A NEW PARADIGM FOR URBAN-DEVELOPMENT

The standard urban development paradigm recognizes the emerging dominance of capitalism in developing countries, but it assumes away the need to promote and nurture indigenous capitalist institutions. Current urban policies seek to strengthen institutions that deliver infrastructure services rather than those that enable producers and government administrators to be more productively entrepreneurial. The new urban paradigm proposed here is based on a process of "institutional radicalization" that would change the rules, the enforcement characteristics, and the behavioral norms of the institutions that provide the context for economic growth. The new urban paradigm requires a reexamination of the role of the informal sector with respect to the market economy. Urban policy must seek to discourage rent-seeking entrepreneurial behavior while promoting productive and profit-oriented entrepreneurship. The paper describes the policy implications of the new paradigm and the instruments that can be used in a strategy of urban development.