Analysis Of Hernando De Soto 's Life Essay

746 Words Jun 7th, 2016 3 Pages
Hernando de Soto stated that capital is like energy and that it is a dormant value. However, we know how to create energy like burning wood in stove produces energy in the form of heat to cook food, boil water, or warm a home. The same cannot be said with capital. We have a pretty good idea what it is, but we are not as good at turning capital into economic potential.
De Soto also defines capital as the parallel life of an asset. I think de Soto is referring to the journey or life story of an asset, and what becomes of it. According to de Soto, without a written record an asset is very difficult to exchange with other members of our society. A good example would be buying a pre-owned car. A pre-owned car loses value as soon as it leaves the lot of the dealership. Now fast-forward - the buyer would like to sell the car one day and they will most likely have a market if the car is still in driving condition. However, if the owner doesn’t have the title to the car, it will be much harder to sell/will have to sell for less than it is worth.
Valuation is subjective and an asset could hold very different levels of value depending on many variables and circumstances. De Soto, argues that property rights give entrepreneurs the opportunity to tap into the potential of the asset to create capital. The owner of an asset might not have the means to convert the asset into its full potential/value/income, but it can partner with another party to receive compensation for the asset, use…

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