October 2009 -- The topic of this conference is Michael Heller’s provocative new book on The
Gridlock Economy.1 The central thesis of the book is that one critical obstacle to
overall social advancement is the fragmentation of property among private owners
that prevents its coherent assembly for projects that are desired by all but
achievable by none. There is no question that, more than anyone else, Heller has put
this topic on the map in its current form, chiefly through two earlier academic
articles which have had immense influence on the field.2 The ability to introduce
into the mature field of law and economics even a single new generative term, the
anticommons on which Gridlock is based, is a major intellectual achievement. What
makes this accomplishment so noteworthy is that it now seems obvious—but only
after the fact. The question of holdout has long been on the agenda, but the ability to
link this problem up with the issue of overconsumption of shared resources—or
commons—opens up previously unappreciated avenues for research. We thus
know that with any standardized models the losses that come from excessive
fragmentation of productive assets, or tragedies of the anticommons, are equal to those which come from the excessive use of common resources over which there are
no clear property rights, or tragedies of the commons.3 Today, no assessment of
complex social institutions and practices can be undertaken without thinking about
its anticommons implications. Gridlock is here to stay; not only in discussions about
traffic, but also in those about the economy writ large.
But wherein lies the source of this gridlock? Heller’s subtitle offers us one
possible answer: How Too Much Ownership Wrecks Markets, Stops Innovation, and
Costs Lives.4 Sometimes the strong protection of private property rights is a source
of genuine economic stagnation and dislocation. However, any close examination of
the issues reveals one larger truth that lacks the attention‐grabbing character of
Heller’s title. In most settings, the weak and indefinite property rights system is the
source of the gridlock that he rightly deplores. We do not need another indignant
attack on the vulnerable institution of private property. We need a greater
appreciation of how unbridled government power does just what Heller says: “wrecks markets, stops innovation, and costs lives.”
The purpose of this critique of Heller is to illumine the true sources of the
gridlock problem. In so doing, I hope to avoid moving to the alternative scheme of
insisting that private property is the “be‐all and end‐all” of sound legal regulations
of the economy. Quite the contrary, for many years I have taken the position that we
can identify an optimal mix of private and public property, one that is often achieved
by customary practices that arises out of the countless actions of unrelated
individual persons, but which sometimes depends on state action for their reliable
implementation. The fundamental trade‐off that has to be made in all cases lies in
balancing the holdout problems that drive the formation of the gridlock economy and the exclusion problems that arise under any private property arrangement.5
The proper balance cannot be determined in the abstract, but rather requires a close
look at the nature of a particular resource to figure out what system of rights
maximizes the value in using that resource. Stated in this fashion, it becomes clear
that gridlock is only one important piece of the overall puzzle. Gridlock neither
displaces nor subsumes the other institutional or social problems that stand in the
path of efficient resource allocation.
Citation
"Heller's Gridlock Economy In Perspective" by Richard Epstein, October 2, 2009, Quick Links: Gridlock Economy Conference
Related Scholarship
"Tragedy T.V.: Rights Fragmentation and the Junk Band Problem" by Thomas Hazlett, October 2, 2009, Quick Links: Gridlock Economy Conference
"Heller's Gridlock Economy In Perspective" by Richard Epstein, October 2, 2009, Quick Links: Gridlock Economy Conference
"The Wasteland: Anticommons, White Spaces, and the Fallacy of Spectrum" by Kevin Werbach, October 2, 2009, Quick Links: Gridlock Economy Conference
"Google Book Search in the Gridlock Economy" by Doug Lichtman, October 2, 2009, Quick Links: Gridlock Economy Conference
"Autonomy and Independence: The Normative Face of Transaction Costs" by Robert Merges, October 2, 2009, Quick Links: Gridlock Economy Conference
"On Being Misled by Transaction Cost Economics: Externalities, Commons, and Gridlocks" by Harold Demsetz, October 2, 2009, Quick Links: Gridlock Economy Conference
