Basically, institutional change is very hard. British Prime Minister Gordon Brown has been known to quip that “the hardest part about building rule of law is the first 500 years.” In other words, getting the institutions right is very difficult.

The fall of the Soviet Union offers a useful example. A lot of well-intentioned economists tried to “fix” the former Soviet Republics. There are some success stories, Poland for example, but overall most of the countries failed to perform as anticipated. The economists were more focused on getting the prices right, than ensuring the courts were free and fair and the bureaucracy wasn’t corrupt. Another example is both Iraq and Afghanistan. The US poured hundreds of billions of dollars and thousands of lives into both, and the result is less evil governments than before, but hardly a substantive change in living standards for most of the population.

Institutional change is difficult because it first requires asking the institutions, to admit they do not function well, and second, to reform. These problems are only necessary because the institutions do not function in the first place. If a government was capable of doing so they would likely have already done it. In some sense, it is like asking coal to squeeze itself into a diamond.

Institutionally autonomous cities offer a way around this difficulty. By being built in rural land with no strong interest groups, they do not disrupt the status quo. Second, by being opt in, the acquire more legitimacy. They are not an outside body imposing new laws on an unwilling populace, but rather a new option for people trying to make a better life for themselves. Simply put, because they are regional instead of national, institutionally autonomous cities offer an easier path to institutional change.

So, I have focused my studies and energies on institutionally autonomous cities because I believe they offer the best option for institutional change, economic development, and improving the lives of the least well off humans.

Of course, there are different visions for the ideal institutionally autonomous cities. The visions can be distinguished by the governance body for the cities.

The best known advocate for institutionally autonomous cities is Paul Romer. His vision is Charter Cities. The governance body in a Charter City would be a first world country, Denmark for example. In that sense it would directly import first world institutions to third world countries. Instead of Indians or Zimbabweans needing to move to Denmark, Danish law and the opportunities and economic growth that comes with it could be brought to this country.

However, Charter Cities are not the only option. I think private institutionally autonomous cities, administered by Google for example, could produce better results more quickly than Charter Cities. However, before I discuss why I would like to say I pretty much entirely agree with the Charter Cities project. I think building a Charter City would likely be an enormous success. It would generate a great deal of wealth and improve the lives of people in the host country. In this sense, my quibbles are relatively minor. A Charter City would be a huge leap forward from the existing world, and a private autonomous city could be a small step beyond a Charter City.

So, why do I prefer a private city. The primary reason is adaptability. Building a new city is a megaproject. Private companies would be more responsive to changing conditions, new information, and unforeseen challenges.  However, before going into more depth, I would like to take a second to explain how a private autonomous city would function.

A private autonomous city would begin by buying a large area of relatively uninhabited land. They would also negotiate for institutional autonomy, basically a special economic zone. For this essay I will assume a private city state, for complete autonomy, but the arguments I make will also apply to a private city with more limited autonomy.

The business model would be similar to that of a mall. The proprietor of the land would pay for improvements, then rent out the space at a higher value because of those improvements. In this scenario, the improvements would be traditional public goods, roads, lights, water, sewage, electricity, as well as non-traditional public goods, police and courts.

The general argument is that the land proprietor would have a long term interest in the economic success of the city because such success would increase the value of the land and therefore the rents of the proprietor.

For this essay I will focus on the non-traditional public goods, police and courts, and conclude with my argument that private autonomous cities would be more adaptable. Traditional public goods are often supplied by private contractors to governments, suggesting it would be easy for a private city to contract with similar companies, if not do it themselves. Further, to the best of my knowledge, no one has argued against private cities on the grounds of higher utility costs.

The strongest argument against a private criminal and civil justice system is that it would favor the powerful. A private city, especially a small one, would likely have a small number of large employers. Several big companies would pay a disproportionate share of the city’s budget, and the city would be somewhat beholden to them. Combined with the more direct link between rent and profit this could lead to a criminal and civil justice system that favors the powerful. Especially because residents in a private city would not have the same sense of ownership as they might in a democratic city. Rather than citizens, they would be more akin to customers, which could embolden the city to favor the powerful and delegitimize the voice of the residents.

