The Anticommons

Can "too much ownership" cause gridlock and the "underuse and waste" of resourses?:

The Permission Problem, by James Surowiecki: 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.

The situation that grounded the U.S. aircraft industry is an example of what the Columbia law professor Michael Heller, in his new book, “The Gridlock Economy,” calls the “anticommons.” We hear a lot about the “tragedy of the commons”: if a valuable asset (a grazing field, say) is held in common, each individual will try to exploit as much of it as possible. Villagers will send all their cows out to graze at the same time, and soon the field will be useless. When there’s no ownership, the pursuit of individual self-interest can make everyone worse off. But Heller shows that having too much ownership creates its own problems. If too many people own individual parts of a valuable asset, it’s easy to end up with gridlock, since any one person can simply veto the use of the asset.

The commons leads to overuse and destruction; the anticommons leads to underuse and waste. ... Even divided land ownership can have unforeseen consequences. Wind power, for instance, could reliably supply up to twenty per cent of America’s energy needs—but only if new transmission lines were built, allowing the efficient movement of power... Don’t count on that happening anytime soon. Most of the land that the grid would pass through is owned by individuals, and nobody wants power lines running through his back yard.

The point isn’t that private property is a bad thing, or that the state should be able to run roughshod over the rights of individual owners. Property rights (including patents) are essential... But property rights need to be limited to be effective. The more we divide common resources like science and culture into small, fenced-off lots, Heller shows, the more difficult we make it for people to do business and to build something new. Innovation, investment, and growth end up being stifled. ...

In theory, one should be able to break a gridlock by striking a deal that would leave all sides better off. Sometimes that happens. ... [But...] One reason deals founder is that there are simply too many interested parties. If, in order to create a new drug, you have to strike bargains with thirty or forty other companies... often things go awry because owners won’t make a deal at a reasonable price...

Recent experimental work by the psychologist Sven Vanneste and the legal scholar Ben Depoorter helps explain why. When something you own is necessary to the success of a venture, even if its contribution is small, you’ll tend to ask for an amount close to the full value of the venture. And since everyone in your position also thinks he deserves a huge sum, the venture quickly becomes unviable. So the next time we start handing out new ownership rights—whether via patents or copyright or privatization schemes—we’d better try to weigh all the good things that won’t happen as a result. Otherwise, we won’t know what we’ve been missing.

[Update: Environmental Economics has more.]

Comments

[reason]

About time this issue was opened up for discussion. I have been railing about IP often causing more problems than it solves for some time. (P.S. Mark Thoma - Environmental Economics comments on the same publication).

[reason]

One way to think about this problem is to think about what life would be like if every household owned the road in front of its house. How would commerce work when people had to constantly pay fees for every step along the way. (We don't have to guess this is what the middle ages were like.)

[Ryan]

"The point isn’t that private property is a bad thing, or that the state should be able to run roughshod over the rights of individual owners. Property rights (including patents) are essential... But property rights need to be limited to be effective. "

While this seems like a rather benign and rational sentiment, the lack of explanation of how and to what extend PP should be restricted leaves me suspicious. Are we talking about having rights to your property unless it is arbitrarily surmised that the potential benefit to society outweighs the actual benefit to you, or are we talking about restructuring the terms in which private property rights are written?

[reason]

Ryan,
clearly the second - why can't you see that?

[Ryan]

"reason says...
One way to think about this problem is to think about what life would be like if every household owned the road in front of its house. How would commerce work when people had to constantly pay fees for every step along the way."

Considering privitized roads would be a valid way to think about this if modern technology didn't make hassle of toll boths an irrelevent argument. Besides, I'd imagine pay for roads have the effect of less driving, which is likely good, as a common gripe is that we in the US drive too much.

[Ryan]

Ryan,
clearly the second - why can't you see that?

Because he in no way indicated what he meant anywhere in that article. Of course, you already knew that.

[reason]

Ryan
Because in the exact sentence that you quote he says:
or that the state should be able to run roughshod over the rights of individual owners.
And later on he talks about "handing out property rights" indicating the source of property rights. Only an extreme bloody minded reading could come to the alternative understanding you mentioned.

