This is a book about capital ownership that economists are going to like. It
is anchored in their subject matter, which is social organization to achieve
greater efficiency and effectiveness. That is, how can people be more
productive, individually and collectively? It is a work in the spirit of
Ronald Coase, who was recognized by the Nobel committee for his work in
transaction costs analysis. De Soto says that great growth potential is
available from law reform, to make communication and transfer of property more
simple, secure and rapid. People want to develop assets and accumulate wealth,
says de Soto, and this ambition and ability will be reflected in capitalistic
growth if laws and regulations are refined to permit them to do it. In other
words, de Soto is arguing that if the essential institutional requirements of a
market are put into place, Adam Smith’s vision of capitalist development
will be realized in Third World and former communist countries, just as it has
in the West. The book is therefore in the tradition of achieving socialistic
goals with market-focused means. And it has a lot of right-wing endorsements to
prove it.
If economists like it, does that mean that more economists will be interested
in the objectives of COG? I don’t have a ready answer for that. Nothing in
the de Soto thesis occurs to me as being hostile to the aim of spreading capital
ownership. That is no guarantee, however, that something adverse will not turn
up as I probe more deeply. But even if "The Mystery of Capital" turns
out to be purely neutral with respect to COG objectives, it will have important
implications for ownership spreading programs if it continues to win support
among economists and policy-makers. That is because de Soto has presented an
argument about the nature of capital and the capitalistic process which is novel
and seems likely to be widely discussed in circles where COG participants would
like to be heard. To put it more bluntly, COG types are indignant that
economists generally don’t seem interested in democratizing property
ownership. But if de Soto does stimulate a renewal of interest among economists
in capital ownership and wealth distribution, then COG types will have to cope
with what they have to say about it.
This means that instead of mainly ignoring the subject that COG cares about,
economists might suddenly become interested. But if it is de Soto’s vision
of capital which stirs their interest, what are they going to think about the
rationale of COG proposals and projects? Will the de Soto understanding of what
capital is and capitalism means cause economists to look with greater or lesser
favor on the interpretations of capital that are prevalent or frequent among COG
participants.? One thing that does seem certain is that if economists do move
through an embrace of de Soto’s reasoning to an interest in COG and
similar activities, they are not going to find themselves attracted by the main
elements of what we have discussed here as Kelsonian or binary economics. I will
detail in a later posting some of the principal differences between the Kelso
and de Soto understandings of capital and capitalistic growth. For the moment I
simply raise the question of what it would mean for the COG activity if a
substantial share of its participants were to decide that "de Soto’s
contribution doesn’t matter; we can simply proceed with our former
ideology and platform and get on with the program." I believe that
self-styled binary economists will not be able credibly to ignore the
contradictions to their theory that are served up (unwittingly) in de
Soto’s empirical and conceptual findings.