This argument applies to civil justice, police, and criminal justice. I will discuss them in that order. However, first I will make several general arguments which apply to all three.

First, all cities will have some companies which pay a disproportionate amount of taxes. The specific claim against private cities, is that private cities will be more likely to favor the powerful than other types of city governance. It is not obvious that private cities will necessarily be worse in this regard. Reputation will be very important to a private city hoping to convince residents and companies to locate there. A perception of injustice, either in the civil system, police, or criminal system, could hurt them in the long run.

As an example, many companies, Amazon, MasterCard, Geico, and Ebay for example, likely have a small number of sellers which account for a disproportionate amount of revenue. However, there companies are generally perceived as fair in their dispute resolutions. Few people are going to buy car insurance from a company that favors large clients, or use the credit cards of a company that has unfair dispute resolution mechanisms.

Second, such critiques of private autonomous cities often underestimate how bad civil justice, police, and criminal justice is in undeveloped countries. For a quick sense skim the World Justice Project’s report on the Rule of Law. For example, 21%, 23%, and 24% of Nigerians believe that police, follow the law, respect the basic rights of suspects, and are punished for breaking the law respectively. As a personal anecdote, several Honduran friends have told me they fear the police more than they do the gangs, even though Honduras is the murder capital of the world. More generally, it is common knowledge that justice systems in the undeveloped world rarely deliver justice. Unfortunately, that knowledge is often forgotten or ignored when considering the possibility of a private replacement.

There is strong evidence that private civil justice mechanisms can perform as well, if not better than public civil justice mechanisms. The best book on this is “Private Governance”, by Edward Stringham. One particularly telling example is the emergence of the Dutch stock exchange. Not only was short selling not enforced, it the Dutch government actually banned it. Nevertheless, people continued to write short contracts and they continued to be paid. Those who refused to pay contracts, even ones that were technically illegal, were simply banned from future participation in the stock market.

In a more modern example, international trade is often “lawless.” Companies frequently specify that contracts be settled under private adjudication for both speed and accuracy, as government courts sometimes fail to keep up with complex commercial contracts. The prevalence of international arbitration is reflected in detailed guides to drafting contracts, exemplified here, and here. Such contracts show private dispute resolution is often better equipped to handle complex contracts.

To some extent, international arbitration clauses can be said to exist in the shadow of the state. The New York Convention ensures participating governments enforce private arbitration agreements and rulings made in other countries. However, Peter Leeson found that state enforcement only accounted for 15-38% of international trade, a substantial amount, but not nearly enough to suggest private mechanisms were not working.

There is less evidence that private police can perform as well as public police. This is not to suggest there is suggesting private police would be worse than public police, merely that there is relatively little evidence regarding private police at all.

Edward Stringham has an article about private police in San Francisco. When people and businesses who hired the private police force were asked why they did not use the free public one, responses ranged from, “they take too long to arrive” to “they scare me”. The best response was “that’s a joke right? I have little confidence in SFDP”.

The best argument for private police is the general untrustworthiness of public police in the undeveloped world. I think most honest well-traveled people would admit they trust security guards at restaurants or hotels more than the local police. Unfortunately, improving on public police in the undeveloped world is not a very high bar.

The last, most controversial point, and the one with the least evidence to support privatization is criminal courts. This would be an extreme example, as it is highly unlikely that a private city would gain sovereignty. If a private city did manage to gain some autonomy, the criminal courts would likely be the last thing a host country would abdicate control over. While there is very little evidence on this point, I would like to make several overarching statement.

