Instituto Libertad y Democracia, Lima, Peru
The Other Path: The Invisible Revolution in the Third World (El Otro Sendero: La Revolución informal) by Hernando de Soto
New York: Harper & Row, 1989
Originally published in Spanish in 1986, The Other Path was already a sensation in Latin America by the time it was translated into English in 1989. It had sold over 100,000 copies in just its first year and was shaping the discussion of property rights, government regulation and the free market in the region. Today, a decade and a half later, the book’s influence reaches far beyond Latin America, helping to redefine the way we think about the relationship between the free market and developing countries, and offering a powerful example of the important role think tanks play as generators of new ideas.
Based on field research and in-depth analysis performed by Hernando de Soto and his think tank, Instituto Libertad y Democracia, The Other Path uncovered an informal, but thriving, market economy operating in Peru beneath the country’s stagnating, highly-centralized formal economy. Made up primarily of the country’s poor people who were excluded from participating in the formal economy by the high cost of hyper-regulation and the corresponding corruption, this black-market economy disproves, with startling clarity, two common misconceptions that have long clouded discussions of economic development in the Third World: that the people of developing countries are somehow unsuited for the free-market, capitalist system, or that, as many on the left argue, the international capitalist system itself is repressing developing economies. When left alone to face underdevelopment and poverty, de Soto illustrates, the poor of Peru, and those in many developing countries, have chosen the free market as the most effective, efficient means of meeting their own needs, and the system works.
The implication was clear: It is not the capitalist system or the ‘backwardness’ of the citizenry, which are responsible for the economic problems facing many developing countries. The blame must lie with the outdated legal and political systems that fail to respect private property and individual initiative, and, in so doing, thwart the kind of creativity and invigorating growth seen in Peru’s black market.
Cato Institute, Washington, DC
The Economic Consequences of Immigration by Julian L. Simon
Basil Blackwell, Inc., Cambridge, MA, 1989
With the publication of The Economic Consequences of Immigration, the Cato Institute entered a national debate that had been raging for more than a century: How many immigrants, and of what kind, should the United States be admitting each year?
For the book, economist Julian Simon, who passed away in February 1998, analyzed the economic effects of legal immigrants who come to the U.S. to improve their economic situation. His findings squarely contradict conventional wisdom, making the case that, on the whole, immigration is beneficial to U.S. natives. Among Simon’s findings: Immigrants are as well-educated occupationally as natives; compared to natives, immigrants save more, apply more effort during working hours and have a higher propensity to start new businesses and be self-employed; immigrants do not cause increased unemployment, even among low-paid and minority groups; immigration does not widen income gaps; and new immigrants’ families use less welfare services that do average native families.
In an important acknowledgment of the need to expand these types of debate beyond the narrow confines of academia and think tanks, this Cato book is designed to appeal to a wide audience. Although the analysis employed by Simon is technically sophisticated, a conscious effort is made to lay out the main themes of the book in a manner accessible to general readers, with a valuable summary of the arguments provided in the introduction and a separate section outlining policy suggestions. Mikhail Bernstam of the Hoover Institution called the book, ‘an exciting combination of sophisticated social science and a timely and lively policy discussion.’
Pacific Research Institute, San Francisco, CA
Advertising and the Market Process by Robert B. Edelund Jr. and David Saurman
Pacific Research Institute, CA, 1988
With Advertising and the Market Process, authors Robert Ekelund and David Saurman challenge traditional thinking by illustrating the essential role advertising plays in a free and pluralistic society. In the process, they present a strong case against the increasing regulation of this important form of information exchange.
Many economists and critics have traditionally condemned advertising as a wasteful, redundant and inefficient activity basic to the creation of economic concentration and monopoly power. In contrast, Ekelund and Saurman lay out what they call ‘the emerging view of the advertising process’, arguing that, in fact, advertising decreases monopoly power and furnishes valuable information to consumers. Aimed at a general audience in business and government, the book also addresses a number of controversial instances in which the Federal Trade Commission has sought to regulate the advertising of products, including alcohol and tobacco.
The book received significant media coverage following its publication and drew praise from both the business world and academia. Bruce Yandle, former executive director of the Federal Trade Commission wrote, ‘Those who seek to regulate advertising should first stand an examination on the lessons contained in this book,’ and S. C. Littlechild, of the University of Birmingham (United Kingdom), praised the book as ‘a most comprehensive and scholarly exposition of the economic theory, empirical evidence, and policy implications of the emerging view of advertising.’
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