Who would pay government salaries in a charter city? Paul Romer answers:
One possible revenue source is the value of urban land. If the development authority initially owns the unoccupied land, it will capture huge gains as the city grows. The authority makes this land valuable by providing public goods, so it seems reasonable that it should use the gains in the value of the land to pay for those public goods. Hong Kong and Singapore use gains in the value of the land to finance government activity. Value can be captured by leasing land for private development, by selling it, or by putting very high tax rates on the gains in the value of privately owned land but excluding the value of the structures that sit on the land.
Although a land-value “tax” by the corporate “owner” of the land is what I had in mind, I don’t recall seeing Romer spell that out before. So, how would this work?
First, the charter city corporation would acquire a city-sized chunk of land. Then, as the clear owner, it would have the choice of selling or leasing the individual plots of that prospective city to real-estate developers — but it would do something that’s not quite selling and not quite leasing. It would sell the right to build on and use a plot, subject to a recurring “tax” of some percent of the land’s (unimproved) value — a bit like selling two-thirds of the equity in a piece of land and collecting one-third of the rent.
This leaves the charter city corporation with a clear incentive to increase the value of the land under its rule and the owners of the individual plots a clear incentive to increase the value of their plots — because they’re not taxed on the value of any improvements, just on the average value of land in the city.
Do you think Romer has been reading Moldbug, even if he won’t speak at a conference with him?
Here’s Moldbug on property:
Isn’t Romer just giving the charter city primary property rights?
I assume Romer has been reading Moldbug, but Moldbug’s ideas don’t start with Moldbug; they go way, way back. Agricultural land has a long history of being “owned” to various degrees, with different parties holding different rights, and many historic arrangements approximated a land value tax, with the tax authority owed some fraction of the expected (not actual) yield of a plot.
True, which further proves Moldbug’s point that Romer is just ripping off old (unfashionable) ideas, re-branding them, and calling them his own.
First colonialism and now serfdom!
I realize you’re joking about serfdom — which is technically tenancy with no right to leave the land — but I thought I’d clarify that what Romer is suggesting is traditional fee simple (or freehold) land ownership — in which the land “owner” is still limited by the four basic government powers of taxation, eminent domain, police power, and (more obscurely) escheat. The owner pays no rent, manages the land how he wishes, and can rent or sell the land, but he still pays property taxes and is subject to the law of the land.
The state itself may hold an allodial title; it’s truly sovereign.
What Romer mentions but does not emphasize is that the sovereign in a charter city is not a democratically elected government; the people offer their consent to be governed by coming to the charter city.
I think Romer is smarter than any of y’all are giving credit for. Romer’s main line: we don’t know what works well as governance institutions. Anyone who says they do is full of fecal material. As I’ve recently said in arguing with Devin, can you name a growth-promoting, stable government system? I can’t.
Romer’s line is: we need very badly to try new legal arrangements, because our current ones are ossified, and because abstract theorizing about what will work, without experiment, is a guaranteed path to epic fail.
You’re discussing one specific proposal, not his direction. I’m happy to believe that he is or was temporarily focused on that specific proposal as well, but the specific proposal is irrelevant. What matters is the framework: Try new stuff, don’t use old standard law, experiment with new options.
Re-reading the quotation, and double-commenting:
You’re focusing on this subsidiary phasing:
while the important part of his approach is:
I think Romer is politically astute enough to say “let’s just try some things out and see what works,” while proffering up one such experiment that just happens to look like Moldbuggian neocameralism to those who might recognize it, rather than to suggest “a return to colonialism, with most of the kinks worked out.”
That hypothesis doesn’t fit Romer’s prior career. Mine does.
Romer is an economist specializing in new growth theory — he’s one of the seminal figures in the movement — and his work says that roughly all economic growth is knowledge growth. Romer is about increasing knowledge to increase growth, which is the only big issue besides violence and war.
Romer also knows that knowledge only increases by trying new stuff — and then he read public choice and saw that government institutions basically don’t change their rules. Hence governments don’t increase knowledge and don’t get better.
Since his obsession is growth, by means of trying new stuff, it’s hardly fair to say he’s only echoing the boring Moldbug hypothesis. He’s far smarter than that, and besides, politically mostly liberal.
His line is that you don’t know what will work best, and neither does he. At best he’s pushing neocameralism for a first try, in order to garner some extra support for his actual radical position of trying lots of different things.
The Romer discussion continues chez Aretae, where Devin Finbarr enters the fray and Foseti continues to fight the good(-natured) fight.