First, there are lots of examples of private actors acting badly in criminal justice, honor killings, feuds etc. However, I think these examples have as much bearing on a private city as the Saudi Arabia beheading teenagers has on arguments for social democracy. While they are in some ways the same, private criminal justice, and the actions of a state, they strip out the context that makes them different. Saudi Arabia is still a primitive state and honor killings are a primitive form of private justice. If Google were to build a city it is hard to believe it would try to build the honor killing, teenager beheading, primitive criminal justice system.

Second, a private city could remove sovereign immunity. Wrongful actions taken against citizens, including in the criminal justice sphere, would penalize the city.

Of course, that private cities could provide better civil justice, police, and criminal justice than undeveloped countries does not mean they would do a better job than a Charter City, merely that they would be better than the status quo. A Charter City, assuming it is implemented well, would provide civil justice, police, and criminal justice, at a level consistent with the Charter country. In other words, a Charter City would have low variance of its justice system.

A private city on the other hand, would have high variance. It could outperform a Charter City, but it could also greatly underperform a Charter City. Compared to a Charter City, a private city would have a slightly higher ceiling, but a much lower floor.

So, given the expected value of a private city based on civil justice, police, and criminal justice, is lower than a Charter City, why prefer a private city? The answer is adaptability, the ability to respond quickly to rapidly changing on the ground circumstances.

Cities, especially institutionally autonomous cities, are complex. The problems they have at 10,000 people are not the same problems they face at 1,000,000. Difficulties faced by the developer will not scale linearly. This requires a decision making body that is equipped to respond rapidly and effectively to such problems. Simply put, that body is not government.

One illustration of the difficulty of complex systems is massive multiplayer online games. Some of the more popular online games have millions of players trading with each other. While companies can test the games with thousands, even tens of thousands, of players before release, the dynamics will fundamentally change with millions of players. Often times the initial release is followed by several months of trying to rapidly respond to consumer feedback about the game. For comparison, take the difficulty state governments have had in establishing Obamacare exchanges online. Hawaii spent $205 million dollars developing a website far simpler than most big budget modern games, and it doesn’t even work.

Another example is the refugee crisis in Europe. Naguib Sawiris, an Egyptian Billionaire, is actively trying to buy a Greek island to house refugees. The EU, which has the resources, as well as the political clout to create a refugee city on a Greek island is standing on the sidelines.

For another thought experiment, think of a major institution of the US government that can respond quickly and effectively to new problems, the FDA, the Department of Homeland Security, the Department of Energy? The Department of Homeland Security is the newest cabinet level department created in the US. It’s most visible program, TSA, is widely considered a failure. It was recently revealed that they had a 95% failure rate in a test, failing to detect 67 out of 70 people trying to sneak fake bombs and guns on a plane. Is the political body that created the TSA really going to create an organization capable of building a Charter City, especially as the problem faced by the TSA is far simpler than problems faced by a Charter City. In this sense it is possible for a Charter City to end up a large boondoggle, a new Brasilia built but mismanaged to the point of vastly underperforming expectations.

In a Charter City there is the added problem that the decision making body would not necessarily be close to conditions on the ground. If Denmark, for example, is the Charter Country, would we expect all the Danish workers to move to sub-Saharan Africa? Requiring them to move would likely eliminate many married or elderly workers. If they are not required to move, they will be out of tune with the local conditions.

That being said, there are historical examples of public cities rapidly growing, Shenzhen being the most prominent example. However, these cities had different institutional arrangements than what is likely to arise in a Charter City.

To conclude I’d like to reiterate my main points. Institutionally autonomous cities are currently one of the best ways to improve the lives of the world’s poorest. The two competing visions of institutionally autonomous cities are Charter Cities and private cities. The primary advantage of Charter Cities is low variance and better provision of justice systems. The disadvantage is adaptability. The advantage of private cities is adaptability. The disadvantage is the low floor for the justice systems (though even a low floor would likely be an improvement in many undeveloped countries).

