53 Ariz. L. Rev. 51 (2011). Richard A. Epstein, James Parker Hall Distinguished Service Professor of Law at the University of Chicago.
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.
The Information Economy Project is proud to present articles that have been published in the Arizona Law Review, Volume 53, from the Tragedies of the Gridlock Economy: How Mis-Configuring Property Rights Stymies Social Efficiency held on October 2, 2009:Symposium — Tragedies of the Gridlock Economy: How Mis-Configuring Property Rights Stymies Social Efficiency*
Volume 53, Issue 1, Arizona Law Review
Transaction Cost and the Organization of Ownership—An Introduction
Harold Demsetz | 53 Ariz. L. Rev. 1 (2011) | PDF
Exclusion and Exclusivity in Gridlock
Eric R. Claeys | 53 Ariz. L. Rev. 9 (2011) | PDF
Heller’s Gridlock Economy in Perspective: Why There Is Too Little, Not Too Much Private Property
Richard A. Epstein | 53 Ariz. L. Rev. 51 (2011) | PDF
Tragedy TV: Rights Fragmentation and the Junk Band Problem
Thomas W. Hazlett | 53 Ariz. L. Rev. 83 (2011) | PDF
Google Book Search in the Gridlock Economy
Doug Lichtman | 53 Ariz. L. Rev. 131 (2011) | PDF
Autonomy and Independence: The Normative Face of Transaction Costs
Robert P. Merges | 53 Ariz. L. Rev. 145 (2011) | PDF
The Rise and Fall of the First American Patent Thicket: The Sewing Machine War of the 1850s
Adam Mossoff | 53 Ariz. L. Rev. 165 (2011) | PDF
The Wasteland: Anticommons, White Spaces, and the Fallacy of Spectrum
Kevin Werbach | 53 Ariz. L. Rev. 213 (2011) | PDF
Conference Articles and Abstracts:
“Heller’s Gridlock Economy In Perspective” by Richard A. Epstein, 53 Ariz. L. Rev. 51 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “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…”
“Exclusion and Exclusivity in Gridlock,” by Eric R. Claeys, 53 Ariz. L. Rev. 9 (2011). “Michael Heller earned respect among property scholars in his 1998 article The Tragedy of the Anticommons: Property in the Transition from Marx to Markets. The conception of a “tragedy of the commons” had been popularized by Garrett Hardin in a 1968 article by that name. When ranchers have open access (a commons) to grass, their cattle tend to overeat it (the tragedy). Harold Demsetz provided the canonical economic response to tragedies of the commons: private property. Exclusive rights of control, use, and disposition (“exclusive possessory rights”) encourage owners to internalize externalities associated with the over-consumption of resources held in common…”
“Tragedy T.V.: Rights Fragmentation and the Junk Band Problem” by Thomas W. Hazlett, 53 Ariz. L. Rev. 83 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “Tragedy of the anti-commons occurs when property rules fail to enable efficient social coordination. In radio spectrum, rights issued to airwave users have traditionally been severely truncated, leaving gains from trade unexploited. The social losses that Ronald Coase (1959) asserted, appealing to basic theories of resource allocation, are now revealed via intense under-utilization of the TV Band…”
“The Wasteland: Anticommons, White Spaces, and the Fallacy of Spectrum” by Kevin Werbach, 53 Ariz. L. Rev. 213 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “I urge you, I urge you to put the people’s airwaves to the service of the people and the cause of freedom. You must help prepare a generation for great decisions. You must help a great nation fulfill its future. Do this! I pledge you our help.”1 Federal Communications Commission (FCC) Chairman Newton Minow’s 1961 address to the National Association of Broadcasters is legendary for its caustic dismissal of television as a “vast wasteland.”2 Yet Minow intended to emphasize a different two-word phrase: “public interest.”3 Television was the most prominent use of “the people’s airwaves” — the government-defined capacity for wireless communication — and it was failing to serve national interests.4…
Google Book Search:
“Google Book Search in the Gridlock Economy” by Doug Lichtman, 53 Ariz. L. Rev. 131 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “Michael Heller’s Gridlock Economy popularizes a concept that Heller has developed over nearly two decades of influential academic writing: the notion that, when it comes to property rights, too many rights-endowed cooks really can spoil the broth. I was asked in this conference to apply Heller’s insight to the Google Book Search project, and the request at first seemed natural. Heller himself has suggested that Google Book Search might be an apt poster child for the gridlock phenomenon; and Google likewise can often be heard to complain, in Heller-esque tones, that the only way to build a comprehensive search engine for books is to take the books without asking….”
