Supply and demand of property rights

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Famed Peruvian economist Hernando de Soto has argued forcefully for the protection of property rights as a key ingredient in economic development. His book The Mystery of Capital became a big hit with its argument that the poor had plenty of capital but that the lack of property rights meant it was unusable. De Soto hammered home this point again with the publication of Making the Law Work for Everyone. While there is general consensus on the importance of property rights, there is still a huge, unanswered question: How do we create them?

De Soto was not the first to recognize the value of property rights. In 1898 the United States took possession of the Philippines, and shortly thereafter attempted to create a system of property rights. A new paper by Noel Maurer and Lakshmi Iyer looks at this historical episode to see if there's anything we can learn about attempts to create property rights. The U.S. attempt to redistribute Church lands and create a comprehensive system of land titles proved to be a slow and rather unsuccessful process.

The authors draw an interesting lesson from the whole episode; in short, the attempt to create property rights failed because the demand for such rights on the part of the poor peasants did not match the cost at which such rights were being supplied by the U.S. administration. In other words, it's not cheap to create property rights, or at least it wasn't at that time. Maurer and Iyer suggest at various points that local initiatives to create property rights might be more effective than externally enforced systems - multilateral agencies take note!    


Ryan Hahn

Operations Officer

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