May 13, 2004

De Soto Criticized

Previously, I've praised Hernando De Soto's The Mystery of Capital [here and here]. Gabriel Calzada Álvarez criticizes the book from a anti-statist/anarcho-capitalist angle. The criticism is a two-part one: first, De Soto doesn't offer a "clear definition of 'private property;'" second, the state would be the final arbiter of property rights. On the first part, I'll grant Álvarez that de Soto's defense of private property is flabby in its reliance on utilitarianism. But since the man focuses more on public policy examining the effects of not defining and enforcing property rights is more important in his goal of reducing poverty in the Third World.

On the second part of the criticism, Álvarez notes that government failure (both through mismanagment and corruption) happens. As much as possible designation of the boundaries of property lines should be left in the hands of private entities. Institutions like for-profit title companies have an incentive to efficiently determine boundaries. However, in some disputes there has to be a final arbiter. After all the obligatory private arbitration hearings, there will be occasions where people will seek an institution to make the final decision on their property conflict or some entity has to enforce a contract's provisions. Since the state has a monopoly on force it natually flows to them. Álvarez believes that "such a defense can be undertaken directly by the property own­er, or by contracting for it with a third party or agency." But who keeps a check on the third party other third parties? Who enforces the third party obligations other third parties? This never-ending circle of private checks and balances is one of the most confusing aspects of anarcho-capitalism I've encountered. Since I've been a causual observer of this line of political economy I would guess anarcho-capitalists have found a way out of this infinite loop.

"De Soto's Embrace of the State"