Dear faithful readers, please forgive the brief hiatus from blogging…I bring you a peace offering – economic food for thought!

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Owning a home isn’t just an American dream, its a common goal for people around the world. Owning a home is generally a good investment (not always), as it often brings dignity, security, and stability to a family. I’ve spoken with many Esperanza and HOPE loan associates who say one of their ultimate goals is to own a home where all of their children can fit and live comfortably.

But what does it mean to own a home? What does it mean to “own” anything? The bible, of course, teaches that we don’t own anything…we just administer what God has given to us. But what about in a legal sense?

In Cuba, 85% of the population owns their homes. Yet if you live in Cuba, you don’t fully “own” your home – because you don’t have the right to sell it. The Economist reports:

The only legal way to move in Cuba is by swapping residences—a slow, bureaucratic and often corrupt process known as the permuta(“exchange”), which requires finding two roughly similar properties and getting state approval. To avoid this hassle, some Cubans prefer to marry the owner of a property, transfer the deed, and divorce.

The goal of this policy is to limit the gap between rich and poor, towards a world without class differences. No more rich people amassing property at the expense of the poor. To be sure, we’d all prefer more equality. But crippling private property rights destroys economic incentives for gifted builders to construct homes to sell to anyone, rich or poor:

Because there is no incentive to build new homes, Cuba suffers from a dire housing shortage. Many buildings have been repeatedly subdivided. In some families three generations share one bedroom.

This isn’t just an isolated case. Peruvian economist Hernando de Soto (no, not the conquistador) was made famous for linking poverty in Latin America to a lack of full private property rights provided under the legal system.

“In most developing countries, the vast majority of people live outside the legal economy…Because they lack property rights, they cannot access capital or credit, so they cannot grow their businesses. Without a legal framework, the market system fails.” (link)

Rule of law and property rights. Boring stuff but it constitutes the architecture of economic growth. Get it right and you’ll have the privilege of being able take it for granted. Get it wrong, and your left short on houses, food, and opportunity.

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