Tuesday, August 12, 2008

Tragedy of the Anticommons: Too Much Ownership?

Writing in the New Yorker, a certain James Surowiecki tells us he finds a very insightful idea in a new book, The Gridlock Economy, by law professor Michael Heller. Heller calls the idea the tragedy of the anticommons. It's supposed to be a sort of mirror reversal of the "tragedy of the commons. " This idea, if Surowiecki is reporting it rightly, sounds very wrongheaded to me. But it sounds like just the sort of idea that some people would take seriously, so maybe it is worthwhile to say something about it here.

My favorite example of the tragedy of the commons is from American history. In the 1870s, one decade, the North American bison were nearly hunted to extinction. Professional buffalo hunters would shoot buffalo just to pack their tongues in barrels of salt and ship them east, where they would be sliced to make sandwiches. Dairy cows, on the other hand, are not used in this wasteful way. Farmers do not shoot their cows to utilize some small part of their carcases, leaving the rest to rot on the ground. Why not?

The answer is of course not in the nature of cows and buffalo, which are closely related species, nor does it lie in the fact that humans suddenly become greedy when faced with one sort of beast and not when dealing with the other. The explanation lies in the position that the two sorts of animal occupied in the structure of property rights.

The cow is owned. A farmer who uses it wastefully is wasting his or her own cow. Nothing like this is true of the Buffalo. The buffalo, in those days, was in a common pool that all may exploit, with few or no penalties for wasteful overuse.

Here is how Surowiecki typifies the tragedy of the anticommons:
In the second decade of the twentieth century, it was almost impossible to build an airplane in the United States. That was the result of a chaotic legal battle among the dozens of companies—including one owned by Orville Wright—that held patents on the various components that made a plane go. No one could manufacture aircraft without fear of being hauled into court. The First World War got the industry started again, because Congress realized that something needed to be done to get planes in the air. It created a “patent pool,” putting all the aircraft patents under the control of a new association and letting manufacturers license them for a fee. Had Congress not stepped in, we might still be flying around in blimps.
In the tragedy of the commons, the problem is the common pool. In the tragedy of the anticommons, it is the solution. The former, Surowiecki says, is a case of too little ownership, and the latter is a case of too much ownership. The former leads to overuse and waste, while the latter leads to underutilization and missed opportunities. The latter sort of tragedy is possible because ownership includes a veto power: no one can take what is mine unless I say so. When there is too much ownership, this leads to gridlock and prevents cooperation.

Does this make sense?

I'd say the short answer to that question is "no."

To begin with the obvious: To say that we would be riding blimps today if Congress had not put aviation patents into a common pool is just plain silly. The idea that these companies, assuming each really did have ownership of some essential component of an airplane, would prefer using their veto power to cooperating -- that they would prefer poverty to riches -- really strains credulity.

To take a somewhat less obvious point: I have not researched this case, but I would be willing to bet that it was actually not clear who really held legal ownership of the various ideas involved. After all, "who owns what?" is the question these judges were being asked to decide. To the extent that this is what is going on, the problem was that people's property rights were unclear or indeterminate. Does that sound like a case of too much ownership, or too little?

The fundamental problem with the "anticommons" idea is that its main point, that the common pool is the solution to this problem, is generally not true. In the overwhelming majority of cases in which this "problem" occurs, it is the property rights that are the solution.

Consider for a second the situation in which this supposed problem pops up. There are several people such that: 1) each has rights, but 2) they all have different rights, and 3) to make optimal use of these rights each must make use of the rights of others, and yet 4) they all have a veto power against the others doing so.

This description may not be immediately recognizable when put this way, but what I have just described is daily life in a developed market society. As Adam Smith said, "When the division of labour has been once thoroughly established, it is but a very small part of a man's wants which the produce of his own labour can supply." I am standing at the checkout counter and the supermarket. The market owns a jar of peanut butter, and I own a dollar bill which I have earned by my labor. The market needs money, and I need peanut butter. And yet we each have a veto power over the other's just taking what they need. What happens next? Obviously, we trade, precisely because we do have this veto power. They can't have my dollar bill unless they give me the peanut butter, and I can't have the peanut butter unless I give them the dollar bill. Trade is the solution to our "problem" and, because trade presupposes property rights, this means that ownership is not the problem but the solution.

