In a recent interview, the illustrious economist Hernando De Soto, author of The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, suggests that complicated and opaque laws, which muddles up the property rights issue, has prompted for the latest market crashes.
On the rule of law...
"when it comes to property rights: most of the world is still in the 19th century. During that time period, the US put all their property information on paper. These "rule of law" standards identified who owned what property - this system is still viable today...
"when independence, solidarity and individuality function under the "Rule of Law, all players are on the same playing field; that is the rules apply the same to all [but note, this concept is non-existent in many parts of the world]. South American and African nations borrowed their laws from their colonizers. In contrast, anarchy has many laws within the same territory.
my comment: In an earlier post Are People Inherently Nihilistic?, we said that the term "anarchy" comes with different references. Here, Mr. De Soto appears to imply that anarchy (or perhaps defined as market turmoil) was caused by the many intricate laws within the same territory, which brings us to the next topic...
De Soto's view on property rights and rule of law's role in today's market crash...
``The basic problem with the financial meltdown today is that with all the convoluted derivatives, trades, bundling, etc. the US does not know where its financial paper is. Thus, the US cannot define who is solvent and who is not. The "Rule of Law" comes into play because property ownership is based on a paper trail. Since the paper trail is incomplete regarding detailed ownership of the property underlying the complex derivatives that were sold in the financial industry, no one knows who owns exactly what and what it is worth. As a result, trust plummets."
my comment: so the questionable application of the "rules" which has led to the ambiguous stance on ownership rights has prompted for a lost of trust or "anarchy".
Besides, excess and poorly defined regulations have prompted for regulatory arbitrage, regulatory capture, administrative lapses by regulators (because of sheer volume of laws, enforceability issues and possible confusion) and amplifies conflict of interest among participants or agency problems. And all these get to be reflected on distorted price signals. I'd like to add that inflation, as a hidden tax, is a major contributor to De Soto's property rights-rule of law dilemma.
In Greg Ransom's Hayek Center (where I sourced this, thanks Greg...) adds that... (bold highlight mine)
``My ancestors recorded property right claims with a central registrar in the no-mans land of Oregon when the region had no legitimately recognized government. The people of the region followed customs of law and governance share among the English and Americans, with the anticipation that their property rights claims would later be recognized by the U. S. government when the region became part of the United States. The story is recounted in Nimrod: Courts, Claims and Killing on the Oregon Frontier by Ronald Lansing of the Lewis & Clark School of Law. Yes, remarkably enough, the story is a murder mystery."
my comment: more evidence that property rights had been observed outside of the realm of government.
On the rule of law...
"when it comes to property rights: most of the world is still in the 19th century. During that time period, the US put all their property information on paper. These "rule of law" standards identified who owned what property - this system is still viable today...
"when independence, solidarity and individuality function under the "Rule of Law, all players are on the same playing field; that is the rules apply the same to all [but note, this concept is non-existent in many parts of the world]. South American and African nations borrowed their laws from their colonizers. In contrast, anarchy has many laws within the same territory.
my comment: In an earlier post Are People Inherently Nihilistic?, we said that the term "anarchy" comes with different references. Here, Mr. De Soto appears to imply that anarchy (or perhaps defined as market turmoil) was caused by the many intricate laws within the same territory, which brings us to the next topic...
De Soto's view on property rights and rule of law's role in today's market crash...
``The basic problem with the financial meltdown today is that with all the convoluted derivatives, trades, bundling, etc. the US does not know where its financial paper is. Thus, the US cannot define who is solvent and who is not. The "Rule of Law" comes into play because property ownership is based on a paper trail. Since the paper trail is incomplete regarding detailed ownership of the property underlying the complex derivatives that were sold in the financial industry, no one knows who owns exactly what and what it is worth. As a result, trust plummets."
my comment: so the questionable application of the "rules" which has led to the ambiguous stance on ownership rights has prompted for a lost of trust or "anarchy".
Besides, excess and poorly defined regulations have prompted for regulatory arbitrage, regulatory capture, administrative lapses by regulators (because of sheer volume of laws, enforceability issues and possible confusion) and amplifies conflict of interest among participants or agency problems. And all these get to be reflected on distorted price signals. I'd like to add that inflation, as a hidden tax, is a major contributor to De Soto's property rights-rule of law dilemma.
In Greg Ransom's Hayek Center (where I sourced this, thanks Greg...) adds that... (bold highlight mine)
``My ancestors recorded property right claims with a central registrar in the no-mans land of Oregon when the region had no legitimately recognized government. The people of the region followed customs of law and governance share among the English and Americans, with the anticipation that their property rights claims would later be recognized by the U. S. government when the region became part of the United States. The story is recounted in Nimrod: Courts, Claims and Killing on the Oregon Frontier by Ronald Lansing of the Lewis & Clark School of Law. Yes, remarkably enough, the story is a murder mystery."
my comment: more evidence that property rights had been observed outside of the realm of government.
