HernandoDeSoto thinks that property rights are about more than who gets what. Property rights are also a conceptual toolkit which encourages economic growth. Property rights allow, for example, multiple people to share ownership. This, in turn, allows groups to club together to buy things like factories and to make other investments. This further enables various kinds of lending.
Importance of Property to Economic Development
:Doug North has made a career out of talking about how parliamentary government and independent courts established secure property rights in Britain, and arbitrary royal government and dependent intendents created insecure property rights in France, hence the English economy boomed while the French economy stagnated in the century and a half before the coming of the Industrial Revolution.
:I've always had two worries about this line of argument. First, if Britain is the most successful late-early modern social formation in the world, France ranks no lower than number three. Britain, Holland, France–and behind them come all the rest, every single other nation and principality and empire in the world. To treat late-early modern Britain and France as if they are at opposite poles of success and failure may make sense if you are an eighteenth or nineteenth century British or French historian or politician. It makes no sense for anybody else. The number two superpower in any era is doing something very right.
:Second, it is not at all clear to me that disrespect for private property rights is the root cause of the fact that France was several steps behind Britain in economic development. Consider Jean-Laurent Rosenthal's work on Provencal canals. If you wanted to build a canal in eighteenth-century Provence, you had to get the active cooperation of–and suffer a potential holdup by–each individual jurisdiction along the canal's root. In England, by contrast, the King-in-Parliament would help you: eminent domain was there if you were politically well-connected and if you couldn't reach a satisfactory bargain for a right-of-way on your own. It is overscrupulous respect for "property rights"–the fact that that absolute monarch, that enlightened despot Louis King of France could or would not seize land for canals–that played a key role in hindering the development of commercial infrastructure.
:You see the same conceptual problem at work earlier. The problem with medieval commerce along the Rhine was not that private property rights were not respected: part of the Rhine barons' property was that their permission was needed to pass through their jurisdiction, and so they could levy whatever tolls they wished on river traffic. The problem was that there was no central authority to expropriate the Rhine barons' property right to levy tolls on passing traffic.
:So I want to see a detailed institutional history drawing the line between property rights that are good for commerce and growth–property rights that merchants and craftsmen like–and property rights that are bad for commerce and growth.
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