Skyhooks versus Cranes

On his Charter Cities blog, Paul Romer captures the why of the Nobel for Elinor Ostrom:

Most economists think that they are building cranes that suspend important theoretical structures from a base that is firmly grounded in first principles. In fact, they almost always invoke a skyhook, some unexplained result without which the entire structure collapses. Elinor Ostrom won the Nobel Prize in Economics because she works from the ground up, building a crane that can support the full range of economic behavior.

Read the whole thing »

BTW, it looks like Paul is having some success in Honduras with adoption of his Charter Cities proposal. No investors yet…

Mr. Romer is undaunted. He’s shopping for a government to serve as guarantor.