Titling of Property

The NYTimes has an excellent piece on Greece’s broken property system:

In this age of satellite imagery, digital records and the instantaneous exchange of information, most of Greece’s land transaction records are still handwritten in ledgers, logged in by last names. No lot numbers. No clarity on boundaries or zoning. No obvious way to tell whether two people, or 10, have registered ownership of the same property.

As Greece tries to claw its way out of an economic crisis of historic proportions, one that has left 60 percent of young people without jobs, many experts cite the lack of a proper land registry as one of the biggest impediments to progress. It scares off foreign investors; makes it hard for the state to privatize its assets, as it has promised to do in exchange for bailout money; and makes it virtually impossible to collect property taxes.

… less than 7 percent of the country has been properly mapped, officials say. Experts say that even the Balkan states, recovering from years of Communism and civil war, are far ahead of Greece when it comes to land registries attached to zoning maps — an approach developed by the Romans and in wide use in much of the developed world since the 1800s.

Here from our course on development economics at MRUniversity is our video which covers the theory and empirical research on titling from Peru to Palau:

Comments

This is not groundbreaking journalism on the part of the Times, no matter how much they congratulate themselves. Michael Lewis wrote about the land title issue two years ago in his book Boomerang.

Never imagined Greece was so dysfunctional, property tax is the base to city public services. Where is money coming from instead?

Ps. Didn't know a guy named Michael Lewis had rights over "Greece stories". Maybe not copyright, but bragging rights, I got it.

Who is the economist that Michael Lewis borrowed from? Seriously. I don't remember his name. He made some outlandish claims about potential GDP for Egypt and the like if titling led to credit, etc.

I believe you are referring to Hernando De Soto.

I don't remember his ultimate claims about Egypt, but I thought "The Mystery of Capital" made a fairly compelling case for the contention that a lack of (some types) of formal, clear and accepted/enforced property rights is a main cause of economies that have consistently underperformed over the long term.

Sounds like Hernando De Soto in The Mystery of Capital, 2000 (also The Other Path, 1989. De Soto is Peruvian and was making a contrast to the Marxist Sendero Luminoso, the Shining Path.).

In the United States, most western states have a "plat" system. You can go to a map and easily find out the ownership of any bit of land in the state, as well as mineral rights, easements, etc. However, in many older, eastern states, you have to find the most recent deed and work back through books of deeds. It can be very difficult and time-consuming for an ordinary person.

Paul Johnson's history of the United States from the last 1990s had a wonderful section on all the work Thomas Jefferson put into setting up a system to make real estate titles in what's the Midwest rational, documented, and affordable by average Americans. It's been a long time since I read it, but I believe Jefferson set up the grid system of surveying where land is sold in square chunks. In other words, Jefferson thought through all the problems that plague Latin America in terms of land ownership and gave America the opposite system.

This only scratches the surface. Every single aspect of government is equally dysfunctional, ESPECIALLY the judicial system. Beyond serious violent crime, there is virtually no rule of law in Greece.

"property tax is the base to city public services."

In a place called "not-America" that is not the case. Property tax is irrelevant (as a percentage of taxes collected) in most of the developed world. The problem here is one of property rights and enforcement, taxes are a secondary concern.

Yes, you may be right on how the property tax is finally used and who exactly collects it (local, state or federal authorities). But, OECD numbers are interesting: http://www.oecd-ilibrary.org/taxation/taxes-on-property_20758510-table7
Property tax seems to be a nice source of tax revenue in a dozen OECD countries.

That's % of GDP. Most of those countries have much higher tax revenues than the US in terms of GDP, making it much less in terms of % of tax collected.
(of course for the Greek government any additional tax revenue at the moment would be great, but for the future of the country's economy it is not the major concern around this problem)

Sorry, you were talking about a property tax / total tax revenue ratio. You're right. In the end, property rights enforcement is the big trouble.

I guess the MERS system is our attempt to catch up to Greece.

MERS being private sector free market capitalism, we must conclude that the best system is the system the Greeks have which makes determining property ownership next to impossible. If clear property ownership rights were best for free market capitalism, MERS would not have been created by the capitalists to undermine clear property rights and responsibilities.

Some have scholars have been applying these property rights arguments to explaining the persistence of poverty on American Indian reservations and Canadian Indian reserves.

Self-Determination: The Other Path for Native Americans
http://www.sup.org/book.cgi?id=9896

Beyond the Indian Act: Restoring Aboriginal Property Rights
http://www.mqup.ca/beyond-the-indian-act-products-9780773539211.php

Well, the biggest problem with Indian property rights is they are limited to land that has no gold, silver, or other mineral wealth, no water, no topsoil, and in general no commercial or strategic value.

The most valuable asset of Indian land is the right to sell tobacco and booze without paying excise taxes, and the right to host gambling. But even those rights are being undermined.

But simply, only white men have inalienable property rights, not red, brown, yellow, black men, and not women.

This reminds me of the joke about the New York Times covering the end of the world. In big type: WORLD ENDS. In somewhat smaller type: WOMEN AND MINORITIES HARDEST HIT.

I don't know about that, while native americans were cheated they still have some nice land. In places like Minnesota and the Pacific Northewest indian lands could be put to far better economic use. Some tribes like the Shoshone and Coeur d'Alene have improved things a lot recently with better management, but their lands are required to be leased. I can think of a lot of Indian land that could be quite profitable with proper management. If you have ever had to do business with tribal authorities you would see how this would be the case.

