As a way of pursuing the reason as to why some countries remain poor while others become rich, many conceivable explanations have been offered by economists. However some factors that have, positive effects have been recognized as contributing directly to economic development. The institutional roles in the economic development process have also been emphasized recently by economists, and the most notable of these institutional structures is the well defined and secure property rights, a long identified factor that must exist for efficiency in the market functions as stated by economists. In this article there is a review of de Soto theory that is both time counterintuitive and simple on its explanation on why some global regions cannot effectively use capitalism to their advantage. His theory in summery suggests that in spite of being wealthy such regions can’t produce capital because of the lack of representational processes that would make assets productivity and visibility (De Soto 3).

The articles by Hernando de Soto or Hernando de Soto Polar, main work thesis states, that if a nation does not have an adequate and well functioning market, it then be in an adequate position to participation in its information framework, that is tasked with recording other economic information and ownership property. Unrecorded, or unreported economic activity have direct effects on the entrepreneur’s results, if they lack legal property ownership it becomes hard for them to not only expand their businesses premises but also sell and obtain their products in credit. On such cases no legal remedies can be found in courts for the business related conflicts, since they were no clear guide line of legal ownership initially. Their lack of income and information eventually prevent the government from acting and collecting tax for the public welfare.

With the existing of the generalized exclusion practices two parallel economies mainly the extra legal, and legal. It is evident that the economic benefits of the globalization and law are enjoyed by only an elite minority, while the rest of the other majority entrepreneurs remain to languish in absolute poverty, while on the other hand the elite watch as their assets increase to an approximate 10 million trillion dollars globally, that in the shadows of the law exist as dead capital. The extra legals in these cases are known to formulate their own set of rules as means of protecting their assets, survive and perform most of their business.

Responsible nations around the developing world since the falling of the Berlin Wall, have effectively worked hard to make the market economy transition that in most cases has widely often failed. This failure of the free market system has been used effectively by populist leaders to eradicate poverty and beat anti-globalization drums in the developing world. The ILD however, believes that within the developing nation’s flawed legal systems is where the enemy can be found and this makes it almost impossible for the assets and the many people to gain stakes within their individual markets. The citizens in these countries have enthusiasm, talent, and an ability that is astonishing that allows them to gain profit out of nothing practically.

In the countries that are still considered as developing, their legal systems are often accessed by a few and this leaves a poor majority unattended to, in this way the advanced nations can be viewed as their gateway for success mostly in their, economies.

For it is in these legal systems that there is standardizing and creation of property documents as authorized by the law. It is through these documentations that a public memory that permits the society to perform such important and crucial economies reviews in the countries. These Functions include gaining access and identifying data on their assets, individuals, rights, titles, obligations and charges; through the assurance, quantifying and rights and valuing of the third parties (Caicedo, Santiago, and Fabio 2).

Opportunities like access to credit, the creation of systems for credit, the establishment of systems of identification, insurance information, the mortgage of property, the issue of shares, the provision for infrastructure and housing, and a host of other economic activities that drive a modern market economy can all be easily accessed through these public memory mechanisms.

Separate testable hypotheses can be derived from the work of De Soto namely the provision of the property rights that can be secured through land tilting. It is believed that if the hypotheses of De Soto are true then there should be an expected rise in the increase of access and securing of the property rights, which would adequately relate with an increase in capital formation and credit markets. In addition, through a comprehensive land tilting system the property holding would be allowed to serve as effective grant access and loans collateral to enforce as described by the titles in the enforcement of the rights.

To make his case more viable DeSoto used the example of utilizing the government land tilling as a means of securing and achieving the property rights. To explain his example he stressed on the relevance of a legal formal or written property rights system and the need for having an informal incorporation of the extralegal or informal, sector of the currently established legal sector. To best facilitate economic growth he has argued that there is need for legal standard titles. In summery the author has a belief that informal property rights and unarticulated government codification are necessary for the realization of positive advantages that are associated with well-defining and securing of property rights that promote economic development. An example of this is seen in the research done on the Peru field that effectively helped with the detection of the housing investments that were as a result of urban tilting of the lands that surrounded Lima that had a majority of their investments being credited. This indication from the analysis showed that access to credit was not necessarily increased through the governmental land tilting. The Lima land tilting can be concluded as being related to loan approvals increase from the public sector.

Independent research on the effects of land titling in rural Peru has shown that the argument has no substantial support that land tilting by the government can be used as a basis of guaranteeing loans mainly as collateral. In addition to credit effects and investment, the mechanisms of title enforcement are of equal relevance. And since, no known public enforcement costs are found to be added with the legal titles that are on expenditures. It shows that even though land may be legally defined through land titling, it does not offer an alternative form of property enforcement. This proves that it is more beneficial for individuals if they rely on informal, private enforcement methods as compared to the initial local government’s provisions. Analysts have found explanations for this and supported the occurrence as a state that property rights enforcement is not effectively gained through the public institutions. However, can be achieved mainly through, the enforcement of property rights and the privatization mechanisms. Private enforcement mechanisms have to incorporate confidence and trust in verbal agreements, mainly between social and cultural norms, arbitration and respect as conducted by local authorities that through the elections that are held locally are often chosen.

No general consensus has emerged through these studies, on the land tilling effects. And due to the lack of any clear evidence on the established secure property rights on the government land titling, de Soto’s hypothesis on a formal system of land titling system is hard to accept. And the benefits associated with secure property rights are not necessarily led by the formal system of land tilting such as property enforcement and credit access increase. In theory, land titling as a means of ensuring property rights, raises important political economy questions since it is not applicable in practice. In future studies there could be an inclusion of incorporating the analytics of bureaucracy theory, highlighting the costs of government into the analysis, and focusing on the incentive incompatibilities between communities, tilting agencies and local citizens.


There are two testable theories that can be derived from the work of Hernando de Soto. First through the access provided by the property rights collaterization of assets can be used for loan securing. Through these strategic studies both economic and empirical conclusions can be derived that effectively could help support the thesis.

Government land titling can be clearly described through the second hypothesis of De Soto since they help establish leads and secure property rights that can be associated with only positive benefits. However, there are mixed results that are associated with the effects of land titling literature. The government tilting offers other suggestions on the lands that it is not necessarily the best means to achieve rights of securing property in institutions across time.

The theory of government land titling, can lead to positive benefits; in the practice, but the described advantages may not show due to the concerns surrounding public choice concerns that revolve mainly on the government agencies. In addition, to securing the initial property a broad outlook may not be the best option due to lack of information in the community level.

Work Cited

Caicedo, Santiago, and Fabio Andrés Díaz. “Too Early, Too Quickly: Impact Of Short Term

Decision In Fleet Renewal Programs.” th International Conference Of The System Dynamics Society, Albuquerque, New Mexico, USA. 2009.2-8.

De Soto, Jesus Huerta. Socialism, Economic Calculation and Entrepreneurship. Edward Elgar,