De Soto Essay

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de Soto vs. Ferguson

Opposing Economic Theories

Compare and contrast the views of Hernando de Soto with those of Niall Ferguson on the importance of being able to mortgage your home in establishing wealth and prosperity.

Hernando de Soto and Niall Ferguson take very different approaches when explaining the current world economic systems. De Soto takes an approach that favors the advancement of markets and the infrastructure that makes these markets possible. He argues that much of the poverty in the world today is due to the lack of laws and regulations that allow for markets to happen. If poor people had access to the capitalism system then they could prosper from the system that they have formerly been alienated from. Value, de Soto claims, comes from the system of law that allows people to be able to trust each other and the system itself. Ferguson takes a more pessimistic view towards markets and the current system of capitalism. He makes many predictions in his works that all predict more economic issues that will plague modern economies. Ferguson takes a more historical approach to the view of money and how it is used and how it accumulates.

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He takes a critical approach to the use of money and how it is valued in society today. These two individuals have polar opposite views on money and capital.

De Soto

De Soto frames the world's economic problems into different "mysteries." The mystery surrounding missing information deals with the fact that in third world countries most of the actually business transactions occur do not get recorded, taxed, or even known to have exist. These transaction are considered to "extralegal" and do not contribute to the formal economy. The extralegal system isn't part of the mainstream system of trade yet most of it acts as if it was in the formal economic system. However, these extralegal transactions are actually larger than the official economies in many countries. The mystery involving capital deals with the notion that capital, in order to be properly accounted for, should be documented rigorously and thoroughly standardized.

In modern countries there are systems to verify ownership of capital. For example, if you own a house you will have a deed that is recorded in a government building somewhere to prove your ownership claim. If you….....

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