Myths of Private Property Rights

This week, I spoke about property rights and their role in generating economic and political opportunities in emerging markets at a panel on global housing finance (conference organized by the Appraisal Institute).  While thinking about the issues, I came up with this list of commonly held private property rights myths:

• Issuing property titles gets capital moving
• Property rights are for the rich (countries, firms, individuals)
• Everyone agrees that private property rights are good
• Foreign ownership is bad
• The best way to give people a stake in the system is through collective ownership/ redistribution
• Developing countries should be given a break in terms of intellectual property rights
• You want property rights? Its easy – We already have it!

I would like to focus on just a few.  The first one goes right at the heart of Hernando de Soto’s critics, who say that his approach of giving people titles to land does not work.  In fact, de Soto always said that property rights do not work without supporting institutions, and a legal title is worthless if you can’t, for example, enforce it or if its simply a piece of paper written out by the government without any background work on developing an actual strategy for formalization of informal settlements.  So, the arguments of critics are misplaced – they obviously have not read Hernando de Soto beyond the headlines.

The point on IPR is also important.  Often, people tend to focus on CDs, DVDs, and software in discussion on intellectual property rights.  These are important, but what I would like to bring up to the critics of IPR is that counterfeit products kill – in Russia, tens of thousands of people die from counterfeit alcohol, and I can only begin to guess how many people’s lives are ruined by counterfeit medicines.  Now, DVDs and medicines are ultimately secured from piracy through the same set of institutions, so paying attention to IPR enforcement is crucial to the development of societies (not to mention investment.)  

And, finally, the last point is the most important one – you can’t just transfer property rights systems from one country to another.  If you do that, you are probably set for a disaster.  One of the brilliant features of de Soto’s approach to developing property rights systems, is that in any country he goes to he works with the local population first to find out why things work the way they do, before developing a set of recommendations.  This goes back to the larger issue, that in developing institutions we have to find the right blend of international experience and local knowledge.