Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, July 9, 2008

Coming July 15 To A Bookstore Near You….

   posted by Shubha Ghosh       

              Michael Heller’s The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation and Costs Lives synthesizes over a decade of scholarly work on property rights and markets into an easily digestible and nourishing morsel.  For those not familiar with Professor Heller’s work, Basic Books has done a major service in publishing this must read (and more importantly must buy) volume. 

                Heller, currently Lawrence A. Wien Professor of Real Estate Law at Columbia Law School, highlights an underappreciated problem: too many owners can be as problematic for well-functioning markets and other institutions, as too few.   His work has added the tragedy of the anti-commons to the lexicon of legal theorists and policy makers to contrast with the more familiar tragedy of the commons.   While the latter tragedy is the result of overuse from ill-defined property rights, the tragedy of the anti-commons leads to underuse because too many rights holders have claims that prevent  the efficient and innovative use of scarce resources.  Too many rights holders, in other words, lead to gridlocks in markets, politics, and social relationships.

                  Examples spill over from the book.  Life-saving drugs are denied to the sick because too many patent owners prevent drug development and distribution.    Airports fail to be built because developers face the transaction costs of negotiating with too many landowners.    Wealth fails to be accumulated among families in the South as landholdings become increasingly divided across generations.   In terms of sheer number of eye-catching and head turning examples,   this book has to take the award and is worth the cover price alone.

                For readers of this blog,  Professor Heller also has something to say. According to Heller,   in many instances, well-defined and concentrated ownership may be the solution to the anti-commons.  Aggressive antitrust enforcement may actually exacerbate the problem of too much ownership in the name of promoting competition.   Although his proposed solution of creating a Protrust Division of the DoJ is somewhat at the outer limits of farfetched,  Professor Heller has a point in suggesting that the name antitrust in US law be replaced with the European term, competition policy. The name change may also lead to a change in attitude against large concentrated companies and a focus on identifying the legal conditions for competition and innovation.   Devoted readers of this blog may note that we are one step ahead of Professor Heller on this front; we added Competition Policy to the name of this previously labeled Antitrust Blog about a year ago.

                I am a big fan of Professor Heller’s work, and he has shaped my thinking in many positive ways.  So it is a delight to see his ideas distilled in such a fresh and exciting package (i.e. without the footnotes and eternal reinvention of the wheel that is the stuff of law reviews).   For those first encountering the tragedy of the anti-commons,   one may ask (as I asked myself ten or so years ago): what is the nature of the problem that Professor Heller has identified.  At the surface, it seems to be simply one of identifying another type of transaction cost of bargaining.  Scratching deeper, one may see in the anti-commons the problem of unrealized scale economies.    Thinking within broader jurisprudential terms, Heller’s tragedy of the anti-commons is just a variant of Professor Mary Ann Glendon’s Rights Talk, the idea that American society has devolved into the pursuit of individual rights, at the expense of the community.  (The Supreme Court’s recent  Second Amendment decision in Heller [no relation, I assume]  is perhaps one example of the expansion of rights talk.)  The tragedy of the anti-commons encompasses each of these points and more.

                If I were to put my finger on the source of the tragedy of the anti-commons,  I would characterize the problem as a crisis of decision making.   “Too many cooks spoil the broth,” as Professor Heller himself invokes.  But the problem with too many cooks or too much ownership is that decision making can become cacophonous and anarchic.   A crisis in decision making is what the tragedies of the commons and anti-commons share.   It is well-known that monopoly ownership (a single cook, so to speak) can be one solution to the tragedy of the commons.  Once both tragedies are understood as problems with decision making, it isn't surprising that monopoly turns up as a solution to the tragedy of the anti-commons as well.  But monopoly concentration has its own problems.  The solution to both tragedies seems to lie in creating institutions that give voice to individual participation in an ordered, communal manner without slipping into the perils of dictatorship.   The market can be one such institution; participatory democracy, another.    What Professor Heller’s new book invites us to do is start thinking of how to design institutions in order to meet these ends.  Not a bad invitation for this pivotal election year!

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