Why Too Much Ownership Can Backfire

And on the off-chance you too are wondering why wind power isn't taking off faster or why certain drugs are not getting developed, a new book, The Gridlock Economy, by Columbia law professor Michael Heller, should clear things up, although not make you feel any better. Clearly, when there's no individual ownership, individual self-interest ends up depleting resources — overfished oceans are one example — and ultimately making everyone worse off. But too much individual ownership creates its own problem, namely gridlock. When too many people own individual parts of a valuable asset, any one person can simply veto the use of the asset. Before World War I, so many companies owned patents on various aircraft components that no one could manufacture an airplane without getting sued. The war started and Congress, realizing it needed to get planes in the air fast, created a patent pool that let manufacturers license patents for a fee; similarly, the DVD player quickly became affordable because many companies cooperated to form patent pools.

It's not all that easy, though. In biotechnology, the thousands of patents granted over the last twenty-five years, especially on things like gene fragments, are probably slowing down drug development by requiring the licensing of many previous patents. Wind power could supply up to 20% of U.S. energy needs but only if new transmission lines are built. That won't happen tomorrow, since most of the land that the grid would cover is owned by individuals and few people want power lines running through their back yards. Or as psychologists know, when something you own, however small, is critical to the success of a venture, you tend to ask for a price close to the full value of the venture. When all the parties demand that, things fall apart.  Innovation, investment and growth slip away.  Two obvious answers that don't violate any tenets of capitalism:  Have one company do the work and share the revenues equitably with the others.  Or create more patent pools. Or else we'll never know what we'll be missing.