Ultimately, the success of a Charter City or a private city will depend on the organization with decision making authority. It is certainly possible, though unlikely, that business, growth oriented organization can emerge from negotiations between two governments to build a Charter City. Similarly, it is possible that a business with few ethical scruples can take advantage of a country granting institutional autonomy, preying on those who move there. The potential success of either project will depend the governing body, and those of us interested in such a project should do what we can to ensure the process for choosing the governing body is fair, open, and transparent.

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‘The fact is, General, I would like very well to bury the whole lot of you.’

A friend and admirer of Father Abram J. Ryan pointed me to this amusing anecdote:

A wanderer, Ryan left his footprints in various places in the 1860s, including as a priest in Illinois and Tennessee, where he was also an unofficial chaplain to Confederate soldiers. It was in Knoxville that he penned his most famous poem “in a little over an hour” and “out of a broken heart,” he said later. A plaque commemorates the spot, and a Catholic school in Nashville bears his name.

Some tales have Ryan going missing at times, or at least spanning a wider geographical area, including New Orleans, where he was said to have smarted off to a general who had accused him of refusing to bury a Union soldier.

Ryan supposedly said: “Why, I was never asked to bury him, and never refused. The fact is, General, I would like very well to bury the whole lot of you.”

Photo taken at the Confederate Memorial Hall in New Orleans, during my vacation there earlier this year.

‘American earth in old October’

Driving up to Geneseo tomorrow morning for the Front Porch Republic conference, and a long October drive made me think of this bit from Of Time and the River, what might be my favorite description of Fall (from “Telemachus”):

October is the richest of the seasons: the fields are cut, the granaries are ful, the bins are loaded to the brim with fatness, and from the cider-press the rich brown oozings of the York Imperials run. The bee bores to the belly of the yellowed grape, the fly gets old and fat and blue, he buzzes loud, crawls slow, creeps heavily to death on sill and ceiling, the sun goes down in blood and pollen across the bronzed and mown fields of old October.

The corn is shocked: It sticks out in hard yellow rows upon dried ears, fit now for great red barns in Pennsylvania, and the big stained teeth of crunching horses. The indolent hooves kick swiftly at the boards, the barn is sweet with hay and leather, wood and apples — this, and the clean dry crunching of the teeth is all: the sweat, the labor, and the plow is over. The late pears mellow on a sunny shelf, smoked hams hang to the warped barn rafters; the pantry shelves are loaded with 300 jars of fruit. Meanwhile the leaves are turning, turning, up in Maine, the chestnut burrs plop thickly to the earth in gusts of wind, and in Virginia the chinkapins are falling.

There is a smell of burning in small towns in afternoon, and men with buckles on their arms are raking leaves in yards as boys come by with straps slung back across their shoulders. The oak leaves, big and brown, are bedded deep in yard and gutter: they make deep wadings to the knee for children in the streets. The fire will snap and crackle like a whip, sharp acrid smoke will sting the eyes, in mown fields the little vipers of the flame eat past the black coarse edges of burned stubble like a line of locusts. Fire drives a thorn of memory in the heart.

The bladed grass, a forest of small spears of ice, is thawed by noon: summer is over but the sun is warm again, and there are dais throughout the land of gold and russet. But summer is dead and gone, the earth is waiting, suspense and ecstasy are gnawing at the hearts of men, the brooding prescience of frost is there. The sun flames red and bloody as it sets, there are old red glintings on the battered pails, the great barn gets the ancient light as the boy slops homeward with warm foaming milk. Great shadows lengthen in the fields, the old red light dies swiftly, and the sunset barking of the hounds is faint and far and full of frost: there are shrewd whistles to the dogs, and frost and silence — this is all. Wind stirs and scuffs and rattles up the old brown leaves, and through the night the great oak leaves keep falling.

