Paul Romer’s Bold New Idea for Charter Cities

By Lawrence MacDonald

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The planet’s population will swell by two to three billion people over the next few decades. Where will all those people live? My guest on this week’s Global Prosperity Wonkcast has a bold new idea. Paul Romer is a senior fellow at the Stanford Institute for Economic Policy Research, a non-resident fellow here at the Center for Global Development, and one of the world’s leading growth economists. He is proposing brand new cities—he calls them ‘charter cities’—built from the ground up with sound rules designed to promote swift development.

The two ideas at the heart of Paul’s proposal are, first, that good rules are fundamental to development and, second, that new cities might be able to draw their rules, people, and land from different sources. He argues that inadequate property rights, legal systems, and other types of rules hold back development in poor countries. If the residents of a poor country could choose to live in a new city, governed by the rules of a well-functioning country, they might benefit enormously. If good rules are in place, Paul says, where that city is located doesn’t matter much.

The name ‘charter cities,’ Paul explains, comes from the historical example of the colony of Pennsylvania, which was founded under a charter drafted by William Penn. That charter enshrined new freedoms of religion– freedoms that were quite attractive to prospective immigrants. “It’s a nice illustration,” says Paul, “of how a new system of rules… could come into existence not through a vote or a consensus seeking process, but instead by creating a new entity and saying, ‘Who wants to opt in? Who wants to buy into these new rules?’”

In the podcast, we discuss existing cities that somewhat resemble Paul’s model—places like Hong Kong that, due to flukes of history, imported rules from distant countries. We also try to imagine what sorts of scenarios could support new charter cities. Surprisingly, Paul foresees a potentially large role for countries in the global south, especially China and India, in guaranteeing rules for these new cities.

One of the obvious bottlenecks to creating new cities is the need for land that is fit for habitation and has access to fresh water. Paul suggests a technological solution. By using large-scale renewable energy to desalinate ocean water and reprocess waste, cities can be built in locations that have until now been unlivable. Connections to the world would be provided by container ports, airports, fiber optic cables and satellites, so the new cities need not be located along rivers or existing trade routes. Paul imagines the arid coasts of Australia or Africa dotted with new, solar-powered, efficient cities, plugged into the global economy and providing immigrants with education and jobs.

Paul sees these well-designed, densely populated cities as part of the solution to the planet’s environmental woes. While some people in the developed world prefer a more rural lifestyle, cities are much more efficient and people in developing countries constantly express their preference for city life by moving to those cities that do exist.

“All throughout history, we’ve thought of heaven as the city on a hill. Done right, a city can be the pinnacle of human civilization. They’re the cathedrals of our era,” he says.

Listen to the Wonkcast to hear more about Paul’s proposal. Have something to add to our discussion? Ideas for future interviews? Post a comment below. If you use iTunes, you can subscribe to get new episodes delivered straight to your computer every week.

My thanks to Wren Elhai for his very able production assistance on the Wonkcast and for drafting this blog post.

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