Are Afghan Riches a Curse? | Nita Ghei | Cato Institute: Commentary

Are Afghan Riches a Curse? | Nita Ghei | Cato Institute: Commentary: "As economists from Milton Friedman to Mancur Olson have pointed out, the difference between rich and poor countries is not a matter of resources; it's a matter of institutions.

Countries ruled by laws that respect property rights, and with institutions that augment and facilitate free exchange, tend to prosper. Countries where property rights are precarious, and where the risk of appropriation of property by the state is high, tend to remain poor.

If the state is likely to seize your investment or profit, why would you invest in a business in hopes of a long-term payoff? On the other hand, the higher the probability that you will be able to keep your profit and income, the greater the incentive to invest and work hard."

"But markets are reasonably efficient only when people are confident that contracts will be enforced, property rights will be respected, and investments will not be expropriated by the state or a local warlord. These are safe assumptions in the United States and Europe, for example, but not in many poor countries."