8 comments:

N. Hunt said...

Dad,

I think you're giving Dr. Heller too much credit saying that he proposes the solution ofcreating a common pool. In the example of the WWI airplanes, each airplane company still had to pay a fee in order to use a copyright they didn't own, so clearly the mechanics of private property rightswere still in place. What Heller is seeing is a phenomenon that's been known in economics for quite a while: transaction costs. The culprit in the airplane problem wasn't too much ownership,it was that the companies couldn't come together for mutual benefit when clearly cooperation would have yielded more profit than using their "veto powers" against one another. The issue of veto powers can only be used againstthe use of private property if somehow cooperation and trade would yield less profit than clinging to your property (which seems more like an issue of negative externalities to me). Otherwise, it's merely an issue of transaction costs.

-Nat Hunt

Michael said...

Just to add to your comments, the commons problem obtains because the goods in question are rivalrous. So it doesn't even make sense to apply a commons analysis to intellectual property. The veto problem is simply a garden-variety transaction cost.

(For identification purposes, I am the commenter formerly known as "Q" the Enchanter.)

Lester Hunt said...

Nat and Commenter Formerly Known as ...,

Interesting that you both suggest that high transaction cost is the real problem (when there is one). That makes sense to me. And of course the same thing does not make sense in the case of the tragedy of the commons. There, the property rights situation has to be changed somehow (either via creating ownership or via regulation) before things can get any better.

Theodore Nordsieck said...

One thing to note in particular is that the anti-commons shows up almost exclusively in nonrival property. The one good example I know of the anti-commons being a problem for rivalrous property is the dissolution of the ad coelum rule with the advent of flight, although I suspect that water right probably suffers a bit from this as well.

Lester Hunt said...

Mr. Nordsieck,

I've noticed that all of the examples that make sense seem to be about intellectual property -- which, to use your term, is non-rival (which I take to mean if I use it then the whole thing is still there for you to use). Why this should be so, I haven't figured out yet. (No doubt, there are economists who have written about it at length and I just don't know their stuff!.)

The disappearance of the ad coelum rule {that a landowner owns everything above it, to infinity)with the advent of human flight is a very interesting example. I'll have to think about it.

Michael said...

Theodore, that's pretty good, though it's unlikely that the right to exclude ever truly extended to the "heavens above." The question was merely academic until the advent of skyscrapers and airplanes, but it seems more accurate to describe the situation as one in which the rule was clarified rather than dissolved.

Robert W. Franson said...

There's another factor dropping an increasingly immobilizing net over both the traditional commons and individual ownership. That's the use of lawsuit or threat of lawsuit to assert some non-owner privilege, or some apology that needs to be made, or any presumed wrong that needs to be righted.

David E. Bernstein in You Can't Say That! discusses the growth of censorship, compelled speech, legally compelled association, and so on. While his focus is on civil liberties, many of his examples involve assertions of rights against either public or private ownership.

Ken Drinkwater said...

Way late to the party...

If you were trying to build a plane, it'd be really hard to negotiate with all 10 patent-holders at the same time. Lets say you budgeted 10k for each patent, and you secured the first 9 patents at that price.

The 10th patent-holder is going to see that and say "Well, well, well... you already sunk 90k into this project, and you still don't have the right to build a plane. Before you said you were willing to pay 100k for that right, I think I'll be generous and charge you 99k." At this point, the manufacturer either caves in to the demands or folds up shop and goes bankrupt.

This is sort of like what was happening in the Senate when the Dems were trying to get 60 votes. They only had a pool of about 60 possible people, so they needed unanimity in order to get anything passed, but this was really difficult because people would always come out of the woodwork to make an outrageous demand, I believe Ben Nelson was asking for some sort of Cornhusker Kickback or something. You had a situation where lawmakers were threatening to vote against a law they wanted to pass - they figured if they didn't take advantage, someone else would. Pretty tragic.

It seems like this tragedy of the anti-commons arises from the need for unanimity, a situation in which the greediest man will wait til it looks like everyone else is signing on, then he'll step forward to make extortionary demands. Eminent Domain is another example of this. It would be like if 10 different people owned the same buffalo, the only way to negotiate for its slaughter is if you got all of them in front of you at the same time, told them to put their heads together, and come up with with a price. It sort of sounds like that's what that licensing body was created to do.

Coordination is the operative word, more so than cooperation. Maybe someone already said this, my reading comprehension tends to sundown.