PREA Interviews Paul Romer
+ Brandon Fuller
The Pension Real Estate Association (PREA) recently interviewed Paul about charter cities.
Here are some excerpts:
Q: The concept of a charter city has as its basis self- selection of its residents and the firms that move there. Is there a brain-drain effect on the regions outside that city? If the skilled workers and businesses with certain attributes move to the city, are there winners and losers?
A: You have to think about different geographic scales. Central America suffers now from a substantial brain drain toward the parts of the world that have vibrant, successful cities. So if you could get a vibrant, successful city of ten million in Central America, there would actually be a net reduction in the brain drain from the region. Frankly, the area is suffering brain drain of both skilled and unskilled workers, who take enormous risks to travel to the United States right now. Moving somewhere nearby rather than leaving the region would be a huge benefit for the region and for those people. Within the region, there will be places that end up with few people, just as there are in the United States—think of rural Nebraska—and that is OK. We should be concerned about the well-being of the people, not the well-be- ing of the places.
Q: A number of environmental concerns, including climate change, have heightened interest in the role that cities can play in mitigating environmental impacts. Do you envision some guiding principles that can enhance ecological profiles of charter cities? What are the special opportunities and challenges, particularly related to the use of uninhabited land?
A: First, the mere fact of having people move from rural settlement to urban settlement is good for the planet and the environment. It significantly reduces the human footprint on Earth. Part of the reason it is good is that as people shift from economic activities that exploit the natural resources of the land, they shift into the manufacturing services, knowledge-based productive activities, which offer more income and make much smaller demands on the environment. Consider a country like Indonesia. If Indonesia could build dozens of cities that offered people the opportunity to get jobs and education and to start connecting to the modern world that, say, Hong Kong offered in the 1950s and ’60s, then Indonesians wouldn’t devote so much of their human and natural resources to harvesting timber, clearing land, and exposing peat to grow palm trees for oil. Indonesia, a substantial emitter of carbon right now, would emit far less if Indonesians moved to cities.
In a new city, the charter might say that all electricity generation must use renewables or zero carbon. It’s easier to do something different in a greenfield than to go back and retrofit an existing system. Some people are hoping that all new charter cities will, for example, rely only on extremely low carbon waste–generated electricity or use no liquid fuels to power vehicles. The problem with those hopes is that they impose the cost of reducing carbon emissions on the world’s poor. It’s a little bit like people in the United States and Europe saying, “We don’t want to incur any additional cost to reduce our carbon emissions, so let’s force the poor people of the developing world to pay more for their electricity.” That is morally unjustifiable and the world’s poor simply will not agree. There is a potential deal that could be done. Officials from a European country or the US might make this offer to a developing country: Rather than spending money to retrofit our electrical systems, we will sub- sidize you for adopting low carbon waste–generated electricity technologies.