The Localised Dilution of Resources: A look at Paul Romer's 'Charter City' Concept

This is a TED Talk by Paul Romer, a professor who left his job at Stanford to pursue his very revolutionary idea of the ‘Charter City’. In this talk, he emphasises on the power of rules, and how they guide the technology which it needs to actualise ideas. This he conveys with the following image.

Ideas

Now, rules are the little builders that erect walls within a system, the walls that will bring to life guiding paths for data to move in and out. They specify what can happen and what can’t. With the right technology, what rules can do is not only bring to life ideas – which they make possible because they bring to life the goals that the idea has in mind – but also behave as administrative interfaces between the intelligence that has put them in place and the machinery that will do the manufacturing. For example, in a car, the gearbox behaves like a rule that creates smaller rules. The engine of the car produces power which is conveyed to the wheels by means of a crankshaft. By bringing in the gearbox, I am able to enforce a set of rules in the system. If I now set the gear to ‘R’, the system will deliver outputs of a different kind by moving the car backwards.

CAR = ENGINE + GEARBOX + WHEELS

Similarly,

RULES = BEHAVIOR + INTERFACE

In essence, they govern systems by enabling the incorporation of ideas in the working machinery.

When Romer talks about the good rules and the bad rules, I believe that he is talking about the behavior of any rule in general. A good rule is that which makes the car move backwards when the gear is set to ‘R’ and forward when set to anything else. A bad rule can either be a car that doesn’t move when a gear is changed or that which behaves in opposing manners.

That being said, I was thinking of my ocuntry, India, and how these good rules and bad rules can be identified within its administrative cogs, and how those Charter Cities can be brought to life. Because, just as much as Romer points out to the examples of North and South Korea, and Cuba and Canada, he is essentially pointing to regions in the world where neighboring populations have access to disproportionate amounts of resources because of a change in leadership.

Let me establish the analogy to India here. In India, the nation is divided into little states (on a linguistic basis) each of which has its own little government and a Chief Minister at the helms. Therefore, different states have different policies of governance. This means that they have different rules. This disparity, to note, is lessened by the fact that the central government is usually a coalition of these smaller state parties. But that doesn’t change the fact that when I cross the border from Tamil Nadu into Kerala, I’m exposed to (possibly) the same resources but in different amounts because of a change in leadership.

Let me question myself at this stage.

1. What are the problems I see? To answer this, imagine a vector field that illustrates the policies of the different states. Extrapolated on the India map, they would be a set of arrows pointing in different directions, some similar, representing their individual goals. If two arrows point in opposite directions, they don’t necessarily different goals, but different target groups. For example, Gujarat may target the farmer more than Rajasthan, which will eye the urban crowd. Although they do aid the nation from different directions, this fragmented governing as I see it has one pro and one con.
   1. Pro: With leaders governing smaller and smaller pieces of land, they are able to manage resources better than just one person and one party at the top.
   2. Con: Sometimes, resources are spread across borders and it may be beneficial for a region in particular to be governed in a specific way.
2. What are the bad rules? The bad rules I choose to see are with respect to this fragmented government policy of the nation.
3. What are the outcomes of these bad rules? As Romer says in his talk, villages are too small to experience the benefits of a good business and nations are too big. What is of just the right size is the city. In the Indian political context, when a state assumes the administrative parenthood of a city, it gives rise to a mismanagement of resources. Let me elucidate thorugh some points.
   1. Imagine a state that has a political capital and a commercial capital. Now, suppose that the state is so large that close to 95% of its population resides in small villages.
   2. A party gets elected to govern the state by a mostly rural turnout. Therefore, it is possible that the party that has come to power would have promised benefits for the farmer more than the software engineer.
   3. Now, the state can either be aligned with the central government’s interests or opposed to it.
      1. If aligned, then a nationalised subsidy for the farmer will be compounded by the state’s interests.
      2. If opposed, then the state will turn down the nationalised subsidy and bring into picture its own. Result? The state is wasting its resources.
   4. This localised policy shift will have two outcomes of its own.
      1. If aligned, the farmer will be receiving twice as many benefits as the software engineer.
      2. If opposed, the software engineer in the state will be moving at a pace different from a software engineer elsewhere in the nation.
   5. This particular scenario is quite relevant I would say to the current Indian sociopolitical scenario. Therefore, what the fragmented governance is giving rise to is an uneven utilisation of resources that in a region throughout which the resources are spread out – a localised resource concentration/dilution.
   6. The ultimate loser is the city. Since it is a collection of humans, the value of the city itself is derived from the capabilities of these people. When Romer says that the land value increases because the city’s inhabitants are earning more, it actually means that the city – through its location and other properties – has enabled its people to be like that. In the scenario I detailed out, the urban population is either exposed to a disparate quantity and quality of resources or does not avail them at all.
4. What is my solution? The set of bad rules that I attributed this problem to was the usage of a fragmented governing system. My solution is to fragment the already existing pieces into even smaller ones. And before you think I’m an idiot, let me tell you why that solve some problems.

