52 Books a Year: #4 - The Gridlock Economy

Posted by Brian Sun, 26 Jul 2009 20:00:13 GMT

The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives
By Michael Heller

4/5

The tragedy of the commons is a commonly used rationale for more private ownership. The Gridlock Economy focuses on what happens when ownership is split up between too many parties, what Michael Heller refers to as a “tragedy of the anti-commons”. In this scenario a resource is split up between so many owners that nobody can capitalize on it.

The book begins by describing the continuum from tragedy of the commons to anti-commons and conjectures about the existence of an optimum at some point between them. From here, most of the book goes through various examples. For example, in pharmaceuticals many companies are patenting various genes. When a new drug is being developed it may require licensing many of these patents, but each patent owner holds out for as much money as possible, causing gridlock. The most pertinent example to today’s economy was how the large numbers of owners of various parts of a securitzed mortgage make reworking the loan very difficult. It is hard to contact all of the owners, let alone getting them to agree on anything.

Overall, The Gridlock Economy is a highly recommended read. The writing style was clear and concise and the message of balancing public and excessive private ownership is one that needs more thought in today’s economy.

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