Christian Long

Paul Romer: Charter Cities

In TED Talks on April 26, 2010 at 1:25 pm

Reflection by DANIEL L.

Original TED page w/ speaker bio, links, comments, etc:

Paul Romer:  Charter Cities

Ive always wondered why someone that lives in a third world country, usually lives in terrible conditions, and has no electricity in their home, but randomly has a nice phone.

I have seen this many times on TV and I just find it very interesting.

Well a man by the name of Paul Romer discussed this subject. Paul Romer first talked about these 5 African students that lived in a third world country, at the airport doing their homework under street lights because they dont have any electricity at home. Paul Romer picked out one of the students and talked about how that student probably has a cell phone.

Now why is it that this student has access to advanced technology like a cell phone, but doesnt have access to 100 year old technology like electricity?

Well its all about “rules”.

The electric comany under this nation operates under one rule. The rule is that it has to sell electricity at a very low price, so low that it loses money on every unit it sells. So that means there arent enough resources to give everyone electricity. This is known as a “bad rule”. This rule obviously does not use property and demand. If you have less resources you raise the prices, not lower them.

So the president of the country wanted to change this rule, he wanted a rule where businesses earned a small profit, so that they have a need for more customers. This is the rule that the cell phone companies operate under, and that is why everyone has a cellphone. The president wanted to use this rule with electricity but he was not able too because of protests from businesses and consumers. So the 5 Africans have to keep doing their homework under street lights.

Paul Romer came up with a radical idea to try and help bring the modern economy and technology to countries similar to where the 5 Africans live. His idea was to create something called a Charter City. Basically it would like what Hong Kong is to China. A Charter City would be a created city where people would go to live and work and it would be part of a country, but it would have its own “rules”, it would preserve choices for people, and will be a gateway that will bring the modern economy and the modern world to the country. Benefits of a Charter City would be that it could create its own rules that arent ristricted, for example the electricity rule that I talked about earlier.

To make a Charter City, here’s what would have to happen:

For example, say Raoul Castro which is the leader of Cuba, wanted to do what China did with Hong Kong. Castro would have a perfect place for his “Hong Kong”, and that would be Guantanamo Bay. The United States have control over Guantanamo Bay, but say Castro got Canada to control the island and told them they wanted a new city to be built and they wanted Canada to control that city, and that citizens from Cuba would move their. Then that would be what a Charter City would be like.

Even though I think this is a well thought out idea, I still think that there is always going to be a flaw in every economic plan. I think its impossible to have a perfect economy. Theres always going to be ups and downs. Even if a Charter City is created there is still going to be a flaw, and once that flaw is discovered thats when everyone panics. Like the United States for example: our economy was pretty solid then we went into a recession so then people start panicing and all the sudden they dont like the president anymore. So then they want a new president with new economic ideas, and then when his idea doesn’t work they dont like him anymore so its just a cycle. Kind of like an economy, theres always going to be good economic times and bad economic times, this is very similar to how life is.

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