Poverty, Property Rights, and Human Well-Being: A

Frank Knight identified property rights as the essential ingredient for economic progress. In his classic work, Risk, Uncertainty and Profit, Knight (1971: 319) states: Let us begin with the relation of capital in the sense of material goods to the fundamental structure of society. The facts of progress will be seen to have an intimate connection with the very institution of private property. In an unprogressive society private property in the modern sense of the term need not exist. The social justification of private ownership is that the coupling of control of resources with enjoyment of the fruits of their use is supposed to give an incentive to use the goods effectively in production. Well before the modern development of the economics of property rights led to a similar conclusion, Knight asserted that property rights are the essential prerequisite for economic progress. I build on that simple premise and examine the incidence of poverty among the poorer nations of the world with respect to the presence or attenuation of property rights. Property Rights and Economic Growth Property rights are an essential prerequisite for growth. The eco-nomic theory of property rights suggests that economic growth requires a government to establish property rights so that economic agents can contract with minimal transaction costs and thus increase economic wealth for citizens of that country (North 1981, Eggertsson 1990: 317). Property rights exist at the nation-state level, as nations establish basic legal rules and procedures for defining and settling ownershi