According to the New York Times, the new mayor of New Orleans, who campaigned on a promise to reform the city’s police department, recently asked the federal Department of Justice to intervene. The city’s police department, he wrote, has been described as one of the worst in the nation.
“This assessment is made based on several indications, including the number of violent crimes, incidents of rape, and malfeasance by members of the police department. It is clear that nothing short of a complete transformation is necessary and essential to ensure the safety for the citizens of New Orleans.”
Read more...
Because the conventional economic analysis of crime treats norms as exogenous, it may be missing much of the action on the front lines. Creative enforcement strategies — like those employed in Bogotá, New Dehli, and New York — don’t just change behavior. They change norms.
Read more...
In an article on charter cities in The Atlantic, Sebastian Mallaby has a good summary of how the Hanseatic League of cities emerged in the Middle Ages from what was arguably the first charter city.
When Henry the Lion founded Lübeck, he wrote a charter that specified “a set of ‘most honorable civic rights,’ calculating that a city with light regulation and fair laws would attract investment easily.” The city itself was a dramatic success. It also spawned clone cities that copied its charter. See the article for the details in this remarkable historical episode. (It even has pirates!)
Read more...
Jamaica could let its diaspora vote in its next election. Doing so may be its best hope for a healthier form of political competition then, and therefore for better policy now. It may be its only hope for moving away from the unstable trajectory created by bad policy and out-migration of its well educated citizens.
Read more...
Paul Romer: The latest post in our E-seminar series of contributions from economists and other experts comes from Kris James Mitchener of Hoover Institution and Santa Clara University and Noel Maurer of Harvard Business School. They write about several case studies in which countries that struggled with corrupt customs agencies successfully used external institutions to clean them up and increase revenue collection.
Corruption is a serious problem for governments in the developing world. In states where corruption is rampant, it is very hard to build a coalition to stamp it out. Such corruption is particularly pernicious when it affects the revenue-collecting functions of the state: in addition to the deadweight costs corruption imposes on society, corruption in revenue collection reduces the state’s ability to offer fiscal incentives to public officials to obey the law. The recent experience of Angola suggests that a troubled nation can reduce corruption and increase revenue collection by adopting external institutions. Angola outsourced customs collections to Crown Agents, a British nonprofit with expertise in public financial management. In so doing, the country tripled its tariff revenue in the span of a few years, all the while reducing its tariff rates.
Read more...
In the current circumstances, any attempt at creating a new city in Haiti under foreign control would turn a humanitarian military intervention into a humanitarian military occupation. This approach is fraught with risks that the concept of a charter city is designed to avoid.
Read more...
We would like to believe that democracy will lead to steady improvement in the rules that a society follows. In principle, it seems self-evident that if a rule is bad, citizens or their representatives vote for a better one. In practice, it is not always this simple.
Sometimes it takes a two-stage decision process to get rid of a bad rule. People must first vote to change a higher-level rule that structures voting on other rules. Then, following the new voting rules, they can vote to change the bad rule.
Read more...
Paul Romer: The latest post in our E-seminar series of contributions from economists and other experts comes from Richard Green, Director and Chair of the Lusk Center for Real Estate at USC.
Hong Kong, Singapore and Korea experienced great economic success: all have per capita GDP that is at least seven times higher than in 1960 (see Penn World Table for more information). All three economies also came to be relatively well housed. While we cannot draw a uniform lesson from their experiences, it is worthwhile to examine each case for clues about successful housing development.
Read more...
According to Transparency International’s corruption index, corruption is “sticky.” Over time corrupt countries tend to remain corrupt, while clean countries remain clean. This makes it tempting to lean on cultural interpretations to explain the persistence or absence corruption.
Hong Kong provides a compelling counterexample, showing that a change in rules can defeat a culture of corruption. Though it once had high levels of corruption, comparable to those in mainland China in the 1970s, the British government was able to effectively banish corruption. In 1977, 38% of the population thought that corruption was widespread, by 1982 only 8% did.
Read more...
Most economists think that they are building cranes that suspend important theoretical structures from a base that is firmly grounded in first principles. In fact, they almost always invoke a skyhook, some unexplained result without which the entire structure collapses. Elinor Ostrom won the Nobel Prize in Economics because she works from the ground up, building a crane that can support the full range of economic behavior.
When I started studying economics in graduate school, the standard operating procedure was to introduce both technology and rules as skyhooks. If we assumed a particular set of rules and technologies, as though they descended from the sky, then we economists could describe what people would do. Sometimes we compared different sets of rules that a “social planner” might impose but we never said anything about how actual rules were adopted. Crucially, we never even bothered to check that people would actually follow the rules we imposed.
Read more...
Paul Romer: One of the goals of this blog is to encourage the kind of exchange between economists and other experts that we expect from an academic seminar. Matt Kahn, from UCLA has offered this first outside contribution in the E-Seminar series.
Charter cities that don’t tax away as much of the income gains from higher skill may also offer higher real returns to skill compared to many a worker’s country of origin. The promise of better rules may also attract foreign direct investment to charter cities, generating economic opportunities for skilled workers from less-developed areas. A paper by Heckman and Scheinkman (1987) shows that equilibrium returns to skill can differ across sectors so higher returns in a modern sector based in the Charter City need not lead to correspondingly higher returns in traditional sectors that operate in surrounding countries. Could the differences in spatial returns to skill created by a charter city cause a Brain Drain from nearby poor countries that harms those left behind?
Read more...
Rule sets can improve through what I will call an evolutionary dynamic based on small, incremental changes or through a new-system dynamic in which an entirely new rule set enters and competes with an existing one. …
Catch-up growth is based on copying existing ideas. Frontier growth involves the discovery and implementation of new ideas. …
In catch-up growth, the new-system dynamic can be used to copy existing rule sets. This allows faster growth without the additional risk that comes from using the new-system dynamic at the frontier.
Read more...
Bob Haywood is the former head of the World Economic Processing Zones Association and the current executive director of the One Earth Future foundation. He wrote in with an interesting example: a recent treaty between two countries that specified the charter for a city.
In 1984, China and the UK signed a treaty called the Sino-British Joint Declaration. It specified the charter under which Hong Kong would operate for 50 years after the handover to China in 1997. The Declaration, together with the Basic Law passed by the Chinese to implement its provisions, specified in great detail what the existing rules were in Hong Kong and how they would be maintained.
Read more...
Charter cities have been recently featured in several publications: The Boston Globe, Forbes (article), Forbes (video), Newsweek.
About