Paths to Property

by Don Boudreaux on January 2, 2008

in Foreign Aid, Property Rights

Karol and her Mercatus
colleague Paul Dragos Aligica have just had their important new
monograph — Paths to Property — published by the prestigious
Institute of Economic Affairs.  (And my colleague Pete Boettke supplies
the Foreword.)

Karol and Paul challenge the conventional wisdom
(made popular today by certain Irish rock stars) that Africa’s poverty
can be solved with more foreign aid.  But nor will prosperity emerge
from simple cookie-cutter "market solutions."  Property rights and
markets are utterly essential for prosperity, but these must emerge
from the bottom up.  Top-down imposition tends to produce sorry
results.  Empirical examples abound, drawn from Karol’s extensive
fieldwork in sub-Saharan Africa

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The other Eric January 2, 2008 at 11:47 pm

William Easterly, who was at the World Bank, wrote about how difficult it is for large, bureaucratic organizations to actually help anyone with aid. Easterly wrote "The White Man's Burden" which is a great, and frustrating, read. The bigger the aid funding agency or foundation, the more likely it is that they will look for top down planners to connect to– often because they are already on the speed-dial (we used to call it a roll-a-dex long ago). Planners already know the answers. Planners like and trust outside experts.

But the evidence says they fail. From the book: "The West spent $2.3 trillion and still had not managed to get $4 bed nets to poor families. The West spent $2.3 trillion and still had not managed to get $3 to each new mother to prevent five million child deaths." More aid is just more money spent.

The Mercatus Center's work is important because the most effective support for developing countries seems to be, well, supporting development. Easterly wrote about 'searchers' who apply piecemeal problem solving, small scale loans, bottom-up problem solving and market-related solutions in the field.

Because these people are out in the field, doing actual work with local people, not paying a staff to communicate world changing strategies in New York and London (or buying sunglasses to wear at night) they often get missed by the big agencies.

Property rights provide stability in commerce and family relations across cultures. Even fitfully growing commerce, and basic property rights, in a hundred villages may be enough to slow a few warlords from running rampant. Property ownership creates social stability in ways both subtle and powerful.

As we cede more property rights in the U.S., and water down the definition of what private property means, I wonder who should be paying the most attention the articles in this report?

Colin January 3, 2008 at 5:39 am

The ignorance of the importance of property rights is, unfortunately, wide spread and as my anecdote will illustrate, is rampant among even very well educated people.

With my undergraduate career in economics and history nearly finished I have been able to see the very different ways that economists view the world and the way historians and other scholars in the soft social sciences view the world.

During this recent semester I had two history classes as part of my minor in history (I am a majoring in economics). One history class was a history of the Caribbean and the other was the social history of Latin America. The professors of both classes confidently stated that free markets made people in the Caribbean and Latin America worse off.

During office hours and after class, I talked to both of them and reminded them that whenever and where ever free market approaches have failed in LATAM and the Caribbean it has been in countries without the requisite property rights and rule of law to uphold these property rights. To support my arguement I mentioned the history of economic development in Western Europe and Japan and I also told them about the work of Hernando de Soto. Their responses both pleasantly surprised me and horrified me at the same time.

I was pleasantly surprised that they were quite receptive to the case I was making. They both seemed to genuinely take an interest in what I was saying and they listened as if they were learning something new as opposed to listen while forming a knee jerk rebuttle. While the fact that my line of arguement recieved a much warmer reception than I had anticipated was the pleasant surprise, what horfied me was that two smart, well educated people appearantly had never heard the case for property rights in all of their years of schooling.

The fact that an undergrad like myself had to teach two PhD holding professors about something as elementry and crucial as property rights shows the extent to which entire departs, at both undergrad and graduate level, neglect to even introduce their students to the case for property rights. Their ignorance also shows the degree of isolation that many academics in the soft social sciences and humanities experience.

If people, who dedicate their lives to studying the human exprience, are ignorant of property rights then that means that most citizens, with far less education, are also ignorant of property rights and its role in being the corner stone of economic growth. With vast segments of society being uninformed about the concept of property rights, let alone its functions, it is no wonder that politicians can talk the public into increasingly giving up its rights to property in exchange for hollow promises of some sort of "greater good."

vidyohs January 3, 2008 at 6:25 am

Very interesting, Colin, thanks.

Scary indeed. But, not necessarily surprising.

SaulOhio January 3, 2008 at 6:58 am

It amazes me how often people criticize free markets based on experiences of what happens in the absence of property rights. I've been told capitalism is a bad thing because of disasters in privatizing large government industries in thrid world nations, or "deregulation" in California. In these instances, free market capitalism is clearly innocent–its got an alibi!

My congratulations to those people actually out there, like Hernando DeSoto and the people at the Mercatus Center for their work, doing empirical research, not only proving again and again the value of property rights, but improving our understanding of how they work.

Jon January 3, 2008 at 8:56 am

In reference to part of the post, anyone see last season's SOuth Park Episode with Bono in it?

I love how they completely nail him for the 'productivity' of all his aid work.

SaulOhio January 3, 2008 at 9:42 am

The big problem with solving poverty through property rights is this: Its not sexy. There's no opportunity for people to display their compassion. No need for rock concerts to raise money. No opportunity for politicians to charge to the rescue. No cause for people to claim an altruistic moral high ground. Nobody has to charge to the rescue on a white horse. Just people quietly going about their business making profits, poor people raising themselves out of poverty through hard work and saving.

vidyohs January 3, 2008 at 10:11 am

Good post SaulOhio.

If I may add though, I suggest that part of the problem with our USA population especially is ignorance of exactly what property is.

From my observations when anyone is asked if they own property they think of land and/or a house on it, and they say no as a reflex.

How few in my experience think of that car, that savings account, those clothes in the closet, those jet skis/dirtbikes/ATVs, that time share condo in Colorado, that jewelry they wear, the money in their wallet, all of the furnishing in there dwelling, etc. etc. etc.

Those things are property that either one can claim absolute ownership of or they can be taken away.

How many of us have paid attention to the mantra of the looney left when they talk about how we should emulate the "native Americans" because they didn't own property and were organized on socialist lines. Their mantra is so easy to destroy by simply knowing what property is, even down to understanding that yes in stable indian communties where agriculture was performed each individual family did have a plot that was "theirs".

Ignorance is just such a killer and can be so easily manipulated by the skilled.

I believe the left preys on that ignorance and keeps the ignorant focused on land and/or a house. That makes it easier for them to create the divisive conditions where resentment can flare into votes for socialism and "redistribution of the wealth".

vidyohs January 3, 2008 at 10:13 am

Ooooooh my bad. Fourth paragraph last sentence should read at the end , "all of the furnishings in their dwellings, etc. etc. etc."

vidyohs January 3, 2008 at 10:16 am

Oh, and add to the mix all of the many many people that do not want to own land or a dwelling, and who are perfectly happy renting an a home or an apartment. I know people that are actually scared to think about living outside the rabbit warrens of big cities.

However they still need to be aware of just how much property they do own.

Donate Real Estate October 10, 2008 at 10:53 pm

I'm a big fan of hernando de soto and the ild.

But its not clear to me if their approach would be considered to be bottoms up or top down.

My understanding however is that they are getting results.

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