The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives
Michael Heller has written one of the most interesting economics books of the last year. It is a thought provoking and well written account of the anti-commons problem that has not been clearly focused on by many economists but which has a profound impact on how the US may grow in the 21st century.
An important concept in public economics is the “failure of the commons”. When there is public use or open access of land, fishing areas, or other non-private spaces or activities, there will be overuse and the free-rider problem. For example, if no one owns a fishing area, then no one has an incentive to manage the areas effectively for renewable. Everyone will fish to the maximum under the assumption that everyone else will try to maximize their catch. No one has the incentive to keep up the common property. There is overuse of the resource.
In his book, Heller focuses on the opposite problem of underuse through the “tragedy of the anti-commons”. When there is too much private ownership or if there is private ownership that is just a small portion of a total, there is the potential for what he calls phantom tollbooths. Too much diversification will lead to too many costs and underuse of property. The simple examples can include the use of patents to block the usage of certain technology. It could be the licensing of telecommunication bands into small regions which makes a national system difficult to implement. It could be NIMBY (not in my backyard) behavior which stops development of useful public works. It can come in the form of a single hold-out in development. It can also be a morass of regulations which create banana republic behavior within government which creates deadweight costs.
This book focuses on this problem because many are not aware of it. He also offers some simple solutions. If we have a chance to focus on change, this would seem to be an area where fresh thinking can have a significant impact on the economy without high financial costs.
One hopes that this is the change that some have in mind for the next few years.
An important concept in public economics is the “failure of the commons”. When there is public use or open access of land, fishing areas, or other non-private spaces or activities, there will be overuse and the free-rider problem. For example, if no one owns a fishing area, then no one has an incentive to manage the areas effectively for renewable. Everyone will fish to the maximum under the assumption that everyone else will try to maximize their catch. No one has the incentive to keep up the common property. There is overuse of the resource.
In his book, Heller focuses on the opposite problem of underuse through the “tragedy of the anti-commons”. When there is too much private ownership or if there is private ownership that is just a small portion of a total, there is the potential for what he calls phantom tollbooths. Too much diversification will lead to too many costs and underuse of property. The simple examples can include the use of patents to block the usage of certain technology. It could be the licensing of telecommunication bands into small regions which makes a national system difficult to implement. It could be NIMBY (not in my backyard) behavior which stops development of useful public works. It can come in the form of a single hold-out in development. It can also be a morass of regulations which create banana republic behavior within government which creates deadweight costs.
This book focuses on this problem because many are not aware of it. He also offers some simple solutions. If we have a chance to focus on change, this would seem to be an area where fresh thinking can have a significant impact on the economy without high financial costs.
One hopes that this is the change that some have in mind for the next few years.
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