A New Approach to Economic Development
From the point of view of institutional economics, growth is related to the implementation and enforcement of property rights. The system that emits, and enforces those rights needs to have very low transactions costs leading to the least possible frictions. The lowest the transactions costs the highest the level of security of investment, as well as the benefits of direct and indirect socioeconomic impacts. However, traditional economic development models do not focus on transactions costs and property rights systems, both of which seem to be the suspects for low productivity, slow growth, and informality. Many developing countries suffer from systems of property rights that are unpredictable because they are inundated with overwhelming bureaucracy, difficult to follow, track, and measure. The speaker has developed a methodology to best diagnose the reasons why a country has such high transactions costs and how to reduce them systematically. This diagnostic method is called Reality Check Analysis (RCA) and its outcomes allow for the best design of policy reforms and strategic application. The presentation will focus on the theoretical definition of the problem, the analysis of Reality Check Analysis, its application and important results measured through a socioeconomic 3,000 household survey. This survey presented the direct benefits of applying a simple property rights system to investment, savings, property values, trust, child labor, to mention a few.