“Autonomy and Independence: The Normative Face of Transaction Costs” by Robert P. Merges, 53 Ariz. L. Rev. 145 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “Anticommons theory made a splash, and is today being expanded and applied, because it shifted our collective attention in a crucial way. Before the 1990s, the big policy questions in IP were all about individual IP rights: when should a copyright or patent be granted, when denied? Anticommons theory burst into this conventional conversation like an unruly drunk at a ballet recital. It demanded attention. It said, in effect, “you may mean well, but you’re missing the big point. You’re wasting your time!” The big point is not the individual grant of an IP right. It’s the aggregate impact of granting many rights to many discrete and independent right-holders…”
“On Being Misled by Transaction Cost Economics: Externalities, Commons, and Gridlocks” by Harold Demsetz, 53 Ariz. L. Rev. 1 (2011), October 2, 2009 (paper presented at the IEP Conference on the Gridlock Economy). “During the last half-century transaction cost became a prominent consideration in discussions about externalities and ownership arrangements. The author of this essay contributed to this development in the earlier part of this half-century but has since come to doubt the importance of transaction cost and even the roles it is thought to play in these two areas of economic thought. A succinct statement of this doubt as it pertains to the externality problem is a primary task of this essay. The last part of the essay questions the dominant position given to transaction cost in discussions of ownership forms that now go by the names of commons, anti-commons, and gridlocks…”
“The Rise and Fall of the First Patent Thicket: The Sewing Machine War of the 1850s” by Adam Mossoff, 53 Ariz. L. Rev. 165 (2011), March 2010. “After Professor Michael Heller proposed that excessively fragmented property rights in land can frustrate its commercial development, patent scholars have debated vigorously whether Heller’s anticommons theory applies to property rights in inventions. Do these “patent thickets” exist, and if so, what are the best solutions? This article contributes to this debate by analyzing the rise and fall of the first American patent thicket: the “Sewing Machine War” of the 1850s…”
Coase Conference: Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase, University of Chicago Law School. Richard A. Epstein, James Parker Hall Distinguished Service Professor of Law at the University of Chicago.
The work of Ronald Coase is notable for how it introduces the notion of transactions costs to explain both the creation and maintenance of firms and for understanding the larger question of social costs. Nonetheless, it seems improbable that positive transaction costs are the only explanation as to why and how firms are organized. A richer account of the problem properly stresses that differences in individual levels of competence, as well as individual variations on matters of temperament and taste, which help to explain why, for example, some firms are organized as partnerships and others as straight employment arrangements, with many permutations in between. The stress on differential levels of competence also helps to improve the understanding not only in related areas such as employment discrimination law, but also in more distant areas such as capital markets and tort liability.
The Information Economy Project is proud to present articles that will be published in a special joint issue of the Journal of Law & Economics and Journal of Legal Studies, from the Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase held on December 4-5, 2009:
“The Effect of Allowance Allocation” by Robert W. Hahn & Robert N. Stavins. We begin with “The Problem of Social Cost” (1960) … The Coase Theorem: Bilateral negotiation between the generator and recipient of an externality leads to the same efficient outcome regardless of the initial assignment of property rights (if no transaction costs, income effects, or third-party impacts).
“Coase, Transaction Costs, and the Spread of the Rectangular Survey for Land Demarcation within the British Empire” by Gary D. Libecap, Dean Lueck, Trevor O’Grady. This paper examines adoption of the rectangular system (RS) of land demarcation within European settlement colonies of the British Empire in the 18th and 19th centuries. This was a time when agricultural land markets were first developing on a widespread scale. These jurisdictions had similar immigrant populations and legal structures, but their land demarcation practices were quite different.
“Coase and the New Zealand Spectrum Reforms” by Charles L. Jackson. In 1989, New Zealand’s Parliament enacted a new statute, the Radiocommunications Act 1989, that explicitly used a system of property rights to regulate the use of the radio spectrum. This statute resulted in the first ever spectrum auctions – and New Zealand’s use of auctions has been copied around the globe. New Zealand’s adoption of a property rights regime, a more fundamental change than the introduction of spectrum auctions, has not had the same wide acceptance.
