Paul Romer has a big idea about how to encourage development in poor nations. The government of Honduras may be willing to test his core thesis. As I understand it, the host nation would pre-commit to change its “rules of the game”. It would set aside some of its land for a new city. The new city would be governed by a new set of rules and laws agreed to by the host nation and international investors. People in Honduras would be free to migrate to this new “enterprize zone”. How this migration would take place remains a work in progress. International capital would flow to this new city because of the high marginal return on investment and safe property rights. People in Honduras would invest more in their education as the opportunity to move to this new city would create a high return to skill. Economic growth would ensue and improve overall well being. The basic micro economic logic behind Paul’s idea makes perfect sense and I’m very hopeful that this could work.