Trains cross the continent in a swirl of dust and thunder, the leaves fly down the tracks behind them: the great trains cleave through gulch and gulley, they rumble with spoked thunder on the bridges over the powerful brown wash of mighty rivers, they toil through hills, they skirt the rough brown stubble of shorn fields, they whip past empty stations in little towns and their great stride pounds its even pulse across America. Field and hill and lift and gulch and hollow, mountain and plain and river, a wilderness with fallen trees across it, a thicket of bedded brown and twisted undergrowth, a plain, a desert, aand a plantation, a mighty landscape with no fenced niceness, an immensity of fold and convolution that can never be remembered, that can never be forgotten, that has never been described — weary with harvest,potent with every fruit and ore, the immeasurable richness embrowned with autumn, rank, crude, unharnessed, careless of scars or beauty, everlasting and magnificent, a cry, a space, an ecstacy! — American earth in old October.

And often in the night there is only the living silence, the distant frosty barking of a dog, the small clumsy stir and feathery stumble of the chickens on limed roosts, and the moon, the low and heavy moon of autumn, now barred behind the leafless poles of pines, now the pinewoods’ brooding edge and summit, now falling with the ghost’s dawn of milky light upon rimed clods of fields and on the frosty scurf on pumpkins, now whiter, smaller, brighter, hanging against the steeple’s slope, hanging in the same way in a million streets, steeping all the earth in frost and silence.

Then a chime of frost-cold bells may peal out in the brooding air, and people lying in their beds will listen. They will not speak or stir, silence will gnaw the darkness like a rat, but they will whisper in their hearts:

‘Summer has come and gone, has come and gone. And now —?’ But they will say no more, they will have no more to say: they will wait listening, silent and brooding as the frost, to time, strange ticking time, dark time that haunts us with the briefness of our days. They will think of men long dead, of men now buried in the earth, of frost and silence long ago, of a frorgotten face and moment of lost time, and they will think of things they have no words to utter.

And in the night, in the dark, in the living sleeping silence of the towns, the million streets, they will hear the thunder of the fast express, the whistles of great ships upon the river.

What will they say then? What will they say?

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Predicting the (Virtual) Future

Writing at his Forbes blog Modeled Behavior, Adam Ozimek offers a few speculative thoughts on what the year 2045 might look like.  While his piece is brief and interesting throughout, and should therefore be read in full, his prediction concerning virtual reality caught my attention.

My second prediction is we will spend a disturbing (to us) amount of time in virtual reality. Right now humans spend a tremendous amount of time staring at screens that basically amount to a moving flat picture. Perhaps eventually brains will adapt and learn to not trust virtual reality, but the early reports are suggesting the coming VR is very good at tricking us into feeling strong emotional and even physical responses. What will happen to the demand for the virtual world when it goes from flat moving pictures to immersive experiences capable of inducing emotional responses that closely mimic real life? I believe it will explode, for good and for bad. Importantly, our sphere of empathy will expand as we have the opportunity to “walk in other people’s shoes” in a very realistic way.

This is dead-on in my view.  The answer to his question “what will happen to demand?” is that it will explode, of course. We can probably shave fifteen years off the predictive timeframe as well and find virtual reality use to be not only common in wealthier nations but quite consuming as well, especially among the younger demographics.

Widespread use of virtual reality matters…a lot…and for a variety of reasons.   The most important is that, a lot of sticky and tough questions notwithstanding, certain VR experiences could amount to a referendum on actual reality.  About a year ago, on this blog, I made the case that even early versions of VR technology were likely to meet the minimum hurdles to become just that.  Effectively, they’d be real-life incarnations of low-level experience machines, famed philosopher Robert Nozick’s term for his made-up contraptions that can trick you into believing you are actually experiencing any thing you can imagine happening in reality, all while your physical body floats, lifeless, in the machine.  His point was that most people would not choose to live in the machine the rest of their lives, but rather, people value something beyond just felt experiences alone; most people aren’t hedonists.  Here’s the gist of why VR might actually qualify as an experience machine sometime soon:

More interesting for the philosophical ramifications of early VR however, is that it does not have to match Nozick’s experience inventory to claim the title of “an” experience machine. Once the realism requirement is met in a single experience, any experience, then we have a limited version of the full-blown thing.