[reason]

Besides, I'd imagine pay for roads have the effect of less driving, which is likely good, as a common gripe is that we in the US drive too much.

Maybe, but we would surely have to drive around expensive, blocked or badly maintained stretches adding to any particular journey.

[reason]

And imagine you live at the end of cul-de-sac and some of your neighbours don't like you!

[Ryan]

"Maybe, but we would surely have to drive around expensive, blocked or badly maintained stretches adding to any particular journey."

Highly unlikely, roads are expensive to maintain without scale and not very profitable without scale either. Most likely people would give up their sections of roads at a discount to some enterprising person.

With that said, isn’t there miles of unused land near our nation’s highways that could potentially be used for wind power? I don’t see the need to run power lines through someone’s living room when there is perfectly good uninhabited land.

[Ryan]

And imagine you live at the end of cul-de-sac and some of your neighbours don't like you!

What better reason to be more sociable?

[Corban]

To avoid people extorting the buyer, pull a Harvard and secretly buy the land/IP without telling them the ultimate use. This way you avoid the prorating that they do. However, are there acceptable kinds of prorating (environmental, social, economic)?

[kharris]

"But property rights need to be limited to be effective."

In the example given, "limitation" doesn't seem apt, though it's true. "Limitation" sounds as if it might extend to all kinds of things, like what color one is allowed to paint the privy. That isn't what is meant here. The apparent problem in the airplane example was the division of rights among many parties. Property rights need not to be sliced into so many pieces that there is a high transaction cost to doing anything with the property. Joint stock companies have lots of owners, each of whom (in theory) has property rights, but the company has a limited number of officers and board members who can make important decisions and a structure and rules to allow settlement of disagreements. The cost of making a decision is kept small relative to other costs of doing business.

[Ryan]

kharris,

Interesting persepctive. When I first read this, I also wondered if mimmicking the corporate world wouldn't ironically be a solution to the "anticommons" issue.

[piglet]

The "Tragedy of the commons" argument has become a poorly understood platitude. What causes the "Tragedy" is not lack of private property but lack of effective regulation. The typical examples are air pollution and overfishing, both of which are difficult to prevent and require strong regulatory frameworks. The case of the commons pasture has actually little validity since small peasant communities tend to have mechanisms of social control that in most situations prevent individuals from taking advantage of the community.

Traditional peasant communities have been farming communal land for thousands of years without necessarily overusing the land. On the other hand, private ownership of farm land is by no means a guarantee that the owner will take care. Almost all privately held farmland in the US is being degraded by its owners through unsustainable farming methods, to an extent that is historically unprecedented. It can hardly be disputed that Native American farmers, who didn't have a concept of private property, were on the whole doing a better job (although they were by no means the eco-heroes that we'd like to see in them).
The theory that ownership translates into better stewardship is really just a convenient myth and it's time we recognize it as such.

says...

"Highly unlikely, roads are expensive to maintain without scale and not very profitable without scale either." That's exactly the point.

"Most likely people would give up their sections of roads at a discount to some enterprising person." Probably, but what if your neighbor refuses? And what prevents that "enterprising person" to charge you whatever they like? Either you pay up or you stop leaving your house. "Property rights" is such a beautiful, powerful concept. A pity that most of its proponents don't understand it.

[ken melvin]

Twould have been as well to have titled 'The failure of the Market'. Much a part of said 'markets' is greed.

There are legal avenues to impose the common good. For those (many of whom come from the software crowd) who decry patents and copyright protection, imagine that you spent many a year's labor and much expense developing an apple orchard, who is entitled to the fruits of your labor and expense. Usually, indeed , one or more corporations steal patents and copyrights, too often without consequence.

[reason]

Ken Melvin,
I would like you to clarify your post. I have consistently argued that there are problems with the current IP framework. In areas such as pharmaceuticals, I think you could argue that the current framework is disfunctional, and that it is problematic in areas such as bio-technology should be clear. I am all for rewarding the creators of intellectual property but I just question whether we can't find a better framework. IP is a lottery, and can often force the reinvention of the wheel (instead of improving not quite perfect versions). For one thing, I think we should ensure competition on the production side by forcing multiple licences. And we should find ways to improve co-operation and reduce secrecy, since ultimately the advancement of knowledge is what drives progress. And knowledge discovery, I believe, works best as an open co-operative project.

