Google Should Liberate A City By Mark Lutter, Foundation For Economic Education
Smart Cities versus Free Cities
Alphabet, Google’s parent company, is taking my advice and building a city. Well, sort of. Sidewalk Labs, an independent company owned by Alphabet, is building a city, or more specifically a district, to test self-driving cars, new forms of public transportation, and the ”Internet of Things” (IoT) — devices, vehicles, buildings, and other items embedded with electronics to enable these objects to collect and exchange data.
Unfortunately, the company did not heed my advice to lobby the government to allow the creation of a special economic zone for their district. That being said, Sidewalk Labs is seeking to opt out of city regulations such as parking and street design, a small step in the right direction.
The district Sidewalk Labs is building illustrates an important distinction between smart cities and free cities. Smart cities seek to use big data and the IoT to improve city management. Free cities opt out of harmful laws and regulations that prevent economic growth and technological innovation. The prototypical example of a smart city is Songdo, South Korea. The epitome of a free city is Hong Kong, China.
Sidewalk Labs’ focus on smart cities is part of a wider trend. Cities around the world are improving their services with information technology. The more important trend in the 21st century, however, is free cities, even if their development is currently lagging behind that of smart cities. There are two reasons why the free cities trend is more important: first, the benefits of smart cities are overrated; second, the benefits of free cities are underrated.
How Free Are Smart Cities?
Smart cities will continue to improve municipal governance. Most of us want to live in cities with little traffic, responsive police, and good schools. Smart cities can help achieve those and more. But much of city administration is secondary to other aspects of urban life. I currently live in Washington, DC. It has a lot of traffic, unresponsive police, and poor schools. In spite of these problems, people continue to move here.
Sustained economic growth is about more than improved administrative efficiency. If DC governance improved by 50 percent, my life would improve, but only marginally. At best, smart cities can better adapt to new technologies, such as driverless cars. However, the primary barrier to these new technologies is often political. The key to growth is to remove these political barriers. That’s what free cities do.
How Smart Are Free Cities?
Free cities are autonomous or semiautonomous cities that opt out of a set of national laws and regulations and import laws and regulations more conducive to economic development. There are two categories of free cities: one for the developing world, and one for the developed world.
The developing world is primarily concerned about catch-up growth. It does not seek to build new technology but simply to harness existing technology and capital to improve lives. Free cities in the developing world could import institutions from the developed world to jump-start growth. Successful past examples include Singapore, Shenzhen, Hong Kong, and Dubai.
Free cities in the developed world could be used to accelerate technological innovation. Amazon, for example, recently moved its drone program from the United States to Canada because the FAA was unable to issue regulations in a timely enough manner to allow Amazon to continue to innovate in the United States. Similarly, Sergey Brin, Google’s cofounder, said that Google, now Alphabet, is largely staying out of health care because it is so highly regulated. Free cities in the developed world could create pockets of regulatory freedom to unleash our best and brightest innovators.
So, Alphabet, please do continue to work on smart cities. But also play the long game. Think of how free cities can improve the lives of the world’s poorest, as well as accelerate technological innovation. Do not discount the possibility of building a free city. And be ready when the opportunity arises.