When there are many owners of one thing, progress can come to a standstill
The Gridlock Economy:How Too Much Ownership Wrecks Markets,Stops Innovation, and Costs LivesBy Michael HellerBasic Books; 259pp; $26
Back in the 1950s, millions of American kids participated in a Klondike land rush. Cereal maker Quaker Oats (PEP) bought up many acres of land in the Yukon, subdivided these into 21 million square-inch parcels, and enclosed the deeds for them in cereal boxes in what became one of the most successful marketing promotions in history.
But the buzz-worthy "Big Inch Giveaway" raised a hornet's nest of problems. For one thing, until the acreage was finally auctioned off to a single owner, the land languished unused—although one boy did send the local title office four toothpicks to fence in his turf and another tried to donate his three-square-inch patch to create the world's smallest park.
In The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives, Columbia Law School professor Michael Heller masterfully draws upon "Big Inch," and many other cases, to describe a concept that cuts across the grain of America's property-respecting culture. While private ownership usually creates wealth, he observes, gridlock can result when too many people own pieces of one thing. This "tragedy of the anticommons"—a phrase first coined by the author in 1998—"covers any setting in which too many people can block each other from creating or using a scarce resource." Although the idea may be unfamiliar, after reading this book you'll start seeing its spooky tentacles everywhere.
The tale of the Quaker campaign is essentially a comedy, but most of Heller's examples are more serious. He makes a compelling case, as farfetched as it may at first sound, that fractured ownership is largely responsible for today's air-travel delays, the low real estate values in many communities, slower wireless broadband speeds in the U.S. than in Japan, and the fact that much Native American land is unused. The tragedy of the anticommons may also explain why one promising Alzheimer's drug can't come to market and why so many people die of organ failure.
Take that potential Alzheimer's treatment. One problem, he says, is that multiple intellectual-property owners hold the patents needed for a single effective drug. Pharmaceutical companies use their intellectual property to block rivals. While drug research and development spending doubled from 1995 to 2002, the number of "new molecular entities," or novel treatments approved for sale in the U.S., fell in 2002 to the lowest levels since 1983.
Heller is no Adam Smith basher, however: He believes entrepreneurs and industries can sometimes solve such problems on their own. The Golden Rice project is a perfect example. According to the World Health Organization, across the globe as many as 500,000 children go blind each year because of vitamin A deficiency. To address the problem, two scientists developed genetically modified rice containing the vitamin. At first, winning rights to use the 70-odd U.S. patents key to Golden Rice seemed a huge task. But in the end, the intellectual property owners, including Syngenta, Novartis, and Monsanto, helped aggregate and license their technology for free as a philanthropic gesture.
In many cases, goodwill doesn't do the trick. But some dilemmas can be solved through innovative ways of managing property. Confronted by economic development, landholders often find their lots to be worth less than if they were combined—but combination, sometimes involving the use of eminent domain, can be cumbersome and still shortchanges owners. One solution: Heller proposes that neighborhoods set up condo-like associations he calls Land Assembly Districts, which give neighbors more control over the aggregation and sale of land.
Other problems require government intervention. A fascinating chapter examines the Chesapeake Bay "oyster wars" that raged for years over who got harvesting rights, and featured the likes of marauding Virginia pirate Gus Rice. The state-boundary imbroglio ultimately required the intervention of the U.S. Supreme Court.
Historical anecdotes aside, most of Heller's book is about the future, with implications for wireless policy, U.S. copyright law, and the management of urban sprawl. Fifty years after Quaker Oats' giveaway, there's no happy ending to this "tragedy" in sight.