[reason]

Anonymous (please label yourself if you can),
your answer is correct and appreciated, but this was so obvious that I couldn't be bothered spelling it out. As I mentioned on another thread, I had concluded that Ryan is just another Libertarian troll and not worth engaging with.

[robertdfeinman]

Lack of power line construction is not due to the difficulty in getting rights of way, power companies can use eminent domain and have for a long time. They can get tied up in court, but so can everything else in the US.

Power lines aren't being built because firms can't see a clear profit since they don't control the siting of the power plants that would feed them. This is a result of the breaking up of an industry where vertical control made sense: generation and distribution should be controlled by the same management. The financial vultures saw a way to make money off the separation and did. We are left with chaos.

As for patent pools they are very common, although sometimes this also has to go through the courts before companies will agree to cross license. They fight not over doing it, but how much each party gets.

We need a new rhetorical term: Argument by sweeping over-generalization. Something much in favor by the punditry these days.

[piglet]

"this was so obvious that I couldn't be bothered spelling it out. As I mentioned on another thread, I had concluded that Ryan is just another Libertarian troll and not worth engaging with."

You are probably right, reason. I sometimes like to follow absurd arguments to their absurd conclusions.

[reason]

robertdfeinman
Re Argument by sweeping overgeneralization
I thought that was what pundits did, full stop.

[S Brennan]

The "tragedy of the commons" occurs when there's no armed park ranger enforcing the agreed upon rules of use.

Every society needs enforceable[1] rules and a mechanism of enforcement. Every mechanism of enforcement has at it's core deterrence and deterrence always has an element of cruelty.

People left to their own devices will pursue their best interest, these behaviors, on balance, are destructive to the whole.

Put another way...libertarians are either juveniles, idiots or liars.

[1] Any enforceable rule must have broad consensus among the population, otherwise too much of a society's resources must be dedicated to the enforcement of laws that benefit few.

[Alex Tolley]

The bigger picture is whether this is a big enough problem to stifle the necessary advances we need to make to solve some of our global, Malthusian problems.

And irony indeed if our IP and market based economic structure becomes a hindrance to new developments compared to other nations.

[reason]

Alex Tolley,
nobody said this was an either/or question. There could still be an optimal solution.

S. Brennan,
I think your point is a good one, but it needs refinement. The cost and ease of enforcement is a non-trivial issue that is often neglected. I think Libertarians often treat it as a reason for not regulating without ever evaluating whether the value of regulation exceeds the cost of enforcement or not. But property rules in general are just another sort of regulation and have a non-zero cost of enforcement. Some rules by there nature encourage self enforcement others encourage cheating. For instance that is the reason I am in favour of marine reserves as the answer to overfishing problems rather than quotas. Fishermen have an incentive to report people observed fishing in marine reserves, it is much harder for them to control quota infringements by other parties.

[Alex Tolley]

reason: "nobody said this was an either/or question. There could still be an optimal solution."

Where did I say the problem was binary? With IP, I've seen the problem in biotech (gene patents), software (idiotic S/W patents) and I am appalled at the increasing length of copyright terms. I am saddened at the rights that property owners have that is slowly destroying Lake Tahoe. OTOH, I was opposed to the Kelso decision a few years ago that allowed the state to expropriate private property for commercial gin.

But for me, the technical landscape is littered with thickets of defensive patents that are more about blocking competitors than about commercial development. The US has tried to stuff its IP laws on the world via the WTO, but I don't believe this is in the best interests of the global community. As its extreme, it is morally obscene for Big Pharma to allow people to die because they are not allowed to get cheap versions of drugs because of the need to protect profits.

[piglet]

"The US has tried to stuff its IP laws on the world via the WTO, but I don't believe this is in the best interests of the global community."

