Mr. Romer’s answer is to do with this moment what Burning Man does every summer: Stake out the street grid; separate public from private space; and leave room for what’s to come. Then let the free market take over. No market mechanism can ever create the road network that connects everyone. The government must do that first.
In all of this, Mr. Romer has been creeping further from the economists toward the urban planners. By the time he got to Burning Man in August, he was thinking of himself as a University of Chicago-trained economist, once indoctrinated in the almighty free market, now in open revolt against his roots.
They “invented a sense of superordinate civic order — so there would be rules, and structure, and streets, and orienting spaces, and situations where people would feel a common purpose together; where people could become real to one another,” Larry Harvey, one of the founders, recounted in an oral history before his death last year.
“It had gone beyond a bit of pranksterism in the desert,” he said. “We had made a city, and no one wanted to take responsibility for it.”
To Mr. Romer, this was a teachable moment. “Anarchy doesn’t scale!” he said.
The above are all quotes from a fascinating article in the September 5 New York Times. It’s Emily Badger’s “A Nobel-Winning Economist Goes to Burning Man.” It’s a fun read.
When you read the article, you can feel Paul Romer’s excitement for cities that work well. So I have little difficulty with what he’s trying to do.
But he has chosen strange words to describe it. Take a look at the first paragraph quoted above. It’s not that the government did something and then let the market take over. The market, if by “market” we mean “voluntary action,” took over from the start.
It takes some doing to go to a completely anarchist (“anarchist,” remember, means “no government”) set up, see how well it is working, and get from it the idea that “Anarchy doesn’t scale.”
I hasten to add that I’m not sure anarchy does scale, which is one reason I’m still not an anarchist. But how would you look at Burning Man, which proceeds despite government barriers, and conclude that anarchy doesn’t scale.
Near the end, Ms. Badger writes:
In Mr. Romer’s Nobel lecture, he implored people to think of cities, especially in the developing world, as places where people get the benefits of interacting with one another. A global economy built on ideas no longer has to be zero-sum, he argued. Everyone can use ideas at the same time. Someone living in America benefits if someone in India becomes better off and invents a vaccine.
I haven’t read his Nobel lecture but I sure hope he didn’t say “A global economy built on ideas no longer has to be zero-sum.” I hope that’s Ms. Badger’s mistake rather than his. One of the basic principles of economics, which surely Paul must know, is that trade is positive-sum with or without new ideas.
By the way, Paul’s excellent piece “Economic Growth” is in The Concise Encyclopedia of Economics and his bio is in the Encyclopedia also.
READER COMMENTS
David D. Boaz
Sep 6 2019 at 8:57am
I was struck by this paragraph:
Yes, plenty of planning — private and non-coercive, which he surely understands is not what economists mean when they criticize “planning.”
David Henderson
Sep 6 2019 at 10:00am
Exactly.
Jon Murphy
Sep 6 2019 at 9:12am
This is good stuff and highlights something I have been thinking about more and more since coming to GMU: the distinction between government and market is really fuzzy.
Both are means of collective action. Both are means of planning. Both have rules and regulation, laws and legislation, convention, custom, leaders, and do-ers. Government is sometimes treated as this large being outside the functioning of the market, a Cthulhu-type entity that just appears when invoked (eg. Murray Rothbard). Other times, government is represented as inextractible from the functioning market (eg Paul Romer above). Both are true and not true, paradoxically.
What is a government? What is a state? We could conceive of it as a sort of firm with certain extra-normal powers of coercion designed to overcome certain transaction costs. In this way, it is comparable to an HOA along certain margins (although we must not take the comparison too far and subsequently fall into “everything the government does is voluntary” or “social contract” type thinking). The distinction between a state and a private-entity is quite blurry. These extra-normal powers of coercion are the main distinction.
But then that distinction leads us only into matters of a jural superior (which is to say an entity that exists for enforcing rules of justice). It doesn’t tell us much about government as a service provider outside that role. That is a whole other question.
The tl;dr version of this is that government and private enterprise is a fuzzy distinction; like many things in econ, the distinction is not particularly precise and accurate. So, I can see the logic behind Paul’s conclusion, although it is incorrect.
