This week the What is The Future for Cities? podcast examined one of the most ambitious and contested governance experiments underway anywhere: Honduras’ ZEDE (Zonas de Empleo y Desarrollo Económico) framework. Episode 385R presented a structured debate on the 2021 paper analysing the ZEDE law’s journey from concept to legal reality, by Jeffrey Mason, Carl Peterson, and Daniela Ivette Cano. Episode 386 featured Niklas Anzinger, founder and CEO of Infinita City and general partner at Infinita VC, who lives and builds in Prospera – one of the most advanced ZEDEs on the island of Roatán. Together these episodes offered a rare combination of critical analysis and on-the-ground experience.

1. Cities are economic actors in competition – whether they acknowledge it or not

A recurring theme was the need to reframe cities as products competing for residents, much like businesses compete for customers. Niklas Anzinger explained that people already vote with their feet: millionaires leaving high-tax jurisdictions for places like Dubai, tech workers shifting from San Francisco to Miami or Austin. Legacy cities often treat governance as mere administration of inherited systems. New cities, built from scratch, start with the mindset of economic entities aiming to attract and retain talent. This competition drives improvement. When residents can easily relocate, cities must offer better services, lower taxes, or more responsive rules to keep them. The alternative is gradual decline as productive people leave.

2. Governance innovation matters far more than physical innovation right now

Both episodes agreed on a surprising point: we already know how to build cities physically. China and Dubai have demonstrated rapid, high-quality construction at scale. The real bottleneck is governance – the rules around what can be built, who decides, how it is funded, and what rights residents and investors hold. ZEDEs grant deep autonomy: independent courts (sometimes adopting common law or foreign models), separate fiscal policy, custom regulations. Prospera, for example, uses a land value tax and experiments with 3D property rights (allowing ownership of air rights above land). These changes enable faster iteration than traditional municipalities allow.

3. The ZEDE experiment carries both powerful safeguards and serious legitimacy risks

The research debate in episode 385R dissected the law’s origins and structure with nuance. On the positive side: constitutional amendments anchor ZEDEs firmly, judicial independence aims to provide predictability for investors, mandatory compliance with international human rights standards, and requirements like 90 % Honduran workers receiving 85 % of wages. Developers like Prospera voluntarily renounce expropriation powers and offer compensation well above market value. On the critical side: the 2012 political crisis (midnight removal of judges opposing the predecessor law) casts a long shadow. Concerns remain about land rights for indigenous and Garifuna communities, potential erosion of national social standards, and the quasi-corporate nature of oversight through the appointed CAMP committee.

4. Monopoly governments resist improvement; competition forces discovery

Niklas Anzinger drew a direct parallel between government monopolies and market monopolies. Many services we assume only governments can provide – policing, courts, infrastructure, even social security – have private or competitive examples elsewhere. Competitive markets are not perfect, but they create ongoing mechanisms for discovery and improvement. Monopolies lack that pressure. Governance service providers (the core Prospera model) introduce choice. Residents opt in voluntarily, knowing they can leave. This aligns incentives: the zone must deliver value or lose its customer base. The counter-argument from the research debate: such deep autonomy risks creating insulated enclaves that prioritise foreign capital over national cohesion.

5. Innovation is always uncomfortable – and that discomfort is the signal it matters

A standout moment came when Niklas quoted Y Combinator co-founder Jessica Livingston: people love innovation in the abstract but reject it when concrete. New ideas threaten existing interests, disrupt familiar patterns, and introduce uncertainty. Yet history shows most major advances – from ride-sharing to charter cities – faced fierce initial resistance. ZEDEs and startup cities like Prospera are concrete experiments. They test refugee cities (letting zones admit the workers their economies need), decentralised networks (one residency card accessing multiple hubs), and regulatory sandboxes for biotech and other high-innovation fields. The discomfort they provoke is evidence they are probing real boundaries.

After this week’s 385R and 386I episodes the picture is clearer: cities face a governance crisis more than a construction crisis. Traditional monopoly structures struggle to adapt quickly enough to demographic shifts, technological change, or economic competition. Honduras’ ZEDE framework – flawed, controversial, and still evolving – represents one of the boldest attempts to introduce competition, autonomy, and resident choice into urban governance. Prospera and projects like Ciudad Morazán are living laboratories testing whether these ideas can deliver prosperity without sacrificing rights or legitimacy. The research debate offers balanced critique; the interview brings lived experience from inside the experiment. Together they challenge easy assumptions about what cities can and should be.

So here’s the question this week leaves us with:

If cities really are in competition for talent and investment – what rules would make your city more attractive tomorrow?

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Next week we are celebrating Christmas with a very positive and inspiring conversation with Maurice Berger and Raquel Medrano Clemente, co-founders of Liveable Cities Collective!

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Share your thoughts – I’m at wtf4cities@gmail.com or @WTF4Cities on Twitter/X.

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