The Mystery of Capital

Hernando De Soto

Thoughts and Questions?

Chapter two discusses “the mystery of missing information.”

What challenges come to mind when you think of not having information like an address, a title to your property, or a

legally registered business?

Missing Information = Missing Property Rights

The reason capitalism has triumphed in the West and sputtered in the rest of the world is because most

of the assets in Western nations have been integrated into one formal representational system.

Formal property records and titles represent our shared concept of what is economically

meaningful about any asset…Property is the realm where we identify and explore assets, combine

them, and link them to other assets.

Effects of Property

1. Fixing the Economic Potential of Assets

2. Integrating Dispersed Information into One System

3. Making People Accountable4. Making Assets Fungible5. Networking People6. Protecting Transactions

1. Fixing the Economic Potential of Assets

Think about owning the title to a house. What can you do with it?

2. Integrating Dispersed Information into One SystemAs a result of integration, citizens in advanced nations can

obtain descriptions of the economic and social qualities of any available asset without having to see the asset itself. They no longer need to travel around the country to visit

each and every owner and their neighbors; the formal property system lets them know what assets are available

and what opportunities exist to create surplus value. Consequently, an asset’s potential has become easier to

evaluate and exchange, enhancing the production of capital.

Example: Renting an apartment in Ghana

3. Making People Accountable

Think about the Credit Rating system in the U.S. How does it work?

What problems could occur without a credit rating system?

Example: Micro-finance in Ghana

4. Making Assets Fungible

fungible |ˈfənjəbəl| (adjective) able to replace or be replaced by another

identical item; mutually interchangeable

Think about a factory. It is an indivisible unit in the real world, but in the conceptual universe of formal property representation it can be subdivided into any number of portions. What does this mean?

5. Networking People

By making assets fungible, by attaching owners to assets, assets to addresses, and ownership to

enforcement, and by making information on the history of assets and owners easily accessible, formal property systems converted the citizens of the West

into a network of individually identifiable and accountable business agents.

Without this, how would tax collection work? How do governments raise money to fund public works,

education, development?

6. Protecting Transactions

Think about selling pigs (a commodity). How are they sold on the market in Chicago? In a developing country?

Micro-Finance and Ghana

What is “micro-finance?”

Twi Lessons

Hello / How are you: Ete Sen

I’m fine: A yay

Thank you: Med ah see