Innovative governance, side-slipping the nation-state

Mark Lutter, Local Governments Are Changing the World, Cato Unbound, July 11, 2018.

The innovative governance movement is interested in improving governance via the creation of new jurisdictions with significant degrees of autonomy. These new jurisdictions could import successful institutions to create the conditions for catch up growth. Or the new jurisdictions could experiment with new forms of governance, to push the frontier. The overarching thesis of innovative governance is that the existing equilibrium of political units is overly resistant to change, and small, new jurisdictions, particularly on greenfield sites, are an effective mechanism to institutional improvements.

The modern innovative governance movement was launched ten years ago when Patri Friedman and Wayne Gramlich created the Seasteading Institute. Critical of the lack of success of traditional libertarian attempts at social change, the Seasteading Institute argued that new societies, “seasteads,” could be created in international waters. Seasteads would provide a blank slate for institutional innovation and experimentation. Successful models of governance could attract new residents, while unsuccessful ones would fail. This iterative, evolutionary process of governance improvements could help push the frontier of the optimal type of government. [...]

Historically, the innovative governance movement has been heavily influenced, and arguably led, by techno-libertarians, with Romer being the obvious exception. This is beginning to change. However, while the techno-libertarian attitude was arguably important for the vision, it hampered the development of more practical capacities necessary for the creation of charter cities. [...]

Luckily, things are changing, making charter cities more viable than they were ten years ago. A handful of influential groups are beginning to think about charter cities. That said, they’re coming at it from different angles, and few have the full vision. However, with proper coordination, it’s possible to rapidly, within 2 to 3 years, create the environment within which several charter city projects can be launched. Let’s consider some of the perspectives at hand.

Economists: Most development economists are sympathetic to charter cities. While some are strongly critical, there is nevertheless a general sense that charter cities are an idea worth trying. The downside is that economists don’t get career points for discussing charter cities. For example, Romer, who is frequently listed as a contender for the Nobel Prize, gave a TED talk on charter cities rather than publishing an academic article.

Silicon Valley: Silicon Valley is interested in cities. YCombinator made a big splash about building a city, though it was later toned down to research. Seasteading is big enough to be made fun of on HBO’s Silicon Valley. Multiple unicorn founders have told me they are building up a war chest such that they can build a city when they exit.

Humanitarians: While the refugee crisis has dropped out of the news recently, there remains interest in improving refugee camps via special economic zones and creating charter cities as a mechanism for economic development to lower the demand for emigration. The Jordan Compact gives aid and favorable grants to Jordan in exchange for work rights for refugees and increasing refugee participation in special economic zones. Kilian Kleinschmidt, who formerly ran the Za’atari refugee camp in Jordan and is on the Board of Advisers of my nonprofit, the Center for Innovative Governance Research, argues for special development zones for migrants. And of course, there is the aforementioned nonprofit Refugee Cities. Michael Castle-Miller is developing the legal and institutional frameworks for these charter cities via his teams at Politas Consulting.

New-city projects: There are dozens of new city projects around the world. These new city projects are real estate plays, building satellite cities of 50,000 or more residents. Investments in these new cities is rarely under $1 billion. Nkwashi, a new city project in Zambia, is one of my favorite examples. Mwiya Musokotwane, the CEO, is on the Board of Advisers for the Center for Innovative Governance Research.

Some of the new city projects are beginning to think about governance, which is a natural path as their revenues are based on land values.

A final interesting development, which is hard to place or categorize, is that Anders Fogh Rasmussen, the former Prime Minister of Denmark and former Secretary General of NATO, also has an interest in charter cities and special economic zones. He recently launched a new foundation, the Alliance of Democracies Foundation. One of the key initiatives of the Foundation is Expeditionary Economics, which is focusing, as previously mentioned, on charter cities and special economic zones.