Special Jurisdictions as Laboratories of Governance

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Keywords

special jurisdiction, special economic zones, SEZs, competitive governance, experimental science, political science, fintech

Abstract

Special jurisdictions—areas where different laws apply than those that prevail more generally—introduce a new way to put political reforms to the test. In echo of the “laboratories of democracy” label attached to states in the United States, special jurisdictions provide laboratories of governance. They have already proven their worth in teaching policymakers what works and what fails. Special economic zones in China, for instance, demonstrated how market- friendly reforms can drive economic development. Worldwide surveys of special economic zones have also demonstrated what doesn’t work: giving politicians direct control over the location, design, and operation of a zone. More successful zone programs delegate such decisions to private firms. The experiments have grown more bold of late, with special jurisdictions trying new approaches to the common law, fintech regulation, and government itself. Limits apply, of course; humans should not be treated like lab rats, forced to suffer unwelcome treatment. On that count, too, privately planned and run special jurisdictions fare better than public ones. Despite widespread discontent with traditional governments, systemic change remains difficult, risky, and ethically suspect. Special jurisdictions offer another approach, bringing the power of science to bear on the problems of governance.

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