Understatement of the year? ;-)

[John Markesan]

reason, I live in a highly privatized place, and it's appalling. Yes, we all own the street outside our house. I get so sick of spending endless evenings maundering on in neighborhood meetings about whether to fill a pothole or not. (Several neighbors are addicted to the specific kind of mischief they can cause in this setting. They seem to have nothing to do with their time but come up with excuses for meetings.)

I'd love to turn this all over to some decently paid civil servants, so I could get on with the business of doing what I do best. Which is most certainly NOT entertaining the mentally ill housewife who thinks we should cut down a different tree every few months, or the college professor who knows better than everyone about everything, or (etc.).

But again, I'd like to point to a larger concept being overlooked here. All of western agricultural civilization is built on the Mesopotamian idea that land exists to be enclosed, profited from, and used, with some being more wealthy and others less so. The entire rise of mercantile and juridical literacy springs from this conceptual innovation: everything is real estate. (Mark, look up Denise Schmandt-Besserat's work on the origins of writing, and if you e-mail me I can point you to solid historical sources on this.)

Today we are simply bickering about how far we can push that concept. Some think everything is and should be real estate--our genes, our thoughts, our fingerprints, the air, the sky. Others rebel against that.

The biggest disasters I see unfolding are when people adopt that other innovation of Mesopotamian urbanized agriculture: bipolar thinking. Things don't have to be all one way or another. Some approaches work best in some situations sometimes; others, at other times and places.

The unfortunate thing in our contemporary society is that ideas are no longer evaluated according to how well they've been shown to work, in practice. They are pushed, and elucidated, and enforced, discursively and politically, removed from praxis.

That takes me back to the neighborhood meetings where the college professor down the street thinks he knows better than everyone on all topics because he has the Ph.D. in Land Tenure. The man has never been out of school in his life. All he knows is Land Tenure, the tenure track, and the kind of politics and reasoning that exist within those narrow institutions. He is the EXPERT on various topics, therefore he knows the most about, say, the best kind of heavy equipment for someone else's landscaping project, or highway design. He reminds me so much of the economists I used to work with in the Bay Area who, snug in their institutional cocoons could hold forth in various media and settings on subjects and matters they didn't know the first thing about. Like, oh, The Rust Belt. The only rust they ever came near was driving on the Bay Bridge.

"Private property" is a legal concept, and like all legal concepts it is constantly in evolution. It exists to decouple work from privilege--to let people accrue privilege not through effort, but through games discursive and political. We are so immersed in this, in this nation, and especially after 30 years of Reaganomics and 60 of giga-corporate influence, that we find it hard to see the issues clearly without reference to concepts that bias the issues before we can think about them clearly.

John

[Peter Schaeffer]

Alex Tolley,

Under the rules of the WTO, poor countries are substantially exempt from pharmaceutical patents. The relevant part of the WTO is called TRIPS as well as the Doha Declaration. TRIPS is explained here http://www.wto.org/english/tratop_e/TRIPS_e/factsheet_pharm02_e.htm. The Doha Declaration (see http://en.wikipedia.org/wiki/Doha_Declaration) is a clarification of the TRIPS agreement making it (more) clear that poor countries can used patented drugs without buying them from the patent holders or paying comparable royalties.

These aren't just hypothetical WTO rights provided to lower income countries. See "Brazil’s Generic Drug Manufacturing Success and the policies that permitted it" (http://ocw.mit.edu/NR/rdonlyres/Electrical-Engineering-and-Computer-Science/6-901Fall-2005/60C332FC-0020-4197-A6C8-813977AE7274/0/brazil_gen_drug.pdf). See also "Thailand AIDS-Drug Dispute Deepens" (http://blogs.wsj.com/health/2007/05/02/thailand-aids-drug-dispute-deepens/) and "Brazil Stares Down Merck Over AIDS Drug Price" (http://blogs.wsj.com/health/2007/05/03/brazil-stares-down-merck-over-aids-drug-price/)

A minor note in this context is that it is not really clear if Brazil is actually making the generic HIV medicines in question. One source indicates that the active ingredients are made in India and Brazil only handles the packaging.

