Why can’t we increase the menu of cities for individuals to choose from? What are the fixed costs for creating a city? Are these fixed costs shrinking over time? How durable would the new capital have to be? Think for a moment. The new urbanites in Gatesland would need;
1. shelter
2. food
3. water
4. electricity
5. sewage disposal
6. garbage disposal
7. transport services for moving within the city and for trading across cities
8. The children would need schools
9. basic health care
Pointer from Mark Thoma.
What is missing here are social capital and patterns of sustainable specialization and trade. I doubt that you can throw a million people together absent those elements and have it work out well.
This is related to the question I asked about disaggregating the refugee crisis versus immigration politics. For refugees maybe this is a good time to pick your top emigration preference. However if it is aid then maybe beggars shouldn’t get to be choosers even if it gives votes to the oppressed political party.
I don’t know M. Kahn but his language seems predictable. The refugees need schools and a menu of options provided. And they need healthcare provided. Nothing about the health risks to the native population or the burden on native kids at the schools. That is free I guess.
Perhaps one rickety bridge between Paul Romer and Arnold Kling is something like the Open Source Ecology project that would allow more city competition to grow from the bottom up instead of top down offerings from rent seekers and central planners.
It’s difficult to imagine how cities could develop bottom up without any airable land that could also be staked out from the ground up.
If you have to go through an expensive political process to get permission to build then you have no choice but to include rent-seeking in the process.
Why would you have to go through an expensive political process to get permission to build?
Below you say 12 entrepreneurs. So, we up to needing infrastructure for 12, good internet, one pizza place and a coffee shop.
Why do we need Portland? Tent cities work in a pinch for refugees. Why do refugees need Paris?
I think the rent seekers have succeeded when they keep their prices down to an acceptable level and grown the price of rents along with the growth in swithching costs. Refugee crises could be viewed as a period when the price of rent seeker group A and group B fighting raising the cost of rent seeking temporarily. That ground-up cities haven’t succeeded may or may not argue against the concept in light of new facilitating technologies.
The question is how marginal is the networking (and things like it). I think it’s pretty marginal but the uncertainty makes us over-invest in it which makes it seem way less marginal. If all the entrepreneurs move to Portland or Silicon Valley because they think they have to, that makes it artificially harder for others not to have to also move their and reinforces the mythological part.
We assume university is big on networking partly because all the people we might get to network are at a university. We don’t think about things like automatically not being able to network with all the people who went to different universities or if we only need one good contact we don’t need the university at all if someone can figure out a competing technology.
In practice I think loss aversion, search costs, and genuine comparative advantage explain why you see concentrations in certain cities, even when you could theoretically do it elsewhere for much less.
It would really suck to go to a place that wasn’t well suited to what you wanted to do and lose important years of your life figuring that out. Most people go to a place because they already know someone who’s already there and doing something similar, which compounds the tendency for certain places to get a head start.
FWIW, if I could get a group of 10-12 people who had similar ambitions as mine to go to a new place that was much cheaper (Detroit, Cleveland, Lincoln, etc) I’d seriously consider it. I’m not romantically attached to the place and am prepared to leave w/in a year if it’s not working out.
But without that social coordination it’s easier to go to places where the people already are. I work in the natural products industry and Portland has a particularly large concentration of business/investor networks there for that sort of thing.
And I agree with Arnold that sewer systems and green space are the easy part of city planning. Getting talented people to come together to participate in prosperous economic activity is the hard part because that feeds on network effects, where the saltwater cities have a huge head start.
However, I’m not sure it couldn’t be done.
I’m a 30 year old entrepreneur who’s moving to Portland because I feel like I don’t have much of a choice if I want to maximize my chances of business success……but it’s a total pain in the ass.
I would gleefully jump at the chance to move to a “boring” city with a lower cost of living if you could get a seedling of a network effect for certain types of human capital.
I doubt you’d need very many people to make it worthwhile either. A few dozen would be enough if they were well connected.
The list has a major missing item, which is:
0) An effective legal & political system in which to operate; which will be able to handle the increased load on its services.
This is arguably the most important thing, or at least close to the top – you must replicate courts and judges and police, not just housing.
And then Arnold points out the next part of the puzzle; which the naive institutional view (that I used to have) misses. In addition to all the above, you need PSST; a culture of properly using the infrastructure and governance services; and enough civic-mindedness and long-term time preference that your courts & law enforcement are not overburdened.
Proponents of this idea likely imagine duplicating Manhattan or San Francisco. But what if the result was to duplicate Detroit? Unless you have studied the differences between these cities, and have specific factors leading you to believe the new city will be more like SF than Detroit, you risk creating another urban blight rather than a prosperous city.
“An effective legal & political system in which to operate; which will be able to handle the increased load on its services.”
This. Police and courts. I would add fire and rescue to that budget.
Also- the ‘transport services’ is nice, but what are they going to drive on? Dirt? Add infrastructure. Lots of infrastructure.
I had the same idea. All we need to do is buy some nearly worthless land in Arizona or Spain in the absolute middle of nowhere and build up some institutions. From here, we could solicit experts as necessary with the proper background to build the city. Corporations could be attracted for the cheap labor and good institutions.
No, you can’t start it today and absorb a million residents today. You can start it tomorrow and slowly, organically grow with no bound on future growth over time. It would effectively work as the creation of a new liberal state. Various cities would have different variations on their institutions and would both learn from and compete with each other for the best immigrants, thus incentivizing immigrants to be desirable. Thus a positive feedback learning system develops.
The benefit of this model of immigration is that it doesn’t endanger the political institutions of the absorbing state the way massive immigration does today. This is the Achilles heal of unlimited immigration — a defect which libertarians often fail to recognize. The problem is that economically speaking immigration makes perfect sense. Politically speaking, unlimited migration risks absorbing cultures which will actively undermine the liberal ethos which fosters the economic growth that attracts them. These charter immigrant cities would have institutions which clearly prohibit such political rent seeking and privilege.