Too much ownership leads to too little prosperity, according to Michael Heller.
Question: What is new about this theory?
Michael Heller: And the answer is early in my career, a senior colleague told me as an academic I should be aware of the following and it’s been [found out] to be fairly true now in 15 years of teaching which is that you can either, if you write something, either it turned out to be obvious or it’s wrong, but those are really the only two choices you got, something that’s either obvious or wrong, and either is okay as long as it’s interesting. And what I hope that the gridlock economy insight offer is something that is ultimately obvious because there really is nothing new. So, yes, the gridlock economy is a form of transaction cost, but that isn’t a very helpful thing to say in and of itself, right? Because when we’re setting the transaction cost, you want to know how does it operate, can we reduce those cost, where do we go to look for them? And what the gridlock image I hope gives you is a new way to think about a particular kind of transaction cost, one that’s pervasive but really had never been… This is a discovery that I made about an area of loss, of huge loss, of loss of life, of loss of opportunity in our economy that simply hadn’t ever been noticed before. And the discovery that I made isn’t the notion of loss in general but a specific kind of loss and it’s a loss that I call the tragedy of the anticommons.
Question: What is the "tragedy of the anti-commons?"
Michael Heller: In order to understand gridlock, you need to have a set of conceptual tools. So part of why I came up with the gridlock image for describing this problem is that we’re all pretty familiar with gridlock in traffic. We’ve all sat in traffic jams. So, what ownership gridlock is is the economic equivalent of sitting in a traffic jam. Everybody, every driver individually behaves pretty rationally, but when you have 50 people trying to turn left at once at one intersection and everyone gets stuck and it’s the same with ownership. We have an image that owners generally try to do the right thing and that’s right. Every individual owner is trying to do the right thing, but we’ve set up an ownership structure, ownership system where the interaction of those individual reasonable people is that they all get stuck. The drug patent owners can’t agree, the license owners for spectrum can’t agree and the little landowners can’t agree, so we don’t get drugs or wireless or airports. So, ownership gridlock is a little bit harder to see. And here’s the way that I come up with to try to make that invisible problem of gridlock more visible. It’s a conceptual tool. It’s really, if you’re going to take away one image from this interview, the one that I want you to take away is, or one tool from this interview, it’s the notion of the tragedy of the anticommons. So, what is the tragedy of the anticommons? It’s the term that I coined to describe the problem of too many owners [within] too little prosperity. And the way to get there is to sort of go in steps. So most of us are familiar with the notion already of the tragedy of the commons, when we have the ocean we all take fish out and there’s no more fish, that’s the tragedy of the commons, or we all put pollution into the air and the air gets polluted, that’s another tragedy of the commons. Any resources to which there are too few owners, we often will see overuse and destruction of that resource. That’s a really familiar problem and you can see the pollution, you can see there aren’t any fish left. And the usual solution to tragedy of the commons in which there are thousands all around us is to create private ownership. Private property has been viewed as a solution for generations since Aristotle, [achieved] a thousand of years, because when as a private owner, you have some real reason to conserve. So, say, you own the lake, then you don’t take all the fish out today, you’ll leave some so you can fish for tomorrow. So, private property tends to be a system doesn’t just create wealth for society, but it’s also a great tool for conserving scarce resources. So we have this notion that if you have a common, if you have overuse, if you have a waste of some resource, the solution is privatize and that’s been a solution that we’ve seen in the fall of Soviet Union and transition in Eastern Europe and our approach to drug research, we have seen it throughout the modern economy. Privatization is the solution to overuse. Here’s the danger, privatization can overshoot. It used to be thought that you had a spectrum of ownership, commons at one end and private at the other, and anytime you have a commons, you tend to see overuse, so you solve it by moving towards private property. And what I discovered is that you can actually go right past private property, you can start with commons, get to private and go right past that tool what I call anticommons property. So, in a commons you have too few owners and you have overuse, in an anticommons, you have too many owners and you have underuse. Underuse can be just as costly, it’s hard to see but it can be just as costly as overuse. So underuse is out there, it’s costly, it’s hidden because example of anticommons tragedy are all cases where something doesn’t get invented, doesn’t come to market, where the air traffic delays don’t get fixed. They’re all kind counterfactuals. So, what the tragedy of the anticommons does is link together or make visible or have a giveaway to describe a set of a framework for a whole set of problems that all of us live in every single day that are linked in ways that weren’t previously understood to be linked. So, when the notion of the tragedy of the commons was coined, that’s a term that Garrett Hardin made up just 30 years ago. When he coined the term the “tragedy of the commons” that is what sparked one of the main sparks of the environmental movement in this country. The notion the tragedy of the commons made it possible for people to see that hundreds and thousands of different environmental problems in land, in air, in water, in species protection were all the same problem. And once you know and see that those all are problems of under the heading of the tragedy of the commons, you can begin to work towards solution from one area to the other. And my hope has been with the tragedy of the anticommons is sort of the same way that once you can see that all the different problems that seem very different in the economy, how is rap music and drug research the same, or they’re all examples of tragedy of the anticommons. And once you see that, you can begin to start thinking about solutions.