Informal credit markets and the new institutional economics Book

I had little choice about reading this book because I had to review it for a class. But it was surprisingly interesting - mostly because it was a politically motivated book than an academically inspired one.

Much of the book is devoted to a description of how the informal sector formed in Lima, Peru. Basically, the government tried to block peasants from coming to the city by making ridiculously strict laws that didn't allow them to legally live or function there. So they made their own markets, neighborhoods, small businesses and transportation system.

The description of all that was interesting, but the best part was when a team of researchers got together and tried to do everything the legal way. In one example, it took them 289 days to obtain the 11 neccesary permits to set up a small business. Besides just being a gigantic waste of time, it cost 32 times the monthly living wage. This is a great demonstration of how ridiculous the laws were at that time.

The book was a bestseller in both Latin America and the U.S. Unfortunately, it is used as a tool by the neo-liberals to promote free markets and capitalism. Look! These uneducated peasants had scarce resources that they needed to use efficiently, and they formed their own market economy.