Is 'The world's most important living economist' wrong?
Bill Gates calls Hernando Del Soto 'the world's most important living economist'. He seems to have the mantra - the elixir of the 'mystery of capital' - that can turn the fortunes of the developing countries around. But while his insights are being celebrated, it is worth looking closer into his ideas. Mr Soto's idea is actually quite simple: That property rights create access to capital. His point is that the developed countries are developed because their citizens have definite and secure property rights, which opens up access to capital, and therefore, enterprise and road to better life. In contrast, the property rights in developing countries are opaque, non-realisable and enmeshed in bureaucratic tangles. Therefore, the capital formation in these countries is weaker - and therein lies the roots of inequality. This is an insight with intuitive logic and easy appeal. It is easy to prove empirically too: Mr Del Soto's work is full of fascinatin...