Tag: hernando de soto

Financial Crises as Information Problems

If you haven’t seen it already, be sure to give a read to Friedman Prize winner Hernando de Soto’s recent piece in Business Week, “The Destruction of Economic Facts.” It’s a fascinating perspective on the economic and financial turmoil that is wracking the United States and the world.

As de Soto perceives more easily from working in developing economies, an important input into functioning markets is good information—about property, ownership, debts, and so on. The “destruction of economic facts” is one of the roots of instability and uncertainty in Europe and the United States: “In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.”

The law and markets are information systems, says de Soto:

The rule of law is much more than a dull body of norms: It is a huge, thriving information and management system that filters and processes local data until it is transformed into facts organized in a way that allows us to infer if they hang together and make sense.

If you’re interested in information and transparency, it’s worth a read.

Is Madonna Eminent? Or Is This Just “Celebrity Domain”?

The AP reports:

In a land dispute pitting Madonna against African villagers, Malawi’s government has sided with the pop star who has pumped millions into the impoverished Southern African country and adopted two of its children.

Villagers have been refusing to move from a plot of land near the capital, Lilongwe, where Madonna wants to build a $15-million school for girls. The government, however, says it had originally planned to develop the plot, and only allowed the villagers to live there until a project was identified.

Lilongwe District Commissioner Charles Kalemba, accompanied by other government officials and representatives from Madonna’s Raising Malawi charity, on Thursday met with about 200 villagers and told them they would have to move. The villagers have been offered other government land.

“Government allowed you to occupy this land because there was no project yet. But now that Madonna wants to build you a school you have to give way,” Kalemba told the villagers. “You are lucky that Madonna has compensated you for your houses, gardens and trees.”…

Headman Binson Chinkhota urged residents to move, saying the school would benefit their children. But Amos Mkuyu said the $1 500 in compensation he received from Madonna for mango trees and three homes was not enough. He said his family had been living on his three-hectare plot for three generations.

Susette Kelo vs. Madonna – that would be a great battle. As usual, the government has a beneficent purpose in taking these people’s land. They took Kelo’s home for a development that would yield “new jobs and increased tax revenue.” They’re taking Amos Mkuyu’s home for a school.  But stealing land is not beneficent; it is not an act of kindness and charity.

In this case the Malawian government says that the villagers are living on government land. But Mkuyu says his family has been there for three generations. Sounds like they thought it was theirs. For a discussion of collective and traditional property inspired by the movie “Avatar,” click here. Hernando de Soto, author of The Mystery of Capital, has spent a career showing how the lack of well-defined property rights hurts the poorest people in the world.