The most boring and interesting book

I finally got around to reading Hernando de Soto’s book, The Mystery of Capital, based on a recommendation from W.E. Heasley. I recommend it.

I realize the book has been out for a while and I’m very late to this party, but better late than never.

Before I read this book, I had a firm belief that law was an emergent order of an evolutionary process of humans interacting with each other, where different dynamics of interaction were constantly tested in the crucible and the most effective interactions emerged.

In other words, we stop at red lights because that practice keeps us alive, not because it’s a written law. If we were to erase the written law from the books tomorrow, we’d still stop at red lights.

But de Soto gives a good history of emerging law in the United States compared with other countries that are not as successful as the U.S.

U.S. “lawmakers” didn’t seek to overwrite the ‘law of the land’, or the law that had emerged through local and private arrangements from various landowner and gold claim organizations, for example. Lawmakers primarily sought to serve as a backstop for those local arrangements.

In not-so-successful countries, elites ignore the ‘laws of the land’ and try to overwrite them with their own idea of what’s best. But, it turns out that their untested ideas don’t work and people do their best to ignore them.

I’ve witnessed this same phenomena in business management. Company leaders often ignore bottoms-up successes and push their own ideas. Usually those ideas are based on their own untested preferences and they usually end up getting fired because they don’t work.

This bottoms up process was illustrated well with de Soto’s story from Indonesia. While there to launch his book, some Indonesian cabinet members invited him to discuss how they could find out “who owns what among the 90 percent of Indonesians who live in the extralegal [ignoring formal law of property ownership] sector.”

He told the story of his trip to Bali:

As I strolled through the rice fields, I had no idea where the property boundaries were. But the dogs knew. Every time I crossed from one farm to another, a different dog barked. Those Indonesian dogs may have been ignorant of Indonesian law, but they were positive about which assets their masters controlled.

I told the ministers that Indonesian dogs had the basic information they needed to set up a formal property system. By traveling their city streets and countryside and listening to the barking dogs, they could gradually work upward, through the vine of extralegal representations dispersed throughout their country, until they made contact with the ruling social contract. “Ah,” responded one of the ministers, “Jukum Adat (the people’s law)!”

Discovering “the people’s law” is how Western nations built their formal property systems.

I’d like to take a survey of U.S. population to see what percentage of people know that U.S. property law derives from local and private arrangements made by individuals. I bet it’s low. Most people believe law comes from judges and lawmakers, which is about like believing that language comes from English professors.

As W.E Heasley mentioned in the comments of this post, we shouldn’t confuse legislation with law. The best legislation usually derives from the people’s law. Ineffective legislation overwrites the people’s law.

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