The Mystery of Capital

Inevitably, migrants do not so much break the law as the law breaks them—and they opt out of the system. In 1976, two-thirds of those

it provides a standard index to measure the value of things so that we can exchange dissimilar assets.

A set of detailed and precise legal rules governs this entire process. Formal property records and titles thus represent our shared concept of what is economically meaningful about any asset.

looking at the law from an extralegal point of view, to better understand how it functions and what effects it produces.

jar? In this book I intend to demonstrate that the major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital. Capital is the force that raises the productivity of labor and creates the wealth of nations.

What creates capital in the West, in other words, is an implicit process buried in the intricacies of its formal property systems.

For Smith, economic specialization—the division of labor and the subsequent exchange of products in the market—was the source of increasing productivity and therefore “the wealth of nations.” What made this specialization and exchange possible was capital, which Smith defined as the stock of assets accumulated for productive purposes.

Capital is born by representing in writing—in a title, a security, a contract, and in other such records—the most economically and socially useful qualities about the asset as opposed to the visually more striking aspects of the asset. This is where potential value is first described and registered.

But they hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them. Because the rights to these possessions are not adequately documented, these assets cannot readily be turned