[reason]

Alex Tolley -
I generally agree 100% with your comment. Sorry if I misinterpreted you.

[reason]

John Markesan,
Yes ideology is a sort of infectious disease. I don't understand why pragmatism has become so despised. I think Ayn Rand and Milton Friedman openly promoted an ideological approach to the world, but there argument is a bit like religious arguments, it only works if your ideology is TRUE. And it never is.

[reason]

I think it is time here to repeat a true story that tells a tale about commercial interest and patents. In Australia in the 70s there was a popular TV program called "The inventors". One competitor had discovered a way to make razor blades last longer and be safer. The technical expert said "great". The marketing expert, said "nobody will make this. You will receive an offer to take over the patent, purely to ensure it will never be manufactured. Razor makers make money from selling blades, they don't want the blades to last longer." I never saw this product on the market.

[reason]

The above story impressed me, because it told me that although science and technology are the source of human advancement, corporate market economies only like specific sorts of technical and scientific progress and will seek to suppress other sorts. We must recognise this and ensure that scientific and technical comes from other sources as well, and is allowed to enter the public domain. The "Republican war on science" is a war on mankind.

[Lafayette]

In light of the Personal Computer experience

The point isn’t that private property is a bad thing, or that the state should be able to run roughshod over the rights of individual owners. Property rights (including patents) are essential... But property rights need to be limited to be effective.

The metaphor is likable.

The commons was communal land for collective usage. That notion has not aged well in a capitalist America hell-bent on the individual accumulation of capital – in its transition from the Agricultural Age (in which this country was formed) into the Industrial Age (in which it developed) and, more recently, Information Age.

Is intellectual property a “commons”? In many ways it is. Patenting technology applications most often requires painstaking R&D, often funded by the state, or often done in publicly owned university laboratories. Rarely, it is done by one individual, from brainwork concept to patent fruition – without passage through an experimental phase that requires time, effort and equipment; all of which are expensive.

And, of course, there are some developments that remain non-patentable. For instance, when Jobs had his engineers develop, based upon work a Xerox laboratories, a windows-like Graphic User Interface (GUI). Microsoft, and Bill Gates personally, was a subcontractor for that effort.

Gates spent a great deal of time with Apple engineers discussing their project, with MS-personnel participating in certain key parts. Jobs was reputed to have gone ballistic, ordering his engineers to “shut up” with Gates.

When Gates ultimately disclosed his “Windows” operating system, Jobs sued him for having exploited existing Apple patents. He lost his case. Why? Because legal precedence was formulated that expressed the notion that software cannot be patented due to its very nature. Its application, or manner of usage, can be, but not its written code structure.

Which is not true of other written works. They remain the copyright of the author.

So, software code remains within the public domain. And, we have seen that the public domain has developed even further by allowing software applications to be “open” and not “closed”, meaning its usage is available to all because its core software is not uniquely owned by one entity.

This too is an example of a “technology commons”, long since overdue. And which turns upside down Microsoft’s business market. (Which, I suggest, is one reason why Bill detached himself recently from the company he founded. Bill always though in terms of ownership.)

Should we have such intellectual commons, whereby key, patented innovations are suspended in order to allow (1) their larger developmental manifest destiny or (2) a more competitive market? Perhaps so.

Nonetheless, that one of the world’s richest monopolies, Microsoft, is considered a “natural monopoly”. This means there is no patent to protect its market share. MS-DOS beat out fairly and squarely both CP/M and Macintosh in the PC battle of the last century. The why of that outcome is unimportant.

The means to the outcome are, however, the key. A level playing field, also another version of the notion of “commons”, existed. Nothing prevented a more equitable sharing of the marketplace amongst the three participants mentioned above. The subsequent hegemony upon the market of MS-DOS, then Windows, cost customers dearly.

However, nothing induced the possibility of a more fair equilibrium. Nothing predestined CP/M to be a failure and MS-DOS the opposite. Only one factor could have prevented a Darwinian evolution of the PC market. That the state should purchase and put to work all-comer systems to prove them by usage. This, of itself, is not an obvious task.

