What do the cities of the future look like? I predict that the cities of the future will be privately run. Here’s why.
Sometime between when cities were located near arable land and fresh water, or just navigable water, and the present, where and when most cities arose was based chiefly on a meeting between an innovation (such as a new way to mine or use metal or a timber ) and a natural resource (such as ore or timber). This brought industry to the resource, which created jobs, which drew people.
Traditionally, companies have chosen where to locate based on four main factors:
It’s hard to mine where there’s no ore.
It’s hard to mine if no one lives or will live near the mine.
It’s hard to mine if people can’t get to the mine
4. The state
It’s hard to mine when the regulations and taxes make it difficult.
But today’s first-world economies are service and not manufacturing based. Google and Facebook don’t turn iron ore into steel and make automobiles. They take people and combine them with computers to create services.
The transition from a manufacturing to a service economy in the first world presents a massive opportunity to radically change the way cities rise, which will ironically occur first in the third world.
The shift from making things to doing things will render nearly inconsequential three of the four reasons companies choose to locate.
Innovation in the services sector requires few natural resources.
The third world is outpacing the first in math and science education. English is quickly becoming ubiquitous. Travel and telecommunication are becoming cheaper and easier.
If a person from anywhere can be qualified to work, and can work anywhere, much less infrastructure is needed. What infrastructure is needed is incredibly cheap to implement and will soon be nearly ubiquitous.
4. The state
Regulations and taxes will continue to affect the feasibility and profitability of service-sector innovations.
What I think it means for the state to be the primary factor in business location is that businesses will be asking themselves three main questions when deciding where to locate:
1. Where are the barriers to entry lowest?
Service-sector innovation happens quickly. Having to dick around with licenses and paperwork for months to enter the market with your product can be the difference between failure and success.
2. Where are the regulations most transparent, fair and consistent?
Byzantine, labrynthine, compliance-costly, incumbent-protecting, ever-changing regulations kill otherwise profitable ideas.
3. Where are the taxes lowest?
In other words, cities will rise where companies find the best states.
In this case, best means all of the above — low taxes and barriers to entry with a clear, fair, stable regulatory environment — PLUS fair and effective contract enforcement and well-protected private property rights.
So how do you get the best state? The same way you get the best of everything else: innovation through market competition!
Unfortunately thus far the attempted cities and seasteads haven’t been able to offer fair and effective contract enforcement and strong private property rights. And they’ve failed to protect the businesses that’ve tried to locate there from fuckery by other states.
But demand for better cities is rising. And when demand rises, the market provides.
Smart entrepreneurs may have to go inside, like the Honduras experiment, or under, over or beside (Waterworld holla!) existing coercive states. But they will be looking to build voluntary “states” that compete with coercive states and other voluntary states to offer other entrepreneurs an environment where innovation can flourish and wealth can be created.
If sold as such, with a valid business plan for creating that environment, I see no reason charter cities, seasteads or whatever else could have any trouble raising enough money to get started. It’s only a matter of time.