Robert EV
Sep 6 2019 at 11:21am
The fundamental distinction between “states” (i.e. nations, states, municipalities, counties) and businesses (including trade organization), is that one is land and citizen based (its lawful borders contingent on land, and citizens of said land), while the other is ownership and employee based (its lawful borders contingent on what it directly owns, as well as those who are employees). Though businesses such as the British East India Company blur this distinction entirely.
So basically no distinction, except that a nation is, at least nominally, ultimately superordinate (as we’re seeing with the US government’s involvement between Huawei and Google), and that states usually have greater difficulty in terminating citizenship.
An HOA is a government (and it is not ‘voluntary’ for those who move in after the formation of the HOA, just as various national governments [USA, Switzerland] are far less voluntary after the initial formation). Every level of government, outside of totalitarian states, has legal limits on what it can do, and also has legally limited means of coercion, though this doesn’t prevent any kind of government from trying to exceed these limits (and often succeeding).
Jon Murphy
Sep 6 2019 at 12:10pm
Can you expand on what you mean by “citizen-based” vs “employee-based”?
Robert Murphy
Sep 8 2019 at 7:49pm
Robert EV wrote: “An HOA is a government (and it is not ‘voluntary’ for those who move in after the formation of the HOA”
Robert, if I bought my car before you even had a chance to look at it, and now you’re looking at it and want to drive it around but I say “no,” would you say I just exercised coercion against you? Or is my purchase (before you were even on the scene) and decision-making authority over who gets to drive the car, part of the voluntary market process?
Robert EV
Sep 6 2019 at 11:00am
https://en.wikipedia.org/wiki/Kowloon_Walled_City#Layout_and_architecture
Population 50,000 (compared to Burning Man’s 70,000 over a much larger area)
When your “anarchist” example doesn’t compare to an equally well-known actual anarchist example, you may want to rethink things.
We need a word for someone who once would have been wise who has lost that wisdom. “Retardation” obviously doesn’t apply (not to mention its current meaning). Perhaps the term should be “(future) Nobel laureate in economics”.
https://www.ecosophia.net/the-dream-of-a-managed-society/
Robert EV
Sep 6 2019 at 11:23am
A long, detailed, critical post was deleted or spam filtered. Possible because of the inclusion of an insulting word.
Can you please repost it minus this word (and the flanking sentences)?
Thanks,
Robert
Amy Willis
Sep 6 2019 at 2:00pm
Robert, It’s posted. FYI, comments with multiple links will generally get held up in our spam filter. A necessary precaution, though it can slow things up a bit.
Josh
Sep 6 2019 at 11:41am
Libertarians don’t generally argue that corporations would work better without a CEO or management hierarchy, or that basketball teams would be better without coaches. We recognize the value of organization and planning. We just want it to be as voluntary as possible. It seems shocking to me that anyone even halfway intelligent would misinterpret libertarians’ dislike for government as a general dislike of all types of planning.
David Henderson
Sep 6 2019 at 2:11pm
It is quite striking, isn’t it? It’s a mistake I would expect undergrads to make, but not Nobel Prize winning economists, especially those who got a lot of their education at the University of Chicago.
Todd Moodey
Sep 6 2019 at 3:57pm
Or even ***Nobel*** Prize winning economists… 🙂
David Henderson
Sep 6 2019 at 5:22pm
Oops. Thanks, Todd. Change made.
Alexandre Padilla
Sep 6 2019 at 1:04pm
David,
I think that Romer is confusing government with governance and it’s not accurate to assume that anarchy means absence of rules or governance. Peter Leeson in his book Anarchy Unbound explains very well the difference. As you mentioned, one implication of governance is that you voluntary join the “project” and under governance you have ability to exit. Under government, you can’t exit and you d0n’t voluntary join the project. Of course, Leeson explains this much better.
This is a recurrent misunderstanding of anarchy; that somehow anarchy = chaos and there are no rules and no governance.
David Henderson
Sep 6 2019 at 2:12pm
I think you’re right that he is confusing the two.
Comments are closed.