The problem is that for the vast majority of tribes, this would be in serious violation of treaties, but when has that ever stopped the US, or evdn Canadian, government?

The UN essentially imposed titling of property in the Balkans as a measure to establish property rights. But in most cases they gave title to the current possessor of the property, rewarding a lot of criminals as a cost.

Looked at another way, how did Greece make it this far without killing each other in the streets over fence lines? There must be a decentralized method. Apparently the criticism is that government can't properly control private transactions and tax them.

Imagine a US government that was not allowed to know how much we earn or have. Measurement is the first step of taxation.

England didn't have a proper land registry system until the late 20th century.

Unless you count the Domesday book, I suppose.

And yet, strangely enough, back in 2006 the same titling systems were in place but unemployment was much lower than it is today.

Trying to blame the Greek depression on aggregate supply issues when the most urgent problem is clearly with aggregate demand is just silly.

From my interview with economist Hernando de Soto:

I interviewed Hernando de Soto in 2002:

"When he first became prominent, de Soto paid a visit to the leading economists in the United States. They wanted to discuss with him the typical issues that interest contemporary economists -- Peru's budget deficits, money supply, tariffs, privatization plans, and the like. De Soto, however, wanted to find out how to set up a country registrar of deeds office. "Everybody in America who truly understood property rights died 100 years ago," he ruefully laughed.

http://www.isteve.com/2002_de_Soto_plan_for_poor.htm

From your interview:
"The more optimistic de Soto was less inclined to dwell on deep-rooted problems of race, but he did confirm that racial rivalry played a role in the baffling complexity of property rights law in Peru."

I am sorry. But I read through de Soto's response to your question again and again and I fail to see where you get the idea that he was confirming your claim that racial rivalry being the cause and not the consequence of the institution.

Hernando de Soto: "The tools that were used by the elite,"..."were not separate bathrooms, but legal privileges. So, that's why most of our fight in Peru was to withdraw from the oligarchy all the legal tricks to discriminate and privilege. ..."

Don't get me wrong. I am not accusing you of intentionally distorting what he said. It's just that from my own reading de Soto seems to attribute the problem predominately if not entirely to the existing institution and race plays very little part in it.

The challenge to talk about race in Latin America was put forward by Robert Mundell:

"In a panel alongside de Soto, Nobel Prize-winning economist Robert Mundell of Columbia University asserted that the typical Latin American country's maze of regulatory bureaucracies was erected by wealthy whites to keep brown and black people from getting ahead."

De Soto was moderately comfortable talking about race in Latin America. It's not a normal part of his talk for Americans, since Americans don't understand how it works in Latin America, but once Mundell broached the subject, he offered a fairly optimistic take on how the problems could be sidestepped by getting Chile and Mexico to serve as role models for the rest of Latin America:

"De Soto predicted, "The countries most likely to pull out ahead are Mexico and Chile." He later noted that there is less racial hostility in those two countries. Chile simply has few full-blooded Indians left.

"The Mexicans have always been more tolerant," he observed. "You see a white Mexican with freckles saying, 'We Indians ... ' There is a sort of pride in that Indian background than isn't found down in Peru. The Mexicans are, culturally speaking, much more democratic and nationalistic than Peruvians."

This is the La Raza Cosmic ideology invented for Mexico by Vasconcelos after the Revolution. It's been reasonably successful, compared to, say, neighboring Guatemala where an ex-dictator was just convicted of attempted genocide against an Indian tribe.

My impression from talking to de Soto was that the root of Latin America's problem with poor people not having legal title to the land they've lived on for generations goes back hundreds of years to the King of Spain giving absurdly large land grants to various conquistadors. The landowners had to have their fieldworkers and servants live on their vast domains (I mean, they could hardly commute to work from over the horizon). It became traditional for the workers to pass down their hovels to their descendants, but the rich still don't want to give up theoretical title to the land.

Greece is in the odd position of being the only bit of the Ottoman empire (in Europe) that wasn't absorbed into the Communist bloc.

That means it missed both the systemization associated with the Enlightenment (which modernized antiquated property descriptions) and the "systemization" of property rights under Communisim.

The problem is that in 18c Europe, relatively few people owned land/property and they probably felt safe in assuming that property lines would be clarified more-or-less amicably among the elite.

In modern Greece, the costs of poor documentation are balanced by the fears of ordinary people who worry that some bureaucrat will upend (what's left of) their financial stability. Who wants to risk some nightmare that the house their late mother inherited from their grandfather and later sold...wasn't entirely on his side of the new official property line...and now the (non-)owner comes after her kids for compensation...?

Does Turkey have the same problem?

Wouldn't a bad land registry system (eg Greece) make outright theft by the powerful more easy?

I understand that in China many protests are due to people losing what they believe to be their own property to cadres.

Yet everybody seems to know who owns the land next door. Which leads me to think that those Mediterranean countries Greece, Italy, Spain, Portugal are most likely countries to be better off libertarian, that is with almost no government. The people seem to largely ignore the Government as it is and the Government is largely corrupt and yet people live pretty well in those countries (not Greece right now but without).

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