Move Over, Marx

How too many property rights wreck the market.

The last decade has produced enough books challenging received wisdom to fill a small—and stupendously popular—library called the Compendium of Counterintuition. Here we find Malcolm Gladwell’s Blink, which teaches that snap judgments are sometimes more accurate than studied observation. James Surowiecki’s The WisdomofCrowds, almost a companion volume, argues that a bunch of random idiots can sometimes do better than experts. Chris Anderson’s The Long Tail makes the point that selling unpopular stuff can be a way to make lots of money.

The newest addition to the collection is Michael Heller’s The Gridlock Economy,which does for property rights what the Long Tail does for product marketing. The difference is that Heller, unlike most of the authors of counterintuitive books, is actually a leader in the academic field he is scrutinizing.  As one of the nation’s leading property theorists (Heller is my colleague at Columbia Law School), he has accomplished a feat. * In an area that has generated very few nonacademic books, Heller has managed to pull off one of the most perceptive popular books on property since Das Kapital.

TheGridlock Economy takes aim at one of the strongest intuitions in Anglo-American thought: that property is a good thing, and more property is almost always better. In fact, views on property, since about the time of John Locke, have bordered on reverential. Locke, for instance, described property as a natural right given to man by God as the reward for labor. Today the worship of property rights has merged with a faith in Adam Smith and the Market, creating a sort of Vishnu-Shiva combination (the state, incidentally, is Bramha).

By this measure, what Heller offers is blasphemy to the true believer: a market critique of property. He argues that creating too many property rights can actually wreck markets. Property, to Heller, is not holy water but more like fertilizer. Add too much, and everything dies.

How can too much property kill markets? The key insight is this: A property right creates a gatekeeper—someone whose permission is needed to use that thing we’ve just called “property.” That’s fine, but when you have too many gatekeepers—too many people whose permission is necessary to undertake a given project—that fact alone can create gridlock. It is one thing to get, say, five people to agree to something, but if the number is 500 or even 5 million, the project is sure to go up in smoke.

Examples make the point much clearer. Heller stumbled across severe property gridlock problems in Russia in 1991, when he was working for the World Bank. He noticed that while sidewalk kiosks were thriving, stores were empty. The reason was that the government gave out so many conflicting property rights in the stores that bickering among owners was preventing the enterprises from getting started. Kiosks, meanwhile, needed no one’s permission to sell stuff and profited from decades of pent-up demand. A country that for decades had no private property had crippled itself by creating too much of it.

The basic idea that too many stakeholders can kill a project is well-known to anyone who has ever worked on a committee or spent 15 minutes in Washington, D.C. But Heller’s insight is to see that dynamic at work not just in committees but in private markets, where the property system plays a huge part in determining how many, or how few, gatekeepers there will be. And a decade ago he did what a successful paradigm-shifter should: He coined a term for this phenomenon of needing too many people’s permission, so that the permissions themselves become a source of gridlock. He named it the anti-commons.

Heller demonstrates that the anti-commons can be found in places like medical research, and this is where the book gets depressing. He recounts the story of Compound X, a treatment for Alzheimer’s that remains undeveloped because there are too many owners of relevant patents, each of whom can demand the lion’s share of any profits. Similarly, Heller tells the frustrating story of Native American land forcibly propertized by the federal government. Over generations, that land has become so fragmented—it now consists of hundreds of tiny pieces—that nothing can be done with it without contacting thousands of people.

It’s almost enough to make you wonder why we have property rights at all. This is where Heller’s book begins to face the problem that every counterintuitive work encounters: the fact that the intuition you are challenging has quite a bit of truth to it. The classic example of this is the New Testament, which begins with exciting counterintuitive ideas like loving your enemies and ends with a series of boring letters from Paul acknowledging the importance of at least a few rules. The bracing allure of both Blink and The Wisdom of Crowds fades somewhat when their authors have to start admitting that, actually, relying on snap judgment and asking crowds won’t solve all of your problems (darn).

Heller’s book, similarly, fully concedes the utility of property but thinks it just has to be better managed. You won’t find here any bold exposé of the excesses of the American obsession with property—forget about patents, and think slaves. Heller is a renovator, not a wrecker, of property whose prescriptions tend to the pragmatic rather than the radical. For example, he regards condominiums as a clever way to manage a potential anti-commons and thinks similar arrangements should be more widespread. Marx would not be impressed.

And Heller inevitably runs up against instances when the anti-commons is, rather than a bug in the system, a key feature. In the 1950s, for example, New York city planner Robert Moses proposed to tear down much of SoHo and Greenwich Village to build better freeways—but was stopped, thank God, by Jane Jacobs, property owners, and other protesters. Their anti-commons saved Manhattan. This leads to the somewhat unhelpful conclusion that an anti-commons is a bad thing, except when it isn’t. More generously, you might say that an anti-commons is the enemy of change, and that deciding when you want change is a harder question. It takes us back to the tension between property and markets—property can act as a preserver while markets tend toward creative destruction. All this is satisfying to academics who love questions that lead to harder questions. But it may leave lovers of black-and-white feeling a little gray.

A different critique of Heller’s book will come from classically trained economists, who are awfully hard to impress and are poised to complain that Heller isn’t telling them anything new. I was once at a conference where someone said, “Michael Heller calls this an anti-commons—we used to just call it transactions costs—but God bless him.”

Yet I don’t buy the notion that Heller has just slapped a fancy name on something known since God created economic man out of Adam’s tailbone. The function of a phrase like anti-commons isn’t to discover something new. It is to use a phrase to put front and center a set of questions that other modes of thought may overlook or downplay. I think Heller would admit that the anti-commons problem is created by transaction costs, in the sense that Harley Davidson would agree that a motorcycle is just a very loud bunch of molecules. Heller’s phrases, gridlock economy and anti-commons, are a test that forces us to ask when property, designed to liberate, is doing the opposite.

In the end, what matters is that Heller passes the brain-infection test. His idea, once it gets into your head, takes root and explains quite a lot. In my own field, intellectual property, the problems of mass permission are everywhere: Nearly every venture in the media or entertainment field is shaped by the potential need to get permissions from millions of copyright stakeholders. There would be no YouTube—and no Google or Yahoo, either—if those firms had started by asking their lawyers to seek approval from the owners of a gazillion different copyrighted works. Netflix would not exist if it needed permission to buy movies and ship them through the mail—its whole business is premised on an exception to copyright called the “first sale doctrine.” Without the law-breaking shock of Napster and KaZaA, Apple’s iTunes store might never have started. Meanwhile, electronic books have had real problems getting off the ground because of the need to clear so many rights held by so many different people.

Getting permission sounds nice, and quite polite. But Heller reminds us that the need for too much permission, in matters personal or public, can become a quiet form of strangulation.

Correction, July 21, 2008: Tim Wu originally neglected to mention that Michael Heller, the author under review, is his colleague at Columbia Law School. (Return to the corrected sentence.)