1. According to Benito Arrunada of the Universitat Pompeu Fabra in Barcelona, the World Bank, with the support of the Fujimori regime, dumped a whole bunch of money into creating a modern system of land-title registration and transfer for Peru. According to Hernando de Soto’s theories, this was supposed to give ordinary folks access to the capital markets by allowing them to mortgage their houses, thus setting off a storm of entrepreneurship and prosperity.
Actual effect: almost zero.
Reason: Even with a good set of land titles, mortgage lending only works if backed by the threat of foreclosure. Peruvian judges, hostile to market transactions, simply wouldn’t process foreclosures. Ergo, no mortages.
So we still don’t know whether the promised economic miracle would appear if someone could provide not only land titles but courts that would turn them over to lenders when borrowers default.
Arrunada suggested that community responsibilty for default, after the fashion of micro-lending initiatives, was a more promising approach.
Update: A reader points out that De Soto himself had predicted that reforms focusing on land registration alone would fail. That raises the question of why the Peruvians and the World Bank thought their project would work.
2. I have to go read Fred Schauer’s Profiles, Probabilities, and Stereotype. All the discussants at the author-meets-readers seemed to think it was stereotypical Schauer, which gives it a probability approaching unity of fitting the profile of a book you don’t want to miss.