The Anticommons

Columbia law professor Michael Heller, in his new book, “The Gridlock Economy,” [writes about] the “anticommons.” We hear a lot about the “tragedy of the commons”: if a valuable asset (a grazing field, say) is held in common, each individual will try to exploit as much of it as possible. Villagers will send all their cows out to graze at the same time, and soon the field will be useless. When there’s no ownership, the pursuit of individual self-interest can make everyone worse off. But Heller shows that having too much ownership creates its own problems. If too many people own individual parts of a valuable asset, it’s easy to end up with gridlock, since any one person can simply veto the use of the asset. The commons leads to overuse and destruction; the anticommons leads to underuse and waste.

That's from the New Yorker. The article primarily deals with economics, and has very good examples relating to art and wind power. But I feel this also illustrates a key public policy dilemma: how many checks and balances are ideal?

In the United States, it is very difficult to pass truly meaningful legislation, because it has to pass the muster of at least four different bodies - the House, Senate, Presidency, and judicial branch. In all of those bodies, it is possible for one key person to stop the legislative process altogether. There are literally dozens of choke points a bill must pass through in order to become law. This results in the power of government to change laws being "underused and wasted," regardless of how obvious the change may be.

But removing those check points would create different problems: overuse. Rapid changes from administration to administration and from congress to congress would be likely and the chances of stupid legislation passing due to political pressure would be higher.

Now this is more important than Doha...

From an NYT article on the effect of rising fuel costs on globalization:

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

Read the whole thing.

Is Doha Important?

Paul Krugman says the failure of the Doha trade talks in Geneva is no big deal:

[E]xisting agreements stand. This isn’t Smoot-Hawley; it isn’t even the 2002 Bush steel tariff. Life, and trade, will go on.

The Economist initially appears to agree:

You can construct a plausible argument that the collapse of yet another set of talks on the Doha round, which is now coming up to seven years old, is of little importance. While the world’s trade ministers have alternated between talking and not talking to one another about Doha, the world’s businesspeople have carried on regardless: the growth of global commerce has outstripped the hitherto healthy pace of global GDP. Developing countries in particular have continued to open up to imports and foreign investment. You might say that not much was on offer in Geneva anyway: one study put the eventual benefits at maybe $70 billion, a drop in the ocean of the world’s GDP. Global stockmarkets, with so much else on their minds, either didn’t notice or didn’t care. On July 29th, the day the talks broke up, the S&P 500 index rose by 2.3%

But no so fast, it continues:

The lowish estimates of the economic benefits of the round miss out two things. One is the value of the unpredictable dynamic benefits of more open markets. Access to more customers allows exporters to exploit economies of scale. Competition encourages not only specialisation, the classic result of more open trade, but also increased productivity. The other is what you might call the “option value” of the Doha round. The WTO inhabits a sort of parallel universe in which countries negotiate not on what tariffs and subsidies will actually be, but on maximum (or “bound”) rates and amounts. Although many countries have cut tariffs and farm subsidies—if only, in the latter case, because of rising food prices—too few have turned these cuts into commitments. Tighter binding would cramp their ability to turn back to protection. It would have made up the bulk of a Doha deal.

I'm slightly more sympathetic to Krugman's argument - if only because it is based in the short term and is more predictable. However, agricultural subsidies and tariffs do need to be abandoned - the U.S. Farm Bill, for example, was criticized by basically every member of the American public who is not a member of a congress or a farmer. But, despite Obama and Hilary's pandering in the primaries, does anyone really think a new wave of protectionism is going to sweep the globe?

What made America strong?

Ezra attributes American economic power to geopolitics (natural resources, not getting beat up in World War II).

David Brooks attributes it to education and economic freedom.

Who's right? I think Ezra's argument enabled Brooks' argument. Relative peace made it easier for the United States to invest in education instead of in rebuilding broken bridges and buildings. But economic freedom and education played a role as well - the United States' smaller government and lower taxes did enable more economic success (if not more happiness for most of its people) and the United States was able to be a dues ex machina in the two World Wars partially because of technological advantages we had, which were at least indirectly attributable to public education.

Also worth nothing from Brooks' column is the following:

Third, it’s worth noting that both sides of this debate exist within the Democratic Party. The G.O.P. is largely irrelevant. If you look at Barack Obama’s education proposals — especially his emphasis on early childhood — you see that they flow naturally and persuasively from this research. (It probably helps that Obama and Heckman are nearly neighbors in Chicago). McCain’s policies seem largely oblivious to these findings. There’s some vague talk about school choice, but Republicans are inept when talking about human capital policies.

Unlike every other blogger on the planet, I have not read Grand New Party (What? I'm a poor college student and books are freaking expensive), but that seems a very GNP-ish argument to me.