Free Cities Will Create Growth Miracles

Tyler Cowen recently argued there are no more growth miracles. He writes,

The East Asian growth model, for all its wonders, belongs to history. Slow and steady may be the only option left. For whatever reasons, few countries have been able to scale up their educational successes as rapidly as the East Asian tigers. Trade growth, which exceeded overall output growth in the late 20th century, now seems stagnant. Many export industries are automated and hence don’t create as many middle-class jobs as they used to.

Cowen is mistaken. Most of the growth miracles, with the possible exception of China, were based on institutions. Singapore and Hong Kong, for example, grew rapidly. Both city states used common law and as a result escaped poverty.

To argue there are no more growth miracles implies no country or region will rapidly improve their institutions. On a national level this might be the case. Countries with the capacity to rapidly improve their institutions could have done so. However, countries can contract out institutions on the local level.

Charter Cities are an example of this. By taking land where no one lives and importing successful institutions, rapid economic growth can be achieved. More likely than Charter Cities, however, are proprietary cities, autonomous, privately governed cities.

There are over 100 new city projects worldwide. These new city projects are, slowly, realizing the importance of institutions to attracting businesses and residents. Barring an unexpected event, this trend will continue. As such, the new city projects will continue to learn the importance of institutions, gaining greater autonomy, and increasing economic growth.

I would be happy to bet Tyler that over the next thirty years at least one new city will use common law and achieve economic growth over 5% per annum for a ten-year period.

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