Make Honduras Great
We have a new working paper by Jorge Colindres and myself (Mark Lutter) on how charter cities can make Honduras great. We propose a practical plan for implementing charter cities to help develop Honduras and stem the refugee crisis. Below is the abstract
Read MoreWe propose building charter cities to help develop Honduras and alleviate the refugee crisis. Charter cities are large real estate developments under a new jurisdiction with a blank slate, or close to it, in commercial law. The new jurisdiction allows the charter city to adopt the best practices in governance, attracting investment, creating jobs, and stimulating economic growth. Singapore, Hong Kong, and Dubai were able to become world class cities due in large part to their governance, the same opportunity exists in Honduras.
Legislation which allows the creation of charter cities, known as Zones for Employment and Economic Development (ZEDEs), exists in Honduras. However, because of the complexity of creating a new legal system, no charter city has been publicly approved. Our goal is to demystify the challenges of creating a charter city such that it can become part of the strategy of developing Honduras. We propose a plan and timeline which demonstrates the cost effectiveness of charter cities as a policy strategy for poverty alleviation and development.
The paper is split into two sections. First, we review the migrant crisis, the failed solutions, and the governance challenges of Honduras. Second, we review the ZEDE legislation, offering a plan for developing a ZEDE. The appendix has additional information regarding models for the real estate aspect of a charter city.
Evolution, Uncertainty, and the Asymptotic Efficiency of Policy
A great new working paper by Brian C. Albrecht, Joshua R. Hendrickson, and Alexander William Salter. Below, find the abstract for the paper, Evolution, Uncertainty, and the Asymptotic Efficiency of Policy
Politics, like any social process, involves selection mechanisms that determine whether the
outcomes of the process are efficient. This paper presents a model of politics as an evolutionary
process. The decisions of interest groups to enter politics determines the selected policy. Our model
leads to three main results. First, the political process selects for efficient policies in the long run. This
mirrors how markets select for efficient firms. We call this attribute asymptotic efficiency. Second, the
bargaining of interest groups bounds the level of inefficiencies that can exist in the short run. The bound
decreases when organizing interest groups becomes less costly. Finally, policies that appear inefficient
in a static analysis can be efficient once economists consider the dynamic nature of political decisions.
We argue that viewing the political process as a selection mechanism allows political economists to use
efficiency as a tool for positive economics. In our approach, applied political economy involves looking
for relevant costs that make the policy efficient. However, our approach does not rob political
economists of the ability to make meaningful normative statements, but only constrains the type of
statements made.
Private Prerogative, Public Purpose
Alexander William Salter, Assistant Professor of Economics in the Rawls College of Business, and the Comparative Economics Research Fellow with the Free Market Institute, at Texas Tech University, writes on political entrepreneurship.
I contribute to the literature on political entrepreneurship by analyzing the role of the political entrepreneur in Frederick the Great’s Anti-Machiavel. Frederick the Great (Frederick II of Prussia) is best known for turning Prussia into an international power during the mid- to late-18th century. His perspective on governance contains many valuable insights into the nature of political entrepreneurship, the institutions within which it occurs, and its effects on material prosperity. I detail key points from Anti-Machiavel that can advance scholarship on political entrepreneurship, and conclude by discussing how Frederick’s insights into political entrepreneurship can be put to work.
Private Prerogative, Public Purpose
Read MoreSovereign Entrepreneurship
Alexander William Salter, Assistant Professor of Economics in the Rawls College of Business, and the Comparative Economics Research Fellow with the Free Market Institute, at Texas Tech University, writes on sovereign entrepreneurship.
I develop a theory of sovereign entrepreneurship, which is a special kind of political entrepreneurship. Sovereignty is rooted in self-enforced exchange of political property rights. Sovereign entrepreneurship is the creative employment of political property rights to advance a plan. Building on several literatures in political economy and the managerial-organizational sciences, I show how sovereign entrepreneurship is related to ownership and residual judgment rights to government activities. I illustrate the theory by using it to reinterpret the rise of modern states as the entrepreneurial reassembly of ownership rights and control rights within government. I conclude by discussing future avenues of research on sovereign entrepreneurship.
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