Wednesday, August 03, 2005

Property, development, law, endowment and fun

The link between property rights and economic development has been recognized for many years, elaborated by Adam Smith, yet stranegly ignored by much of neo-classical economics. But it is now back, again being taken seriously by many scholars. Douglass North and many others share the credit.

Particularly interesting in this light, is a recent NBER working paper by Ross Levine, "Law, Endowments and Property Rights."

Levine sums up his investigation this way:

"Property rights affect individual liberty and national prosperity. While scholars have hypothesized about the sources of variation in property rights for over 2500 years, researchers have begun to test theories empirically only recently. Researchers have made enormous strides in empirically assessing different theories of the determinants of property rights, but these investigations are in their nascent stages. The law and endowment views offer compelling theories of how legal heritage and natural selection endowments shape property rights today. I see no reason to neglect either explanation but believe that considerably more work is needed in each."

The paper includes a splendid overview of a wide range of relevant background literature for each of the two main hypotheses.

Economics may never have been this much fun.