Too many owners lead to gridlock

Kai Ryssdal Jul 22, 2008

Too many owners lead to gridlock

Kai Ryssdal Jul 22, 2008


Kai Ryssdal: The way ownership works in this society goes something like this: What’s mine is mine; what’s yours is yours, and that works pretty well when you’re talking about cars or houses.

But in his new book called “The Gridlock Economy,” law professor Michael Heller says too much ownership has some unintended consequences.

Professor, good to have you with us.

Michael Heller: Pleasure to be here.

Ryssdal: This gridlock economy, what is it? What does that mean?

Heller: In a nutshell, when too many people own pieces of one thing, no one can use it. Usually, private ownership creates wealth, but too much ownership has the opposite effect; it creates gridlock. That’s a free market paradox. It’s blocking innovation at the frontiers of our economy. If too many owners control a single resource, cooperation breaks down, wealth disappears, everybody loses. Ownership congestion is a lot like traffic congestion, it’s just much harder to see.

Ryssdal: This isn’t an new thing. I mean, property ownership has been around forever.

Heller: There’s been an unnoticed revolution in how we create wealth. Ten, twenty years ago, you got a patent and marketed your product, you got a copyright and signed your song, you took raw land and you subdivided it. Today, the leading edge of wealth creation requires assembly: drugs, telecom, but also software, semiconductors, banking, anything high tech demands the assembly of innumerable patents. And it’s not just high tech that’s changed: Cutting edge film, music is about mashing up, remixing many bits of culture. Even land: the most socially important projects, like new runways, require assembling multiple parcels.

Ryssdal: Help me in layman’s terms explain what seems to be this very complicated theory here.

Heller: Let me give you a life or death example: A drug company exec tells me he may have a better Alzheimer’s drug, but he can’t test it without licensing dozens and dozens of patents. So any one of those patent holders can hold him up, can say “Give me a huge payoff or I’ll block the deal,” and that’s what’s happened. He’s shelved his cure even though it could save millions of lives and earn him billions of dollars. So drugs that should exist, could exist, aren’t being created. We have too many owners — in that example, it’s too many patent owners — and too few products.

Ryssdal: But the owners of those patents that this guy would have to license will come back and rightly say, “Listen, I spent years of my life, tens of thousands, hundreds of thousands, millions of dollars developing this patent on this thing. Why should I just give it away to this guy?”

Heller: Oh, absolutely. You shouldn’t give it away. We let people start getting patents on basic, in this case biotech, discoveries about 30 years ago and we’ve had the biotech revolution. That is a great outcome, but biotech R&D investment has been going up and up and up, but new drugs that actually cure people have not been appearing at the same rate. So I wouldn’t tell that biotech owner at all that he shouldn’t get paid; he absolutely should get paid. What we need is to spot the gridlock problem and create easier ways to assemble, in this case patents, for socially valuable products.

Ryssdal: This is, at its root, a problem that’s codified in this country, right? I mean, we’ve got laws about patents and we’ve got laws about ownership and we’ve got laws about property, so once you spot the gridlock, how do you fix it when it’s so deeply embedded in our society?

Heller: Well, there’s nothing that’s inevitable about gridlock. All of the ownership puzzles that I mention in the book, they all result from choices that we make and can change about how to control these resources, resources that we value most, but to do that, you have to name the problem, you have to see that all these problems — the subprime crisis, missing drugs, slow telecom, sitting in airports delayed on the ground — these are all the same problem and once you see that these are all the same problem, people can come together to fix them.

Ryssdal: The book by Michael Heller is called “The Gridlock Economy.” He teaches at Columbia Law School, too. Michael, thanks a lot for coming in.

Heller: Pleasure to be here.

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