Hernando de Soto – institutions mean a lot

09:00 by Hubert Fromlet, Kalmar

Hernando de Soto, president of the Institute for Liberty and Democracy in Lima/Peru, received in spring 2017 the prestigious Swedish “Global Award for Entrepreneurship Research”. According to the price committee, de Soto’s analyses have led to “new ways to alleviate poverty and underdevelopment by reforming property right systems, business legislation and regulations. His contributions have

¤ led to a new and better understanding of the role of institutions for entrepreneurship, especially in developing countries;

¤ influenced policy worldwide, both in terms of conceptual understanding and practical policy measures;

¤ paved new ways to assess and measure how difficult it is for people to enter the formal sectors – this has been done by painstaking empirical field work;

¤ shown that the main problem in many developing countries is not capital per se but lack of property rights.”

By analyzing de Soto’s research, one can easily recognize the influence of his microeconomic work on the creation of the World Bank’s annual report “Doing Business”, dealing with institutional conditions in a large number of countries and – hopefully – improvements more recently. I regularly discuss the tables in “Doing Business” with my students – a statistical framework from the real world that easily explains what microeconomic and institutional economics (property rights) are all about. However, it should be reminded that well-working institutions alone cannot take lagging countries out of poverty.

Many friends in or of the emerging/developing world do hope that Hernando de Soto pretty soon will also receive what I here may call the Nobel Prize in Economics (officially: The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel). This would be a good and courageous choice – as courageous as giving it to other prominent economists with similar research interests. One may hereby mention, for example, relatively young development economists like Esther Duflo and Daron Acemoglu (why not all three jointly?).

Such a courageous step could mean real encouragement for all poor and underperforming countries and the necessary research on their current conditions and the way to a better future. Combatting poverty – and the environment – should become even more important objectives for the whole globe. Not only for politics but also for research!


Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
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