Property Rights and Economic Growth

Property Rights

Mr. Johan Torstensson made a wonderful contribution to the liberal cause around the world studying the relationship between property rights and economic growth in a paper published years ago. Public opinion must be inffluenced by efforts like this because they state clear and simple truths but if academicians need strong proving methods, there is the correspondent econometric analysis available.

State recognition and enforcement of property rights is of the utmost importance. Developing contries continually receive international advice on this matter. Firstly designing public registries and the legal scheme to put and retrieve information about peoples properties. This step becomes crucial in any economic transaction because involved parties need information in order to make right decisions.

The next aspect is again of great importance. The state not only has to keep public registries, but It has moral obligation in enforcing property rights. A state that does not recognize and protect it, is prone to confiscation. Many states recognize private property as a kind of permission or concesion to the people and puts it to the public interest, whatever that might be.

Even worse, politicians who do not believe in private property, won’t properly enforce property righs. There are cases where the bureaucry teams with criminal organisations in order to exploit public registries and whole sets of legal vacuums that renders useless property rights. National and international investors won’t be fooled so they keep their money and businesses right away from trouble. Only few individuals associated to the political power may have the chance to exploit private or public monopolies.

The right way of doing business is under the possibility of selling, buying private property and producing good or services and doing so, adding more and more value to the national economic output. Everyone being able to reap the benefits of commercial and financial activities confident the government will enforce contracts and bring justice whenever needed. Nations that follow this simple formula exhibit higher rates of economic growth and development.

If political dogma or socialist views dominate public affairs take for sure low or even negative rates of economic output.


Torstensson, Johan, 1994, “Property Rights and Economic Growth: An Empirical Study”, Kyklos 47 231-247