POLS 1201 Lecture Notes - Lecture 9: Dutch Disease, Authoritarianism, Risk
24 Apr 2018
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Property rights: legal guarantee that government will protect the rights you have as an owner of something. Cash only businesses with no legal framework or government regulation > Informal economy: operating with the absence of of property rights. Laws don"t change because bureaucrats need jobs > influence politicians. People do this because they don"t have a choice. Illegal economic activity in latin america and africa prevents the formal economy from growing. Large cost: large amounts of time and money avoiding legal issues. Either end up bribing a cop, or losing inventory when fleeing. Security risk of carrying large amounts of cash around. You either buy more product, or you go and buy dollars on the black market. Huge wad of cash > cops may think you"re selling drugs. If you"re ripped off, nobody can help you. No legal framework forces you to keep the business small. Because you have no permit, registration, or taxes, you can"t sell.
