That’s Just What We Need

An American ghost city! If the Chinese can build ghost cities, so can we, gosh darn it.

After laying out his case that what ails our economy now is a coordination failure, Laurence Kotlikoff, Boston University economics professor and senior economist at the President’s Council of Economic Advisers under Ronald Reagan, puts the “lure” in “coordination failure”:

Let’s have the government allocate 20 of its more than 10,000 square miles of public land to build a charter city. We can call it Romerton after New York University economist Paul Romer, who is organizing a charter city for Honduras.

With our country’s population slated to explode by more than 130 million (today’s population of Japan) by the middle of this century, we’ll need new cities to avoid horrific congestion in existing ones. Building Romerton can usefully employ 2 million out-of-work construction workers who won’t otherwise find jobs. And our remaining 27 million unemployed or underemployed people can readily find work with businesses that the new town will attract or the government can establish. Over time, the government would sell its ownership claims to the land, buildings and companies that it helped develop, and could even turn a profit.

We already have a ghost city: Detroit. If we’re going to employ 2 million workers on a make-work project, why not do it where it could do some good right now rather than in the middle of the next century? Detroit is crying out for re-landscaping, finding a way to turn a collapsing shell that once was a city of nearly 2 million souls to one of fewer than three quarters of a million, less than half its former size.

I’m concerned that Dr. Kotlikoff doesn’t appreciate that we have just been through a speculative bubble in housing. The economic damage done by a bubble isn’t just that prices rise into the stratosphere and then reverting to the mean, injuring investors who bought at peak. It’s the misallocation of resources. In this case we have far too large a residential housing construction sector, commercial construction sector, and financial sector than we should. The objective of policy should be softening the re-allocation, not preventing it from occurring.

We already have hundreds of thousands, possibly millions of unsold and unoccupied units. Building Romerton won’t just employ those construction workers. If it’s effective it will further reduce the value of the existing unsold housing stock in Southern California, Nevada, Arizona, and Florida. If it’s not effective, we’ll have our very own Ordos.

I assume that Dr. Kotlikoff also wants to waive environmental impact statements on all of that construction in federal lands and the roads and so on leading to the construction. Otherwise, what he’s proposing will be a dozen years into the future.

If we’re going to relax environmental impact requirements, there are already any number of energy sector projects that are “shovel-ready”. A bird in the hand is worth two in the bush, no?