Property Economics

Property Rights, Creditor's Money, and the Foundations of the Economy

Edited by Otto Steiger

Metropolis- Verlag Marburg 2008 Contents

Notes on the Contributors xiii Acknowledgements xviii

Property Economics: An Introduction Otto Steiger xix

Note on the References xxix

Part I: The Property-Based Theory of the Economy: Criticism and New Aspects

The Property Theories of Bethell, Pipes, and de Soto: Similarities and Differences in Emphasis as Compared with the ,' Approach of Heinsohn, Stadermann, and Steiger , Thomas G. Betz 3 Heinsohn, Stadermann, and Steiger's "property theory of the economy" 4 Bethell's analysis of property rights in theory and history 9 Pipes's discussion of the relation between property and freedom 12 De Soto's analysis of the "missing ingredient" in developing countries 14 Similarities, differences, and conclusions 19 References 22

f I Property, Development, and Hernando de Soto's Approach: The End of Poverty Ulf Heinsohn 25 What is economic development? 26 vi Contents

Property is lacking, but why is property important? 26 Orthodox and heterodox theories of development 41 Common law as an obstacle to economic development in English history 49 References 55

/The Property Approach of Heinsohn and Steiger: / Questions from an Institutionalist Viewpoint IJIans G. Nutzinger 61 Methodological problems in the distinctions between different economic concepts 61 Possession, property, and ownership: Another look from a modified institutionalist viewpoint 64 The basic elements of New Institutional Economics 66 References 67

r /Some Observations on Heinsohn and Steiger's /"Property Theory of Interest and Money": A Short Comment \Augusto Graziani 69 Heinsohn and Steiger's central points 69 Main remarks on the "property theory of interest and money" 71 References 72

/ Power, the State, and the Institution of Property / Paul C. Martin 75 The institution of power and the institution of property: An alternative theory of interest and money 75 Why the property theory must presuppose a theory of power 83 Debts, power, and the economy 88 Contents vii

On the circulation of power 90 The German currency reform of 1948: A discourse (Paul C. Martin and Otto Steiger) 98 References 103

Part II: Property Economics: Fundamental Thoughts

Russian Patrimony and Its Political Consequences / Richard Pipes 113 The role of common law for the early development of property in England 113 Catherine the Great and the introduction of private property in Russia 116 The emancipation of serfs in Russia 128 The rise of a money-based economy in Russia 133 Concluding remarks on property, law, and liberty 136 References 137

Why Isn't the Whole World Developed? On Property in the Third World TomBethell 141 Richard Easterlin's famous question 141 Inputs without institutions 147 The missing ingredient 152 The lesson brought home 157 Appendix: If economists are so smart, why is Africa so poor? (Stephen Haber, Douglass C. North, and Barry R. Weingast) 159 References 162 viii Contents

/Dead Capital, Fluid Capital, and Money / Hernando deSoto 167 <_» Clues from the past 168 Potential energy in assets 169 The hidden conversion process of the West 169 Capital and money 176 Fernand Braudel's bell jar 179 References 180

Collateral and Own Capital: , The Missing Links in the Theory of the Rate of Interest I and Money Gunnar Heinsohn and Otto Steiger 181

Property and possession 182 Burdening and encumbrance 192 Forgotten precursors of the property theory of the economy 200

The discussion of good securities in classical and neoclassical economics 206 The discovery of property rights and the renaissance of collateral...210

Missing collateral and lack of own capital: The subprime-mortgage crisis 215 References 218

/Property Base: / A Central Bank's Guide to Adequate Monetary Policy ! Hans-Joachim Stadermann 223 The quantity of money: A misleading concept 223

The misunderstanding of gold and assets 227 The quantity equation once again 228 Contents ix

John Maynard Keynes and the equation of exchange 230 The supply of money 232 Refinancing property as a superior concept 234 References 239

Where Does the Market Come From? Why the Controversy Between Polanyi's "Substantivists" and the "Formalist" Neoclassical Protagonists of a Universal Market / Was Never Resolved \ Gunnar Heinsohn 243 V The stalemate in the controversy over the universality of markets...243 A solution to the controversy over the origin of markets 247 Where does property come from? 252 Property and the missing link to markets 256 References 258

The Fundamental Flaw in New Institutional Economics: The Missing Distinction between Possession and Property Otto Steiger 261 The emergence of private property rights 263 The fundamental flaw 266 References 270

Part III: The Institution of Property: Its Interplay with Other Fields

Liquidity Crises of Private Corporations in Emerging Economies and International Bankruptcy Rules • Camille Cornand. 275

V_ x Contents

Recent changes in financial globalisation and its impact on international law 275 Financial globalisation and international property rights 278 The international bankruptcy framework and its implications in terms of international financial governance 284 What an international bankruptcy framework can learn from the property theory of the economy 291 International financial integration versus heterogeneity of national laws 293 References 295

r /Monetary Policy in a Post-Socialist Country: / The Central Bank of Latvia \Jlamona Rupeika-Aboga 299 The recent history of the Latvian currency 299 The Bank of Latvia: Objectives and principles of monetary policy .300 Lack of domestic good securities? 302 The Bank of Latvia's currency board 305 The Bank of Latvia's monetary policy during the year 2002 312 References 316 Appendices 318 f /Property, Mineral Resources, and "Sustainable Development" \RolfSteppacher 323 A new look at property and its implications for development 323 Possession and property: The core institutions of non-capitalist and capitalist societies 326 Property: A necessary condition of development 329 Property rights and economic rationality: Ecological and social considerations 335 Contents xi

"Property regimes in resource management": Necessary differentiations between common, private, State, and "open access" regimes 347 Fourteen theses on property, exhaustible resources, and development 349 References 352

The Property-Based Theory of the Economy / or Property Economics: Philosophical Aspects / Jan Beaufort 355 A new look at "Government-printed money" 355 Why Government-printed money does not differ from credit-issued money 357 Which rules control money and property distribution? 362 A desirable distribution of money and property 366 Three concluding theses 370 References 371

The Appeal of Money for Economic Growth: A Lesson from Goethe's "Faust" Marco Lehmann-Waffenschmidt 373 v On the relation between economic growth and the supply of money 373 Money, growth, and "Faustian dynamics" 375 Credit money as the means to satisfy unlimited needs and wants ....377 References 381