What made Windows finally dominate the market-place was not its operating system, but its applications -- what you could do with it. Namely, the Office Suite of products.

It took a Bill Gates to realize that, to his everlasting credit. Such intuitiveness, however, is not patentable. It is innate.

[reason]

Lafayette,
but microsoft is exactly an example of what the author is talking about. The problem is that the infrastructure part (the operating system) has been tangled up with the application software AND that has stopped better systems from replacing Windows. Standards should never be implemented by their specifier. It is bad news, it inhibits innovation and competition.

[reason]

In my mind we need a more intelligent and subtle anti-trust. Microsoft shouldn't have been fined, it should have been broken up.

[Lafayette]

Article: Wind power, for instance, could reliably supply up to twenty per cent of America’s energy needs—but only if new transmission lines were built, allowing the efficient movement of power... Don’t count on that happening anytime soon. Most of the land that the grid would pass through is owned by individuals, and nobody wants power lines running through his back yard.

There is the right of Eminent Domain. That is, the right, in certain circumstances, where the benefit of the collective is more important than ownership rights of the individual.

This notion has been employed, rarely, in the US. But, it certainly would resolve the question of property rights in terms of a National Electricity Grid.

In fact, we should get more familiar with collective rights, especially after this disastrous administration that went all-out for Individual Rights that led to the Financial Feeding-Frenzy, which will go down nefariously inscribed in American history.

[reason]

Lafayette...
we need to get the mantra into people's heads "With rights come responsibilities". Every child knows that, but society seems to have forgotten it.

[Lafayette]

God of Mammon

reason: "With rights come responsibilities". Every child knows that, but society seems to have forgotten it.

I could not agree more.

If you've got a notion of how to inculcate lastingly the above principle, patent it. At what point does a child, once under obedience to parental authority, begin to forget that rights entail responsibilities. Where is it that they replace that principle with "Winner takes All prevails"? Or, "If I don't grab it, someone else will".

It seems that moral fibre is something that is first inculcated and quickly forgotten once on the highway of life -- meaning independent of the family. From then on it seems molded by the media in a consumerist society, the behavioral rule of which is “Keeping up with your peer group”.

More Americans go to church more regularly than most Europeans (though less than Muslims). What do they learn there? Where in the Ten Commandments (the heart of our Judeo-Christian faiths) does it say, "Go ye forth and earn thyself a megabuck because thou believest in the true God".

All early Christian faiths bore the notion of a God of Mammon, for those who worship greed and avarice. Such character attributes are long-standing in the human race. Where is it, however, in modern religious teaching?

Early Christian faiths bore the logo, "Love thy neighbour". Is this not the core form which we derive our concern for the collective welfare? Or, have we exchanged such principled notions for the Orwellian kind: "All animals are equal, but some animals are more equal than others".

I'm lost, frankly, at understanding what transpires ... but there's little indication that any of it bears goodness. Especially in a country lead by a PotUS who professes religious faith and performs in a manner almost contradictory to most ordinary religious beliefs.

A shame, really, because civil morality devolves from beliefs based upon bedrock values -- and not economics. Belief determines policy decisions, which, in turn, influence the economy of a nation.

Meaning our lives and often our destiny.

[Real Person from the Real World]

Microsoft rants about software piracy and constantly tries to tie any and all of its products into a bundle that makes it difficult to use non-microsoft products. You no longer own what you buy, you rent. And to facilitate that, SaaS, and W2 and working online using fee raising rent-to-use software is coming. Right now, software licensing brings all sorts of interesting problems, pay by the seat? or by usage? and how do you keep track, and crack down on those unwilling/or financially unable to follow the rules? RIAA is cracking down on people who want fair use of the entertainment they pay for. Even if you are selling a copy of something for profit, only for your own convenience, you can be nailed.... And technology is enabling companies to force everyone to play by their rules. Meanwhile globalization, and companies (with the aid of countries to whose benefit it is to abet them), are using people for wage arbitrage, while credit card companies are ratcheting up fees and interest rates. I hope something can bring sense, community, and reasonableness back.