Property law is not exactly a riveting subject, and law professors are not usually good storytellers. But in his new book The Gridlock Economy, Michael Heller, a professor at Columbia Law School, has written one of the most intelligent and accessible critiques of how overly broad property rights can be harmful not only to the commons, but to the market.
If you care to learn why cell phone service is so bad in the United States, why breakthrough medical treatments cannot be taken to market, and how holdouts can stymie valuable real estate development, The Gridlock Economy helps locate a core problem: the fragmentation of individual property rights and the paralysis that results. Though economists like to tout property rights as a wonder-cure for virtually everything that ails us, Heller explains how all sorts of innovation and market growth is killed in the cradle simply because there are too many rights-holders with too many divergent concerns.
It can be extraordinarily costly to identify all of the people with property stakes in a given field, and even if they can be found, many have no wish to sell their rights. Such "holdouts" can effectively block new research on malaria drugs, plans to consolidate an urban university campus, and attempts by mobile phone companies to build a seamless national network of service. Gridlock prevails, and we are all the worse for it.
The signal contribution of Heller’s book is his lucid popularization of legal concepts that only patent scholars, real estate lawyers and telecom policy wonks give much thought to. Heller gives us a new language for understanding an important type of enclosure: the anticommons.
Heller and a colleague, Rebecca Eisenberg, coined this term in a 1998 law review article that explained how drug patents may paradoxically deter the development of new and useful drugs. An anticommons results when too many people own property rights of a given resource -- land, electro-magnetic spectrum, biomedical knowledge -- resulting in an inability to initiate new creative and commercial activity. He cites one legal theorist who writes, "To simplify a little, the tragedy of the commons tells us why things are likely to fall apart, and the tragedy of the anticommons helps explain why it is often so hard to get them back together."
Here is the essential message that Heller develops throughout the book:
"Making the tragedy of the anticommons visible upends our intuitions about private property. Private property can no longer be seen as the end point of ownership. Privatization can go too far, to the point where it destroys rather than creates wealth. Too many owners paralyze markets because everyone blocks everyone else. Well-functioning private property is a fragile balance poised between the extremes of overuse and underuse."
While it is easy to spot a "tragedy of the commons" -- a resource gets visibly ruined and people fight about it -- it is much harder to identify a tragedy of the anticommons, Heller explains, because there is usually nothing to show. How does one see something that has never existed (a new drug, a new business venture)? How can the "bargaining failures" of the market be made visible and rectified?
Heller demonstrates the ubiquity of the anticommons effect by taking the reader on a tour of oyster beds in Maryland, storefronts in Moscow, pharmaceutical labs, the Manhattan real estate market and robber barons of the Rhine River after the fall of the Holy Roman Empire. The stories make clear that the anticommons is not some contrived abstraction, but a name for a phenomena that is widespread but largely overlooked.
The tolls levied along the Rhine River is a particularly helpful example. During the 13th Century, all sorts of barons built castles along the Rhine to forcibly extract tolls from merchant ships trying to bring their goods to market. As hundreds of castles sprang up to demand tolls, it became impossible to carry on commercial trade via the Rhine. Trade collapsed in the region for hundreds of years, and everyone was worse off.
Today, there are countless "phantom tollbooths" that use property rights to extract tribute from the stream of commerce while contributing very little in return. For example, "patent trolls" are companies that amass portfolios of patents simply to use them as bartering chits to extract money from companies doing genuine innovation. Now that companies can actually own "gene fragments," the profusion of individual property rights is making it difficult for biotech companies to develop new therapeutic proteins and genetic diagnostic tests. There are too many bundles of patents spread among too many owners.
It is a heartening sign that many large research-intensive companies understand the anticommons problem. Many are in fact taking the initiative to combat it, if only to protect their own long-term strategic self-interests. Alarmed at the privatization of gene sequences, which are basic building blocks for drug research, Merck created a public database of gene sequences, the Gene Index, and contributed nearly a million of its own sequences. Some telecom companies have entered into patent pools so that they can share patented inventions among each other without the fear and expense of litigation. Innovation can proceed.
Yet there is only so much that individual players in a given market can do to combat gridlock. In most cases, the anticommons must be solved through government interventions such as regulation or eminent domain. Sometimes voluntary cooperation can devise solutions, but much depends upon the particular resource and community involved.
The Gridlock Economy is a refreshing book because it draws upon the deep knowledge and authority of legal scholarship without getting mired in pedantic, inside debates. It speaks to the concerned citizen and policymaker, and grounds its arguments in vivid, concrete stories that anyone can relate to. After going through so many examples, Heller makes a compelling case that the tragedy of underuse, a function of an anticommons of property rights, needs to be named in order to be recognized and then addressed. He is also astute about the neglected potential of the commons: "Cooperative solutions are often small-scale, context-specific, local and not reliant on legal structures -- thus hidden," he writes.
I do have some quibbles with The Gridlock Society. In his zeal to point out the tragedies of the anticommons, I think Heller could do a better job of recognizing that some anticommons can be worth keeping. I disagree with the presumption that consolidating market activity to make it more efficient is necessarily the highest virtue. As one reviewer of The Gridlock Economy pointed out, thank God urban critic Jane Jacobs was able to help prevent Robert Moses from turning lower Manhattan into a highway. Keeping the anticommons of Soho and Greenwich Village wasn’t such a bad outcome.
Heller bemoans the fact that political factors have thwarted the expansion of high-traffic airports around the nation. Building just 25 more runways could eliminate most air-travel delays in the United States, he writes, eliminating gridlock. Yet should the demands of an ever-burgeoning market sector and the nation’s frequent flyers be presumed to be more important than the desires of homeowners who live near airports? This strikes me as an inherently political question, one that economics cannot summarily resolve.
Localism, the diversity that comes with it, and a wide array of non-market values (history, culture, personal dignity) deserve respect, too. If they contribute to “gridlock” in some instances, the outcome may be worth it. There are likely to be many circumstances in which an anticommons is not such a bad thing.
This point should not detract from Heller’s larger accomplishment. The Gridlock Society skillfully draws together many diverse strands of scholarship and weaves them into a cogent analysis and highly readable story. He brings a penetrating eye to the limitations of traditional property rights theory, and clearly explains how many social, technological and economic problems stem from the anticommons. Heller concludes by offering an array of strategies for overcoming gridlock. It will be a difficult, long-term challenge to bring the commons and the market back into a more wholesome alignment, but The Gridlock Society gives us a new vocabulary and mental concepts for making serious progress.