Hernando De Soto Analysis

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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.
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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 the asset to the best of their ability, or combine resources/partner with another party. The economic purpose of valuation is for members of the economy to develop an understanding of what an asset is worth. Property rights and documentation provide a record and a history for assets and transactions. This gives money prices more stability, which helps grow and sustain an

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