“Radio Spectrum and the Disruptive Clarity of Ronald Coase” by Thomas W. Hazlett, David Porter, Vernon Smith. In the Federal Communications Commission,5 Ronald Coase exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the “price system.” The government solution was inefficient unless the net benefits of the alternative property regime were lower.
“Why the Entry Regulation of the China Mobile Phone Manufacturing Industry Collapsed” by Zhimin Liao, Xiaofang Chen. This case study aims to explore an interesting puzzle: why the license regulation in China’s mobile phone production industry, which generated large rents for an once powerful interest group, was suddenly eliminated.
“How to Keep a Secret: The Decisive Advantage of Corporations” by Robert Cooter. In the 1950s socialists around the world built gigantic steel plants like Nowa Huta in Poland. By the 1980s they were losing vast amounts of money and they seemed destined to die a slow death by rust. Lakshmi Mittal, who led the international operation of an Indian steel business built by his father, believed that these industrial dinosaurs could flourish in the age of mammals.
“Regulatory Institutions and Economic Performance: Wireless Communications in Middle-Income Developing Nations” by Roger Noll. Wireless Success Story: Over 4 billion wireless subscribers worldwide in 2009 (compared to 1.3 billion wire lines) Wireless penetration in developing nations around 50% of population, over 100% in some middle income nations (several higher than US = 90%) 2. Generally good1 policies in nations not noted for good economic policies Mostly privatized Multiple firms (3+ in most nations) Permit foreign ownership Narrow, targeted regulation Licenses transferable.
“Competence as a Random Variable: One More Tribute to Ronald Coase” by Richard A. Epstein. The work of Ronald Coase is notable for how it introduces the notion of transactions costs to explain both the creation and maintenance of firms and for understanding the larger question of social costs. Nonetheless, it seems improbable that positive transaction costs are the only explanation as to why and how firms are organized.
“R.H. Coase and the Neoclassical Model of the Economic System” by Harold Demsetz. It is clear from articles I have written for the New Palgrave Dictionary of Law and Economics and other publications that I have high regard for Coase and his works. Some would say I have published parts of his works more times than has he. True or not, my role in explaining, defending, and extending Ronald’s writings has left me with little to say that is different from what I have already written, so my theme today is not a product of conscious deliberation.
“Measuring Coase’s Influence” by William M. Landes and Sonia Lahr-Pastor. Citations measure a scholar’s influence. That Ronald Coase is among the most influential and best-cited economists in the past fifty years is not debatable. Two of his articles, “The Nature of the Firm”, published in 1937, and “The Problem of Social Cost”, published in 1960, are among the most-cited articles in both economics and law and continue to be widely cited.
“Regulation and the Nature of the Firm: The Case of U.S. Regional Airlines” by Michael E. Levine. The organization of airline networks, and particularly of the interaction between the less dense parts of the network with the more dense parts, is a particularly good example of the operation of two of Professor Coase’s main points in “The Nature of the Firm” and subsequent articles: first, that the choice of institutions chosen to organize production is a function of economic circumstances, including regulation, technology and contractual arrangements inside the firm and second, that there is no general outcome that economic theory predicts, but rather that the result always depends on the particular circumstances and choices available and that it will change as circumstances change.
“Commercial Advertising and the First Amendment” by Geoffrey R. Stone. In his path-breaking 1977 article, Advertising and Free Speech, Ronald Coase challenged the conventional wisdom in an important area of First Amendment law. What especially interested Coase was the sharp divergence between the profound commitment to the free market in the realm of speech and the lack of confidence in the free market in the realm of goods and services. Invoking Justice Holmes’s claim that “the best test of truth is the power of the thought to get itself accepted in the competition of the market,” Coase noted that First Amendment doctrine is largely premised on “an extreme faith in the efficiency of competitive markets and a profound distrust of government regulation.” But in the realm of “goods and services,” the same “intellectual community” that celebrates the marketplace of ideas demands ever-more extensive government regulation. Coase suggested that this disparity “calls for an explanation,” but lamented that such an explanation “is not easy to find.”
“Keynes and Coase” by Richard A. Posner. I am sure that Ronald will not like my bracketing him with Keynes, as I am about to do. But if he is patient, he will hear me modify criticisms of his approach to economics that I made in an essay I wrote many years ago – sixteen to be exact – for the Journal of Economic Perspectives.