Friedman Prize Winner: Hernando de Soto


Peruvian sociologist Hernando de Soto has won the second Milton Friedman Prize for Advancing Liberty, which is awarded every two years by the Cato Institute. As the author of 1989's The Other Path and 2000's The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, De Soto is an inspired choice (as was the first winner, economist Peter Bauer).

De Soto's presence has graced the pages of Reason. Check out, for instance, Citadels of Dead Capital: What the Third World must learn from U.S. history.

And here's a fantastic interview with the man himself that appeared in our February 1994 issue.

A snippet:

If you take a walk through the countryside, from Indonesia to Peru, and you walk by field after field–in each field a different dog is going to bark at you. Even dogs know what private property is all about. The only one who does not know it is the government. The issue is that there exists a "common law" and an "informal law" which the Latin American formal legal system does not know how to recognize.

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  1. A well-deserved prize!

  2. Congratulations, Dr. DeSoto. It’s a shame there weren’t more thinkers like him around during the Cold War.

  3. Here, here! Good choice.

    There was nothing better in college than listening to left wing students in an economics class trying to find any reason to hate “The Mystery of Capital.” They stumbled and stammered to come up with “but Latin American culture is different…” which prompted an argument with yet another leftist student over wheather this line of reasoning was, in fact, racist. Genius. Thanks, Dr. DeSoto.

  4. That’s odd. The most left wing professor I had taught us about de Soto. She was very complimentary.

    Leftists like Latin American land use reformers, especially those that break up big holdings for distribution to the poor.

  5. “Until you have universal, well-protected, clear, and transferable private property rights, you cannot have a market economy in Peru, in the ghetto, or anywhere else.

    I wonder how that concept applies to intellectual property? Does anybody know if De Soto has written about intellectual property?

  6. Didn’t he discover Florida?

  7. That was Jackie Gleason.

  8. Excellent!

  9. While vacationing in the midwest last summer, I passed through the village of Kaycee, Wyoming, which had a museum to a range war that had happened there in the 1890s. The locals refused to recognize the laws and claims of absentee ranchers, and when the ranchers sent in private “regulators” (i.e. assassins) the locals formed a posse against them. The governor ended up wiring President Harrison for army reinforcements to save the regulators’ skins. This story really drove home de Soto’s writing about the “forgotten lessons of American history” and an appreciation of how similar the US once was to countries it often looks down upon.

    One of the main culprits here is surely the school presentation of American history, with the rough edges smoothed over and the federal government’s wisdom held beyond question. (that’s not to say that Howard Zinn’s pack of lies is any better.)

  10. The post on the range war reminds me of a movie . . . “Heaven’s Gate”.

    Yep, the Johnson County War.

  11. Plus, that was the point of my original post – DeSoto’s arguments are right up most liberals’ alleys. It’s just the methods he uses to get there are (gasp!) market-based. So his book confused some of the students – they wanted to accpet it, but they felt dirty doing so. It was more amusing than anything else…

  12. “The mystery of capital” is a very interesting thesis. It’s not an argument you’ve heard before (unless you’ve read it) and it’s not the easiest read – but it’s worth it.

    Re: intellectual property. Intellectual property rights (lets use patents as an example) are one way inventors can gain *capital* (ie loans to buy equiptment, time, etc.) to move forward and invent new things. Thus their success becomes a stepping stone to further sucess and so on. The ability to borrow money (capital) is what enables them to fully exploit their ability. Now this is all very theoretical but it *is* actually how some inventors like Tesla (at the turn of the century) operated. However, science has since become somewhat troublingly centralized. But one can easily see the applications of the above principles to something like copyrights on a book for instance. However, when copyrights become unenforcable and not generally accepted – they become extralegal and perhaps they are impossible to maintain. And we may fast be reaching this point … for better or worse ..

    Unrelated economic news: here’s an interesting link on how the govt. lies about inflation. All government economic statitics may be based on faulty assumptions (probably deliberate lies). Of course in my opinion and from what I’ve studied of accounting corporate statements are also based on faulty assumptions.

  13. Alas

    It is economic “history” and every generation seems to produce a new version. That de Soto is receiving this recognition may mean that by now he is no longer cutting edge.

    Washington’s lament in the article–

    “Banditti who will bidd defiance to all Authority while they are skimming and disposing of the Cream of the Country at the expense of many.”

    — sounds as if it COULD be true. Is the future of Rio in the squats? I doubt it.

  14. First, a disclaimer: I haven’t read The Mystery of Capital (yet).

    But as I understand his argument second-hand, from reviewers’ synopses like this, he seems to be referring to something like Hodgskin’s distinction between the natural and artificial right of property. If formalizing property titles means recognizing the rights of existing possessors, and confirming customary forms of land tenure, it’s a good thing. Unfortunately, when states formalize land titles they typically recognize the claims of politically-connected land speculators whose “property” comes from having a friendly politician draw a line across a map.

    A classic example is the Restoration Parliament’s (actually a confirmation of an act passed by the Long Parliament) land “reform,” which abolished feudal tenures and confirmed the landed aristocracy in its titles. In so doing, it transformed ownership in mere feudal legal theory into a property right in the modern sense, and abrogated the peasants’ customary rights to the land.

    If you’ve ever seen the movie Matewan (set in W.V.), there are hillbillies coming down out of the woods to fight a guerrilla war against the coal mining company. Their ancestors had first homesteaded the land, and established morally binding title to it by mixing their labor with the land. But their ownership by natural right was trumped by government and by the mining companies’ lawyers.

    My fear is that most Latin American governments, in regularizing land titles, will favor feudal or political claims to the land, at the expense of the peasants who have been cultivating it ever since their ancestors first occupied it.

    Still, De Soto’s ideas on distributive property ownership as a source of economic independence dovetail nicely with my own ideas on the use of mutual banks by ordinary people as a way to leverage their own property into investment capital, without paying monopoly charges to state-licensed banks. There’s a lot in his work (from what I hear, anyway) that is congenial to a mutualist perspective.

    I’ve definitely got to read it.

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