Naked Economics by Wheelan, Charles (spanish books to read .txt) 📕

title. The couple has a contract signed by the local village chief, but it is not enforceable in a court of law. The Economist goes on to note:

About two-thirds of the land in Malawi is owned this way. People usually till the land their parents tilled. If there is a dispute about boundaries, the village chief adjudicates. If a family offends gravely against the rules of the tribe, the chief can take their land away and give it to someone else.8

Those informal property rights are like barter—they work fine in a simple agrarian society, but are woefully inadequate for a more complex economy. It is bad enough that poor countries are poor; it is all the worse that their most valuable assets are rendered less productive than they might be.

Property rights have another less obvious benefit: They enable people to spend less time defending their possessions, which frees them up to do more productive things. Between 1996 and 2003, the Peruvian government issued property rights to 1.2 million urban squatter households, giving them formal ownership to what they had previously informally claimed as their own. Harvard Economist Erica Field determined that property rights enabled residents to work more hours in the formal labor market. She surmises that property rights give more flexibility to people who previously had to stay home, or had to operate improvised businesses out of their home, in order to protect their property. She also makes another important point: Most programs designed to help the poor reduce their work effort. (This is the Samaritan’s dilemma; if I ease your hardship, you have less incentive to help yourself.) Providing formal property rights does the opposite: It encourages work.9

No excessive regulation. Government has plenty to do—and even more that it should not do. Markets must do the heavy lifting. Let’s talk about articles 575 and 615 of the Russian civil code. These regulations would be very important if you were a firm in Moscow doing something as simple as installing a vending machine. Article 575 forbids firms from giving anything away free, which includes the space that a firm “gives” to Coca-Cola when a vending machine is installed. Meanwhile, article 615 forbids subletting property without the landlord’s consent; the square meter taken up by the vending machine can be construed as a sublease. In addition, the tax collector forbids commercial enterprises (e.g., vending machines) to operate without a cash register. And since selling soft drinks from a machine constitutes retail trade, there are assorted fire, health, and safety inspections.10

Excessive regulation goes hand in glove with corruption. Government bureaucrats throw up hurdles so that they can extort bribes from those who seek to get over or around them. Installing a vending machine in Moscow becomes much easier if you hire the right “security firm.” What about opening a business elsewhere in the developed world? Again, Peruvian economist Hernando de Soto has done fascinating work. He and fellow team members documented their efforts to open a one-person clothing stall on the outskirts of Lima as a legally registered business. He and his researchers vowed that they would not pay bribes so that their efforts would reflect the full cost of complying with the law. (In the end, they were asked for bribes on ten occasions and paid them twice to prevent the project from stalling completely.) The team worked six hours a day for forty-two weeks in order to get eleven different permits from seven different government bodies. Their efforts, not including the time, cost $1,231, or 31 times the monthly minimum wage in Peru—all to open a one-person shop.11

Chapter 4 outlined all the reasons government should stick to the basics. Harvard economist Robert Barro’s classic study of economic growth in roughly one hundred countries over three decades found that government consumption—total government spending excluding education and defense—was negatively correlated with per capita GDP growth. He concluded that such spending (and the required taxation) is not likely to increase productivity and will therefore do more harm than good. The Asian tigers, the all-star team in the economic development league, made their economic ascent with government spending in the range of 20 percent of GDP. Elsewhere in the world, high tax rates that are applied unevenly distort the economy and provide opportunities for graft and corruption. Many poor governments might actually collect more revenue if they implemented taxes that were low, simple, and easy to collect.

The Internet has a huge potential to improve transparency everywhere, but particularly in poor countries. Something as simple as posting on-line the amount of money allocated by the central government for a specific local project, such as a road or a health clinic, can enable citizens to compare what they were supposed to get to what actually showed up. “We got $5,000 for a community center? That doesn’t look like a $5,000 community center. Let’s go talk to the mayor.”

Human capital. Human capital is what makes individuals productive, and productivity is what determines our standard of living. As University of Chicago economist and Nobel laureate Gary Becker has pointed out, all countries that have had persistent growth in income have also had large increases in the education and training of their labor forces. (We have strong reasons to believe that the education causes the growth, not the other way around.) He has written, “These so-called Asian tigers grew rapidly by relying on a well-trained, educated, hard-working, and conscientious labor force.”12

In poor countries, human capital does all the good things we would expect, and then some. Education can improve public health (which is, in turn, a form of human capital). Some of the most pernicious public health problems in the developing world have relatively simple fixes (boiling water, digging latrines, using condoms, etc.). Higher rates of education for women in developing countries are associated with lower rates of infant mortality. Meanwhile, human capital facilitates the adoption of superior technologies from developed countries. One cause for optimism in the development field has always been that poor