Heller on Ubiquitous Market Failures
Via Tyler Cowen, Michael Heller’s book The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives. From the Amazon Page:
25 new runways would eliminate most air travel delays in America. Why can’t we build them? 50 patent owners are blocking a major drug maker from creating a cancer cure. Why won’t they get out of the way? 90% of our broadcast spectrum sits idle while American cell phone service lags far behind Japan’s and Korea’s. Why are we wasting our airwaves? 98% of African American–owned farms have been sold off over the last century. Why can’t we stop the loss? All these problems are really the same problem—one whose solution would jump-start innovation, release trillions in productivity, and help revive our slumping economy.
Usually, private ownership creates wealth, but too much ownership has the opposite effect—it creates gridlock. When too many people own pieces of one thing, whether a physical or intellectual resource, cooperation breaks down, wealth disappears, and everybody loses. Heller’s paradox is at the center of The Gridlock Economy. Today’s leading edge of innovation—in high tech, biomedicine, music, film, real estate—requires the assembly of separately owned resources. But gridlock is blocking economic growth all along the wealth creation frontier.
Heller has been a tireless chronicler of market failures and this looks like a particularly timely book. Consider, for instance, how hard it is to deal with the subprime mess as the slicing and dicing of pools of mortgages has made it very difficult to trace who owns any particular loan. And on a more mundane level–consider how “[e]xtending Amtrak service [114 miles] from Boston to Portland[, Maine] . . . has taken longer than building the transcontinental railroad.”