• Institution building

Institution building

This monograph addresses the question of how best to create or reform property rights systems in developing countries.

Although solutions may usefully be informed by political and economic theory, the authors draw on detailed case studies to suggest that property-rights policies are more likely to succeed when they develop gradually and are tailored to local norms and circumstances rather than imposed from above by governments and supranational institutions

They argue that while there may be very detailed knowledge of how the market economy can mobilise the energies of the people to realise the gains from exchange and create wealth within a system of private property rights, there is still widespread ignorance among policy-makers about how to design, create and secure functional property rights systems in the developing world. Detailed institutional analysis may therefore be more productive than engaging in the old ‘nationalisation’ versus ‘privatisation’ debate.

Other important highlights of the analysis include:

• the available strategies of property rights creation are defined by the various combinations of two basic paths: evolutionary (spontaneous, bottom-up) and legislative (top-down, fiat)
• understanding whether or not the de facto property environment matches or tracks de jure rules is crucial. Caution against over-reliance on fiat and legislation should be paralleled by balanced and realistic expectations regarding the power and limits of the evolutionary approach
• property rights have an economic basis. There are economic thresholds beyond which it makes economic sense to introduce property rights and thresholds under which costs hinder the emergence of specific property arrangements
• because there is no unique solution to fit all cases, one needs to think of property rights policy as a strategic process, not a blueprint-based social engineering undertaking
• a process view of property rights reform shifts the attention from the creation of a static configuration of rules and laws to the creation of a flexible and resilient system which can adapt to changes in costs, technologies and social circumstances
• expectations regarding property-rights-based development policies are high and rising. It is therefore essential that implementation strategies take adequate account of their cultural and institutional contexts
• disappointing outcomes resulting from defective implementation may lead eventually to the dismissal of the idea that robust property-rights systems are essential for economic growth

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