Law & Econ Prof Blog

Michael Heller, The Gridlock Economy

Michael Heller's articles on the anticommons and the boundaries of property interests are some of the most innovative contributions to the scholarship on property in the past 30 years.  He has just published The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives.  I haven't read it yet, but I have a copy and intend to get to it before classes begin next month.  Here's the blurb from flyleaf: 

"25 new runways would eliminate most air travel delays in America. Why can’t we build them? 50 patent owners are blocking a major drug maker from creating a cancer cure. Why won’t they get out of the way? 90% of our broadcast spectrum sits idle while American cell phone service lags far behind Japan’s and Korea’s. Why are we wasting our airwaves? 98% of African American–owned farms have been sold off over the last century. Why can’t we stop the loss? All these problems are really the same problem—one whose solution would jump-start innovation, release trillions in productivity, and help revive our slumping economy."

"Every so often an idea comes along that transforms our understanding of how the world works. Michael Heller has discovered a market dynamic that no one knew existed. Usually, private ownership creates wealth, but too much ownership has the opposite effect—it creates gridlock. When too many people own pieces of one thing, whether a physical or intellectual resource, cooperation breaks down, wealth disappears, and everybody loses. Heller’s paradox is at the center of The Gridlock Economy. Today’s leading edge of innovation—in high tech, biomedicine, music, film, real estate—requires the assembly of separately owned resources. But gridlock is blocking economic growth all along the wealth creation frontier."

"A thousand scholars have applied and verified Heller’s paradox. Now he takes readers on a lively tour of gridlock battlegrounds. Heller zips from medieval robber barons to modern-day broadcast spectrum squatters; from Mississippi courts selling African-American family farms to troubling New York City land confiscations; and from Chesapeake Bay oyster pirates to today’s gene patent and music mash-up outlaws. Each tale offers insights into how to spot gridlock in operation and how we can overcome it."

TSU

Parking Spots

Here's a magnificent example of how technology might make our lives better.  San Francisco is, according to today's New York Times, installing a system of sensors on 6,000 of its 24,000 on-street public parking spots that will allow those with smartphones to get signals on which parking spots are open.  Wow!  If the system can also tell you how many other smartphone users are hurrying to get to the unoccupied spots, that would allow you to compute the odds of actually getting a spot.  Think of this same technology applied to open seating at a concert, lanes in a swimming pool, books in a bookstore, and more. 
TSU

Crime 2007

New York had 494 homicides last year, the lowest since reliable figures were first gathered in 1963. 

Foxnews.com reported on June 9 that the preliminary annual Uniform Crime Report from the FBI shows that violent and property crime declined 1.4 percent in 2007 from their 2006 level.  This report reverses a two-year increase in crime: violent crimes had increased 2.3 percent in 2005 (over 2004's levels) and 1.9 percent in 2006 (over 2005's levels).  Property crimes fell 2.1 in 2007, the largest drop in the last four years.  "The largest declines were in vehicle theft, down 8.9 percent and in rape, down 4.3 percent and murder, down 2.7 percent." 

"The crime trends were not uniform. Murders, for instance, were down in cities of more than 250,000, including an enormous 9.8 percent drop in cities of more than a million residents. But murders rose in some small cities — up 3.7 percent in cities of 50,000 to 100,000, up 1.9 percent in cities of 100,000 to 250,000, and up 1.8 percent in cities under 10,000. Historically, murder trends have begun in the largest cities and moved over several years to smaller ones.

The other violent crimes tracked by FBI statistics — robbery and aggravated assault — were both down 1.2 percent." 

"Violent crimes dropped most in the Northeast, down 5.4 percent with 1.7 percent declines in both the Midwest and West. But it rose 0.7 percent in the South.

Property crimes followed the same pattern: rising only in the South, where they were up 1.1 percent. The West recorded a 4.7 percent decline in property crimes, followed by the Midwest, down 3.6 percent and the Northeast, down 2.9 percent." 

The FBI's Uniform Crime Report website on these preliminary data is here with links to the underlying tables.

TSU

Innovation in Law Firm Organization

Bill Henderson and Mark Galanter (and some others) have been writing some excellent articles tracking changes in the organizational structure of law firms.  The July 2 "Legal Beat" column in the Wall Street Journal has an interesting article about the rise of new sorts of firms.  See here.  The article gives an account of small, niche firms in which the lawyers provide high-quality piece-work to larger law firms on specialized topics.  The lawyers in the small, niche firms work sensible hours in exchange for lower salaries than if they were on the partnership-track at larger law firms. 

It is interesting to remark that there are similar changes going on in the medical profession (in which we have a lovely and remarkably talented daughter-in-law).  This article from several months ago in the Wall Street Journal describes the rise of "hospitalists," who have the same sort of reduced and sensible workload within the medical profession as the employees of the small, niche firms have within the legal profession. 

TSU

Endowment Effect

There is an excellent summary article on the endowment effect -- aptly entitled "It's Mine, I Tell You" -- in this week's Economist magazine.  The article is available here.  The endowment effect holds that possession of a good, asset, or legal entitlement causes human beings to place a higher value on that good, asset, or legal entitlement than they would place on it if they did not possess it.  The article ably summarizes the recent literature on the effect, including the article in a recent issue of the William & Mary Law Review by Owen Jones and Sarah Brosnan on an evolutionary hypothesis about the endowment effect and reports on experiments on the effect among chimpanzees.  The article is available here in pdf. 

Here's the abstract of the Jones and Brosnan article: 

    Recent work at the intersection of law and behavioral biology has suggested numerous contexts in which legal thinking could benefit by integrating  knowledge  from  behavioral  biology.  In  one  of  those contexts, behavioral biology may help to provide theoretical foundation  for,  and  potentially  ncreased  predictive  power  concerning, various psychological traits relevant to law. This Article describes an experiment that explores that context. 
    The  paradoxical  psychological  bias  known  as  the  “endowment effect” puzzles economists, skews market behavior, impedes efficient exchange of goods and rights, and thereby poses important problems for  law. Although  the  effect  is known  to vary widely,  there are at present no satisfying explanations  for why  it manifests when and how it does. Drawing on evolutionary biology, this Article provides a new theory of the endowment effect. Briefly, we hypothesize that the endowment effect is an evolved propensity of humans and, further, that the degree to which an item is evolutionarily relevant will affect the strength of the endowment effect. The theory generates a novel combination of three predictions. These are: (1) the effect is likely to be  observable  in  many  other  species,  including  close  primate relatives; (2) the prevalence of the effect in other species is likely to vary across items; and (3) the prevalence of the endowment effect will increase or decrease, respectively, with the increasing or decreasing evolutionary salience of the item in question.   
    The  authors  tested  these  predictions  in  a  chimpanzee  (Pan troglodytes) experiment, recently published in Current Biology. The data,  further  explored  here,  are  consistent with  each  of  the  three predictions. Consequently, this theory may explain why the endowment effect exists in humans and other species. It may also help both to predict and to explain some of the variability in the effect when it does manifest.  And, more  broadly,  the  results  of  the  experiment suggest  that combining  life science and social science perspectives could  lead  to  a more  coherent  framework  for  understanding  the wider variety of other cognitive heuristics and biases relevant to law. 

TSU