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The 289-Day Experiment
The Institute for Liberty and Democracy's 1980s field test that measured the institutional cost of legally registering a small business in Lima — and supplied development economics with one of its most consequential quantitative findings.
In the early 1980s, a team of researchers at de Soto's Institute for Liberty and Democracy attempted to register a small garment workshop in Lima as a legal business. They followed every rule, filled out every form, stood in every queue. The process required 289 days, multiple government offices, dozens of trips, and fees representing thirty-one times the monthly minimum wage. The experiment supplied a quantitative answer to a qualitative question about why the poor remained poor despite industriousness and ingenuity. The answer was architectural: the formal institutional system had been designed, often unwittingly, to exclude the majority of the population. The experiment became the canonical demonstration of institutional friction and has been replicated in multiple countries with similar results.
In The You On AI Field Guide
The experiment emerged from the Institute's methodological commitment to empirical fieldwork rather than theoretical argument. Existing development economics discussed institutional barriers abstractly; the Institute proposed to measure them concretely. Researchers