Even though close to 64% of the Indian population is engaged in agrarian activities most of which falls into the rural category, it is the cities that make a difference. With the amount of data that is sent in and out of them, a city makes itself relevant by making sure the data comes from and reaches the right group of people. For starters, think of the two technologies that have substantially increased the nation’s crop output over the last 10 years.

The first was the launch of the INSAT weather satellite. A look at the following table will give you an idea of the benefits of the launch – which was a very important outcome of the utilisation of urban solutions.

Economic Benefits		Rs. Millions
	Program	Nature of Benefit	Estimate from Case Studies	Potential Benefit to the country in the Long-run
1.	National Drinking Water Technology Mission	Cost saving due to increase in success rate	2,560 (5 States)	5,000 – 8,000
2.	Urban Area Perspective / Development / Zonal / Amenities Plan for Cities / Towns	Cost saving in mapping	50.4 (6 Cities)	16,000 – 20,000
3.	Forest Working Plan	Cost saving in mapping	2,000 (200 Divisions)	11,860
4.	Potential Fishing Zone Advisories	Cost saving due to avoidance of trips in non-PFZ advisories	5,450	16,350
5.	Wasteland Mapping: Solid Land Reclamation	Productivity gain	990 (UP)	24,690
6.	Integrated Mission for Sustainable Development: Horticultural Development in Land With and Without Shrub	Gross income	Rs.0.20 to 0.40 (per hectare)	13,000 – 26,000
7.	Bio-prospecting for Medicinal Herbs	Value of Indian life saving drugs		800

(From http://epress.anu.edu.au/narayanan/mobile_devices/ch10s06.html)

The second technology that came to the aid of the farmer was the combined harvester-thresher, which reduced the duration of labor that was required to harvest and thresh a piece of land by substantial amounts.

In this fragmentation process, the nation could be divided down to form clearly discernible urban and rural regions. As I said earlier, it is important for the cities to be governed similar so that all cities in a particular region are availed similar qualities of the similar quantities of resources. Does this look like Communism on a broader scale? Perhaps. But what it ensures is that, with the democratization of information exchange through urban areas, there can be greater coordination towards acheiving common goals. At the same time, rural areas, specifically the agrarian ones, will receive greater and greater concentrations of useful information instead of what just the state has decided to give them.

In this fragmentation, which I call the second-degree fragmentation (SDF), the danger of there arising a difference in policies as a result of the installation of different state governments is eliminated. Secondly, the Charter Cities that Paul Romer suggested could be translated into this SDF picture in that all cities work as one super-city in terms of resource management and policy establishment.

I have two concerns at the end of this post.

1. With the current system set so firmly in its ways, bring in such a massive change is quite impossible. Therefore, if anyone has any such comments to put forth, please don’t do so. Instead, what I’d like to hear about is its theoretical validity.
2. I have not studied this subject (yet). There’s still a long time to go for me to be there. But before then, if you have anything to suggest or criticise (constructively), let me know.