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Monday, November 10, 2014

Should Google Run a City?

Let the search powerhouse experiment with governance

Would you want to live in a private city?

No? What if Google were running the city?  Would that change your mind?  Google building and running cities is less crazy than you think.

Google has expressed interest in constructing cities, and Larry Page wants to create autonomous zones that can experiment with social rules. Combined, these two ideas have the potential to transform the world. Institutional change can jumpstart economic growth while competent, efficient administration can ensure those gains are not lost to corruption.

The idea of private cities typically invokes fears of a dystopian future, where malevolent corporations ruthlessly exploit the population for profits. Government is seen as a last defense against private tyranny. However, by replacing a nameless corporation with Google, the thinking changes. Rather than fear predation, we appreciate the benefits of efficient administration.

Companies like Google think long term. They are unlikely to sacrifice their hard-earned reputations for short-term gains. Further, Google is pragmatic. It will think outside the status quo, adopting the best policies to attract residents. Finally, Google is sufficiently big; it will not be intimidated by rent-seekers trying to live off others’ work.

Despite these benefits, many will be skeptical. People living in the United States and Europe tend to have good lives and fairly well-run cities. The recent battles between Uber and taxi cartels show the potential for improvement, but to a Westerner, the benefits of allowing Google to run cities are marginal.

The real potential for Google and others creating private cities is in the developing world. Poor countries are poor because they have predatory governments. These governments prevent their citizens from engaging in entrepreneurship. They also give monopoly privileges to their friends and family, enriching them at the expense of everyone else in society.

These restrictions typically benefit the elite of those societies, condemning the masses to poverty. Without secure property rights and the rule of law, economic development is a pipe dream. Google could offer hope.

Because Google is worldwide and sufficiently well known, it could negotiate with developing nations’ governments for institutional autonomy to run private cities. Governments would merely need to get out of the way. This may seem like a tall order: abdicating power is rare. Luckily, it is already happening.

Honduras passed a law allowing for ZEDEs (zonas de empleo y desarrollo económico), or autonomous regions. ZEDEs allow Honduran regions to opt out of civil and commercial law and import a legal system of their choosing. Further, ZEDEs are able to create their own administrative systems, allowing reprieve from corruption. 

Honduras is just the start. El Salvador and Costa Rica are considering creating their own autonomous regions. Whether the decision makers at Google choose to get involved is up to them. But Honduras offers a great opportunity to follow the company's stated goals.

Read this article is Portuguese here

  • Mark Lutter is writing his dissertation on proprietary cities at George Mason University.