Unraveling Nozick’s selection criterion revealed that those who choose not to plug into a prototype machine could be doing so for multiple reasons, which spoils the thought experiment. The flip side is that, by logical extension, those who do in fact choose to plug into a crude, work-in-progress machine have answered Nozick’s fundamental question. If your benchmark for plugging in is already met with the options of experiences A, B, and C, then the additional options of experiences D or E won’t cause you to change your mind. This simple point allows for virtual reality to provide hard data on the thought experiment in the (very?) near future. If there is even one experience that today’s VR can clear the realism hurdle on, then I submit that we are already beyond the hypothetical.

As Adam correctly points out, virtual reality will deliver both benefits and costs to humankind.  Since his only example (increasing empathy) lands on the benefit side of the equation, allow me to offer an opposing one to balance the scales:  Widespread use of certain VR experiences in 2045 will represent hard evidence that, contra Nozick, many people are merely closet hedonists, and the fundamental value of acting in reality will be, directionally, devalued and marginalized relative to today.

Of course, this prediction doesn’t merely balance the scales, it sends one end crashing down under tremendous weight.  Any benefits introduced by VR in the “real” world will implicitly be marginalized as well since they occur in actual reality.  If, on average, members of global society determine reality isn’t all it’s cracked up to be, whether they realize they are saying so or not, then those benefits are undermined to some extent.

In the end, the thorny philosophical issues that VR raises require more investigation, and soon, in my opinion.  In the meantime, if we are slouching towards hidden referendums on reality, then that should be discussed in detail as well.  And if others aren’t quite as concerned about the consequences, then shallow are the souls that have forgotten how to shudder.

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White plight

The Southern Poverty Law Center is going to have an aneurysm over my plea to consider the struggle poor whites face in America. The piece is (where else?) over at Taki’s Mag today. An excerpt:

The racial privilege status of white trash makes them unattractive to the media because being penurious and pale-skinned is not respectable. While poor minorities are viewed with dignity and sympathy (as they should be), the same doesn’t apply to Caucasians. The white working class is, as Baptist minister Will Campbell put it, “the last, the only minority left that is fair game for ethnic slurs from people who would consider themselves good liberals.” Since the Progressive Era, the U.S. government has made it a goal to forcefully equalize society between races, classes, income scales, and gender. But to Campbell, “poor whites have seen government try to make peace between various warring factions but they have not been brought to the bargaining table.”

The result is pockets of despair in many parts of the country, most predominantly the South. And while it’s true that poor whites have always existed in America, the callous disregard for their difficulty we see by blue bloods in the Acela corridor is new. People like Kim Konzny have been stripped of dignity and left to fend for themselves without the assistance of the media or Washington elites. Unlike impoverished blacks who hold tight to faith and community, they are without an honorable sense of identity. If they cling to the Bible, they are seen as brainless, flat-earth bumpkins. If they somehow succeed in getting out of the trailer, they are demonized and told they’ve earned nothing because of “white privilege.” If they try to stick with their own kind, they are called neo-segregationists.

 

Read the whole thing and look for me listed somewhere on the SPLC’s Hate Map. I’ll be kickin’ back in short-shorts and combat boots with an Old Milwaukee pounder in one hand and four fingers down with one proud in the other. Boy howdy!

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Autonomous cities can solve the refugee crisis

The Freeman was kind enough to publish my piece on autonomous cities having the ability to solve the refugee crisis. I try to gently poke those discussing the idea, namely Jason Buzi and his Refugee Nation, and more importantly, Egyptian billionaire Naguib Sawiris and his attempt to buy a Greek island, to consider the governance of the city. Most of the discussion has focused on engineering and political difficulties. However, ultimately the success of such a project, namely, not simply being a giant refugee camp but a vibrant city, will depend on the legal system under which the city operates. I make this point more forcefully in the article.

