Monday, July 07, 2008

The Gridlock Economy

Tyler Cowen on the tragedy of the anti-commons:

How many popular economics books offer a message which is (mostly) true, non-trivial, and understandable? Michael Heller's The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives satisfies that troika. The key message is that the "tragedy of the anti-commons" is often a bigger problem than the better-known tragedy of the commons. The tragedy of the anti-commons arises when too many veto rights are exercised. Here is one simple example:

Tarnation, a spunky documentary on growing up with a schizophrenic mother, originally cost $218 to make at home on the director's laptop. It required an additional $230,000 for music clearances before it could be distributed.

Or try tracking down orphaned copyrights or proceeding without explicit permission. Furthermore many new drugs are more costly to market, or end up not being marketed, because there are so many possible patent infringement issues. By the way about half of the patents litigated to judgment are not upheld. Too many interest groups have veto power over infrastructure development, such as wind power or a new oil refinery (my examples). The U.S. allocates its spectrum far less efficiently than either Japan or South Korea. Holdouts lower the rate of property redevelopment; I learned that The New York Times used eminent domain to build its new headquarters because otherwise assembling such a large parcel of land in midtown Manhattan was very difficult. It all boils down to the story of too many tolls on the medieval Rhine.

Yes, the author does give full credit to Buchanan and Yoon for their work on the anti-commons.

Heller does not cover the deeper question of whether a society can respect minority rights to the desired degree without encountering too strong a problem of the anti-commons. Most of us are for the right to appeal, for the right to a fair trial, for various courses of redress, for the right to sue, for basic rights of intellectual property, and so on. Some set of interest groups has to support those regimes. Can those interest groups be so empowered without the excesses outlined in this book? Would we still want to abolish the anti-commons problems if it led to a more general weakening of minority rights?

Good questions and what sounds like a good book.

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