De Soto's work has been criticized by members of the academic "development community". Several authors have raised concerns about the quality of his scientific work. In his The Other Path, they portray de Soto's failure to reference the existent literature on the informal economy as bad scholarship or an attempt to make his cures for the problems of the developing world more novel than they are. This angered many veteran sociologists and anthropologists, who had already performed field work on the informal economy. Several of his key findings and assumptions were drawn into question, such as over-regulation as the principal cause of informality, the lack of any connection between formal and informal economy, his idealized view of U.S. capitalist development, etc.
One accusation concerns possible methodological flaws in both his qualitative work and his statistical evidence. For example, he estimates the total value of informal Third World dwellings as 9.34 trillion USD (about $4000 per person). However, the Journal of Economic Literature (Woodruff, Dec. 2001) claims this number relies on an estimates of the degree of informality in a typical underdeveloped country and a value of houses that are both based on extrapolations from small and arguably unrepresentative samples, namely countries that were studied precisely because of their high degree of informality. Woodruff posits that that the real number may be about 3.6 trillion. De Soto's estimates of the number of street vendors in Lima were also accused of bias, and his practice of publishing almost no detail regarding the methodology behind estimates has been criticized.
Others drew attention to failures of de Soto style policies, such as the experience with property titles in the shantytowns of Bogotá, Colombia, where a housing market failed to develop and the credit situation did not improve, or similar experiences in Phnom Penh, Cambodia, or Manila, Philippines, where speculators "took advantage" of inexperienced squatters when land titles issues. A study of a land-titling project in Buenos Aires found negligible improvement in credit access (Galiani and Schargrodsky, 2005). The lack of a significant increase in lending to the poor by private banks leads critics to believe that his policies are oversold. Positive experiences in related areas of microcredit (for example, Grameen Bank) have not needed de Soto's work as a foundation, and have come from quite different politico-economic approaches. Others have claimed that by legalizing the property of the poor, de Soto's policies have led to their land being subjected to higher taxes and regulations than they were in the informal economy, thus leading to more inefficiency than under an informal property regime. But this should not be viewed as a criticism of De Soto, but as a criticism of big government interference as De Soto criticizes.
Supporters respond that the critics do not take into account possible regulatory interferences and problems caused by lacking rule of law and corruption in these nations. Theoretical property rights that do not function in practice arguably do little good.
Critics of de Soto also claim that he has ideological bias. They point out that de Soto's thinking strongly resembles that of the Austrian School of economics and its main representatives Friedrich von Hayek and Ludwig von Mises (neither of which he credits in The Other Path). Regardless of whether de Soto himself is "partisan", his beliefs, which posit relatively painless capitalist solutions to poverty are attractive to free-market and libertarian institutions such as the World Bank, The Economist, and the Cato Institute the last of which endorses and promotes his views as their solution to problems of poverty.
Moreover, his critics attribute the attention he has received to skill in selling his ideas to the press and politicians rather than their fundamental merit or effectivenss.
De Soto and his followers answer that his failure to reference literature has been intended, as he and his team for The Other Path “closed our books and opened our eyes”. His defenders argue his findings (unlike much of the academic criticism against him) has real-life effects, given the number of policymakers that consult his opinion. Likewise, some of de Soto's critics (including the below-mentioned Slate article by Gravois) posit what are perceived as unrealistic expectations, such as claiming that de Soto's ideas are not working simply because, in a space of five years, the Third World economy has not blossomed, although it took the rest of the world centuries to develop economically, financially, and industrially.
Responding to the alleged failures of policies designed according to his writings, de Soto has argued that property rights and deregulations are only necessary, not sufficient conditions for growth, and hinted that much of the criticism leveled against him is motivated by professional jealousy over the attention that he has received rather than any real weakness of his ideas.
Also, although de Soto has been accused of having ideological biases in favor of free markets, his critics often have their own. For example, dependency theory draws heavily from the work of Karl Marx and other socialist and communist theorists, and much critical work against de Soto (including the below Guardian article) includes many of the central tenets of dependency theory without acknowledging them.
http://en.wikipedia.org/wiki/Hernando_de_Soto_(economist)#Criticism