When determining the success of a new country or city, the most important three things are laws, laws, and laws (with location being a distant fourth). Acquiring land, setting up tents, and giving away food and water will only create a giant refugee camp — not a city. To create a sustainable, livable city, where refugees want to move, there must be jobs, and for there to be jobs, there must be enterprise, and for there to be enterprise, the law must encourage it.

In practice what this means is that a refugee city must have economic freedom. Entrants must be free to own property, trade with each other, start businesses, and become productive citizens.

Paul Romer makes a similar point in a recent blog post of his, he writes.

To see what a real solution would look like, you need only remember three things:

1. It takes only a few cities, on very little land, to accommodate tens or hundreds of millions of people.

2. Building cities does not take charity. A city is worth far more than it costs to build.

3. To build a city, do not copy Field of Dreams. (“Build it and they will come.”) Copy Burning Man. (“Let them come, and they will build it.”)

How do we know that cities are worth more than they cost to build? Just look at the value of the land they sit on. Building a city on top converts land that used to be worth very little into land that is extremely valuable. The increase in the value of the land is the sign of the gains that can finance the cost of offering people a government that can create the conditions that offer residents safety, dignity, opportunity, hope.

Creating these conditions does require a local government; even at Burning Man, there is no libertarian free-for-all about where you can set up camp and where the public space will be. The local governing entity determines this before anyone shows up.

Unfortunately he stops short of directly advocating for Charter Cities to be used to stop the refugee crisis, though Alex Tabarrok did tweet at both him and Naguib Sawiris, so if I am feeling optimistic I will assume they are collaborating. I was also pleasantly surprised about his favorable reference to Burning Man, it seems Burner culture has permeated even high academia. Lastly, I feel a need to correct his use of libertarian. Libertarians are not against rules and institutions, they merely favor a specific kind of rules and institutions. Burning Man is libertarian to the extent it is an opt in culture with clearly defined rules that are agreed ex ante by participants.

Overall, I am pleased about the recent and new advocates for refugee cities. It shows the idea of free cities is gaining traction in unrelated circles, perhaps it is an idea whose time has come. That being said, I do hope they take seriously the problems of governance. I fear if they don’t, they risk setting up failure on a massive scale that would both have a high immediate human cost, the refugees, as well as a high future cost by reducing the likelihood of the initiation of similar projects.

One thing I did not discuss in The Freeman piece was the structure of governance. This is a little more difficult than what the laws should actually be (namely British Common Law). Should a refugee city be a democracy, private city, or some hybrid. The question is tricky because democracies have citizens. A refugee city, at least in its early years, wouldn’t have citizens in the same sense America does today, long time residents with a vested interest in the success of the city itself. What would the requirements to vote be, live there for 6 months, 1 year? Who would make the initial investments in a port and other basic public goods, would those investments be recouped, and if so, how?

My bias would be toward a private city, which would solve most of these questions, though in a somewhat unsatisfactory manner. Decision making authority would be clearly delineated, and a person like Naguib Sawiris does seem to have the best intentions of the refugees at heart and enough resources to invest in such a venture. But I doubt he would be willing to spend tens of millions of dollars on such a project as charity. The downside to a private city would be the potential for exploitation of those most in need of refuge. The primary advantage would be a much faster reaction time.

The other alternative would be the EU sponsoring such a city. Raising a few hundred million dollars to stem the refugee crisis would likely not be difficult. Further, they would be in a better position to bargain for economic freedom for the new city. The drawback is such an effort would probably be bogged down by politics and take several years to get off the ground when the worst of the crisis is over.

As usual, I would support both these efforts, though I lean toward the private city. Luckily, there are plenty of refugees for both approaches and the downside is relatively low. Hopefully these attempts can provide some alleviation of suffering and even hope for those who have been forced from their homes by war.