Two paths to good cities

There are two paths to nice cities: to take a messy old city and fix it, or to start from scratch.

The process of solving the problems of an old city is hard. Some cities started over owing to the destruction caused by war, an earthquake, or a great fire. We wouldn't wish that on any city. So there is going to be no opportunity to start over.

The other strategy consists of building new cities from scratch. This has traditionally been a troublesome problem. Cities like Chandigarh or Brasilia haven't worked out too well. The designers who dreamed up these cities did not understand the complexities of the genuine urban life.

I don't know if Bandra-Kurla Complex was intended to be an attempt at urban planning. But if it was, the designers surely knew nothing about what makes a financial centre. All they have there is a few towers housing large corporations. The entire ecosystem of finance - myriad small firms, service providers, even coffee shops - is missing.

There are people who think differently. There is increased confidence these days that it's possible to start from scratch and build good new cities. In India, the most important experiment of this nature is GIFT, which is near Ahmedabad/Gandhinagar. It will be interesting to see how this works out. Read Greg Lindsay's article in fastcompany.com on these radical ideas and opportunities.

Another experiment which is taking place in India, with the establishment of a new high-quality city, is Lavasa.

The real challenge is that of going beyond a first sensible urban plan and some sensible urban infrastructure. Once the machine is set in motion, how will it continue to work? It will inevitably run into problems of urban governance. How can we be sure that the problems of governance and elections, where Bombay has failed so badly, will not bedevil Lavasa?

Here again, there is a slow long path and there is an attempt at a short solution. The slow, long path is to undertake deeper reforms. The 73rd and 74th Amendments to the Indian Constitution began that process but a lot more needs to be done.

In China, the biggest cities (Beijing, Tianjin, Shanghai and Chongquing) have the status of provinces. This idea, of a `direct-controlled municipality' is equivalent to cities like Bombay, Delhi, Calcutta, Madras, Bangalore being states who directly elect a state government and directly get Finance Commission funds from the central tax sharing. This would be a big step forward in improving urban governance in these giant cities.

In some countries, governance is so bad that such reforms are inconceivable. Some countries are just not able to figure out how to do urban governance. Paul Romer's 2nd big idea is: Would it help if a country like Sweden or Canada was given a 50-year lease on a 100 square kilometre block of land, where it would build a high quality city with first world urban governance? He calls this charter cities. I have a blog post which engages in an alternative history on such a theme.

Obama's left turn

I wrote a column in Financial Express about Obama's left turn.
Also see:

• The associated editorial in Financial Express.
• White House nightmare persists by Ed Luce in the Financial Times.
• Neil Irwin in The Washington Post on the difficulties that Bernanke is facing on getting a second term. Also, see this sharp drop in the price of the Bernanke contract at Intrade.
• Analysis by Michael Grunwald in Time magazine.
• Response by Viral Acharya and Matthew Richardson in the Financial Times.

How efficient is the traditional Indian family-run business?

A perennial debate rages in India, about the merits of the traditional family-run business versus the knowledge of the fancy-pants consultant or MBA. A remarkable paper by a group of economists sheds new light on this question. I wrote a column in Financial Express today titled Are Indian family businesses well run? where I describe these results and interpret them. Also see this column by Nirvikar Singh in Mint on the same subject.

The Internet changes everything: Research edition

An amazing story of Internet-scale collaboration to prove a theorem in mathematics.

Interesting readings

• Barbara Crossette on the country that is the biggest pain in Asia.
• India is mired in a difficult process of learning how to achieve a well functioning liberal democracy. Writing in the Wall Street Journal, Amol Sharma and Jessica E. Vascellaro look at the problems with freedom of speech in India. And, writing in the Financial Times, John Elliott on India's silliness in giving out visas.
• New years day reading: the trio of C. Raja Mohan, Pratap Bhanu Mehta, Bibek Debroy in the Indian Express;
  Sunil Jain in Business Standard;
  Swaminathan S. Anklesaria Aiyar in the Economic Times.
• Jayanth Varma in Financial Express on India's exposure to capital flows.
• P. Vaidyanathan Iyer in the Indian Express on what to do with the Planning Commission.
• Dhiraj Nayyar in Indian Express on central bankers.
• On railway reforms: Dhiraj Nayyar in the Financial Express and Sarabjit Arjan Singh in the Indian Express.
• Ashok Desai in the Telegraph on India's place in the Indian ocean, and William H. Avery in Financial Express on what India should be doing in the next decade.
• Sharon LaFraniere in the New York Times, on Chinese scientists returning to China.
• Ravi Kanbur and Eswar Prasad on the monetary policy framework for emerging economies.
• Richard Martin in Wired magazine on thorium-fired nuclear plants. Also see the Energy from Thorium blog.
• Tarun Ramadorai in Financial Express on Dubai.
• John Lee on the generational change in China's leadership and on India.
• Martin Feldstein suggests you should not be investing in gold.
• Mark DeWeaver on the strange place called China, and Carol Mann on the strange place called Afghanistan.
• On the independence of American universities. Also see here. Could the International University of the People be useful for a few million people in India?
• Robert Shiller in the New York Times on the usefulness of local currency, GDP-linked securities issued by governments.
• DARPA is a model for how to put public money into research. In the New York Times, William Saletan reviews a new book on DARPA by Michael Belfiore.
• The rules of the game in hijacking have changed.

How leftist is India?

I wrote a column in Financial Express today: How leftist is India?. This draws on the data shown in this previous blog post. I just noticed a piece in The Economist which dwells on related themes which is well worth reading.

Many people wrote me email about this piece. An important criticism of this evidence is that individuals parse questions differently across countries. In India, it's easy to construct questions such as: The government must setup more PSUs so as to give jobs to the people where it will seem that there is overwhelming support for a more socialist position. The main advantage of the Pew data is that they are doing it, across time, and across countries. More fine-grained measurement of political attitudes would surely be nice to have. But we don't yet have such household survey databases in India. The CMIE Consumer Pyramids is good data - but on politics they ask really only one question, that of the most favoured political party.

Understanding the crisis

As the months are going by, we're slowly building a better picture of what went wrong and why. If you want to only spend two hours on figuring out the financial crisis, then listen to this interview with Charles Calomiris, and read this interview with Raghuram Rajan.