Economic historian Robert Higgs was a guest at my and Karol’s Virginia home this past week. Bob lives in Covington, Louisiana, which is on the north shore of Lake Ponchartrain, 25 miles north of my hometown of New Orleans.
Bob, Karol, and I were discussing economic development, along with Hernando de Soto’s work on the importance of formalizing property rights (especially rights in real estate). Bob observed that both Covington and New Orleans have the very same system of land titling and ownership registration. It’s a very formal system that — in a way to elicit de Soto’s admiration — makes clear who owns which piece of property.
And yet, as Bob points out, the economic conditions in Covington differ dramatically from those of New Orleans. New Orleans suffers even more than the typical American inner city from violent crime, and New Orleans is much more economically stagnant than is the typical American inner city. Indeed, one significant reason that the north shore of Lake Ponchartrain has become such a desired location is that New Orleanians are increasingly seeking a refuge from crime — which is to say, a refuge from distressingly insecure property rights.
My parents recently moved from New Orleans’s close-in suburbs to the north shore. I easily witness the economic dynamism that is now transforming the north shore from a sleepy, rural outpost into a vibrant, culturally interesting, and wealthy community – while New Orleans proper is stagnating.
De Soto’s point is important. But it must not be oversold; it’s no magic bullet. Perhaps formal, impartial, and explicit property registration is a necessary condition for economic growth. It is not a sufficient condition. If it were sufficient, inner-city New Orleans would be just as economically dynamic and robust as is the north shore of Lake Ponchartrain – a place just 25 miles from the French Quarter and with the very same system of formal, impartial, and explicit property registration.
