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.
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