shouting loudly

When too many people own a resource, the resource will be underused. Cooperation will break down, wealth will be lost. That is today’s message of Michael Heller who is at Berkman to talk about his new book, the Gridlock Economy.

Explaining the economic meltdown as an example of a gridlock economy, he suggests that in the past there was a direct one-on-one relation between lenders and borrowers, that they knew each other. Banks lost money on foreclosures, they’d rather work out a deal with you. But in the new world, there are potentially several thousand owners, and it is much harder to re-negotiate a loan. Too many owners fragment mortgages.

The second example he gives is drug patents. He tells a story about an invention, a treatment for Alzheimer. But producing this treatment would touch upon a dozen patents. Imagine a room with a dozen start-ups, each of them thinking they are sitting on the patent that is key to treating Alzheimer. Imagine having to negotiate with all of them. The inventor decided not to go for it and put the treatment on the shelf. The deal could not be made. Heller is making the argument that this is not an isolated case. There is a huge increase and investment in invention and patents in the last thirty years, but there has been a decrease in discovery of major classes of new medicines, what he calls the drug discovery gap. Forcefully, he argues, we have drugs that should and could exist, but don’t. And it is not just drugs, but this problem exists all across the high-tech frontier.

He starts his third example by asking a question: what is the most underused natural resource in the United States? The answer is: spectrum. About 90% is dead air. The licensing of spectrum dates back to Coolidge and basically hasn’t been updated since. We have created a system of geographically fragmented licenses that are non-transferable, making it extremely difficult to assemble public or private networks. The United States has fallen in broadband from number 1 to somewhere number 15. Cutting high-tech will not occur in the United States, the next generation technology cannot emerge here, because it is so hard to find spectrum to facilitate high-speed transfer.

Fourth example: airports. Why do we have to spend so much time at airports? Why not build more airports? Thirty years ago, air traffic was de-regulated, yet Denver is the only new airport that has been built in the United States since 1978. The reason we don’t have more new airports is former real estate law, that allows every community to block the assembly of land you need to build new airports.

Heller concludes that these are essentially all the same problem. There is a change, a shift in the nature of innovation. There used to be a one-on-one relationship between patent and invention, between copyright and song. That is the old style economy. Now the new style economy is much more like a funnel, from many to one. That is to say, assemblage is needed for innovation. Big breakthroughs come from assembling multiple parts into one. Cutting edge is found in mash-ups, remixes, even in the case of resources like land.

He calls this the tragedy of the anti-commons. The tragedy of the commons is that no owners lead to overuse. It was a huge turning point for the environmentalism movement, a metaphor leading to a change in framing, of thinking about public good problems. It was key to a spur to privatization, seen as the solution to the tragedy of commons; that is to say, private property is a great engine to conservation.

But privatization can overshoot.The tragedy of the anti-commons is when too many owners lead to too little use of scarce resources. This is, contrary to the tragedy of the commons, an invisible tragedy – you don’t see when something is not appearing, is not being invented, is not being built.

Edit: See also the much more lucid and detailed blogging of this event by my esteemed colleagues David Weinberger and Ethan Zuckerman. In particular, check out the fascinating exchange on the nature of “property” between Michael Heller and Yochai Benkler that I was unable to capture in my blog. Too many bloggers clearly did not lead to the underblogging of this event, although clearly some blogs were better than others.