Free City Predictions

Yesterday I spoke with Tyler Cowen about my offer to bet that free cities would lead to growth miracles. So, here are the terms.

I bet Tyler Cowen $5 that within 40 years a free city, defined as a city which imports or creates a legal system distinct from the host country, will average 10% per capita GDP growth over 20 years.

Here are some of my other predictions. I expect the first free city to be announced within 3 years. I expect the first free city to reach 100,000 residents within 12 years. I expect there to be at least 5 free cities with populations over 100,000 in 20 years. Each of these predictions I hold with around 60% certainty.

Cowen also has an excellent article in Bloomberg View. He argues that “Nations can be Startups.”

Israel, Taiwan, Hong Kong, Cayman Islands, Estonia, and South Korea could also be thought of as startup nations. Most emerged from war, civil war, the evolution or dissolution of a prior imperial or colonial relationship, or some combination of those factors. In each case there was a chance to start anew and to have founders impose a distinct vision on a new political unit. Just as we doubt that Bill Gates could have founded and grown Microsoft within the confines of the older IBM, so did the success of Estonia require freedom from the Soviet Union and Russia.

Cowen does mention special economic zones and political decentralization, though he focuses his argument on new sovereign nations. I would reverse the focus. Startup political units are likely to consist primarily of semi-autonomous cities, with only a few new nations.

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