Paul Romer at TEDGlobal 2009: Running notes from Session 7

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Paul Romer is a Stanford economist with radical ideas for new global growth. The first to the stage this morning, he has a little difficulty with his slides and jokes, “My work is about how wonderful technology is.”

When the first slide does appear he urges us look at the picture of African students doing their homework under streetlights because they have no electricity in their homes. He zeroes in on one of the students and christens him Nelson. “I’ll bet Nelson has a cell phone,” Romer remarks. He then asks the audience why Nelson would have a cutting edge technology like a cell phone but no access to electricity. His answer — rules. Romer explains that in this country the electric company has to provide electricity at a subsidized price, and so cannot make profit. They have no incentive or ability to reach more customers. The president has tried to change pricing but protests broke out from businesses and the public.

“How can we change rules? ” Romer asks. He answers his question by saying that we can do so by giving more choices to people and leaders (who he notes in many countries are also people). If you give to only one side you have tension, but giving choices to both will produce a set of rules for changing the rules.

He shows a picture from NASA of the Earth at night, clearly showing the electric lights of cities and town. He points out that North Korea looks like a black hole compared to neighbors, and reminds us that North Korea and South Korea began identically but made choices that led to very divergent paths. He points to the Caribbean. He shows how dark Haiti is compared to the Dominican Republic and that they’re both dark compared to Puerto Rico. Haiti warns us that rules can also be bad when governments are weak, as opposed to the strong government of North Korea.

He moves our attention to China. China, he says, demonstrates both the strengths and weaknesses of working with rules. They developed steel and gunpowder, but never developed rules for spreading those. Then, they developed rules that cut them off while other countries were zooming ahead. However, in the late 1970s, growth took off in China. Something changed. Romer shows that the brightest spot in China is Hong Kong. Hong Kong was a small bit of China that for most of the 20th century operated under a different set of rules, that were copied from working market and under the care of Great Britain. Hong Kong, he says, became a model people could copy when the rest of mainland moved to the market model. The demonstrated successes there led to a consensus on a market model move throughout the economy.

Romer asserts that we must preserve choices for people and operate on the right scale. A village is too small and a nation too big. Cities give you the right balance. The proposal is he conceives of is a charter city with investors to build infrastructure, firms to hire people and families who will raise children there. All he wants is some good rules, uninhabited land and choices for leaders, which he thinks should translate to partnerships between nations

He notes that some of the audience might be starting to think is this bringing back colonialism. Romer urges everyone not to let the emotions that come up get in the way and shut down new ideas. He says that colonialism involved coercion and condescension — this model is about choice, which is the antidote to those two.

He proposes charter cities in Guantanamo Bay, Cuba (calling Canada to take a partnership there) and throughout Africa. He says that most leaders he’s talked to get the idea. They understand that they can make more credible promises to long-term investors if they do it with a partner nation. Romer claims that only a failure of imagination will keep us from delivering a global win-win solution. The power of ideas will do it, he says. We can share ideas and we all get more. We must keep moving progress forward so Nelson and his friends don’t have to study under street lamps.

At the end of the talk, Chris Anderson does a quick audience poll by a show of hands. “What do you think? Mad or exciting?” Anderson asks. Overwhelmingly, the hands say exciting.