2) Why does Hernando de Soto believe property rights are important for economic prosperity?
2) Why does Hernando de Soto believe property rights are important for economic prosperity?
Homework Answers
Hernando de Soto is a Peru economist who believes assigning property rights is the key to economic growth.
He believes property rights are important, majorly for the poor sections and the government because:
- The poor can obtain loans and collateral if they are assigned property rights for their business entities
- Higher investment would entail if property rights are well defined and people can take loans against them to invest in their businesses
- Government can collect greater tax revenues if it assigns property rights to small businesses
- It will help avoid transactions in underground economy
- In case of natural disasters, lack of well defined property rights would lead to chaos once the economy is restored to normal and everyone starts fighting for their piece of land, without any proof
These points highlighted by Hernando de Soto explain why establishment of well defined property rights are important for an economy and its people.
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