Tragedy of the anticommons

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The tragedy of the anticommons is a hypothetical situation where rational individuals (acting separately) collectively waste a given resource by under-utilizing it. According to proponents of the theory, this would happen when so many individuals have rights of exclusion (such as property rights) of a resource that the transaction costs of coordinating those rights overwhelm any previously existing benefit. This situation (the "anticommons") is contrasted with a commons, where many individuals have privileges of use (or the right not to be excluded) in a certain resource. The tragedy of the commons is that rational individuals, acting separately, may collectively over-utilize a scarce resource.

The term "tragedy of the anticommons" was originally coined in a 1998 Harvard Law Review article by Michael Heller, a professor at Columbia Law School. In a 1998 article in Science, Heller, along with Rebecca Eisenberg, claimed that biomedical research was one of several key areas where competing patent rights could actually prevent useful and affordable products from reaching the marketplace. Proponents of the theory claimed that too many property rights could lead to less innovation. The purported counter effect of the tragedy of the anticommons, the increased usefulness of a resource as the result of many individuals using it, has been dubbed the "comedy of the commons" by Carol M. Rose in a 1987 article that appeared in the University of Chicago Law Review. It is related to the concepts of network effects and non-rivalrous goods.

1 Classic example
2 Patents
3 Copyrights
4 Eminent domain
5 See also
6 References
7 External links

[edit] Classic example

In Heller's 1998 Harvard Law Review article, he noted that after the fall of Communism, in many Eastern European cities there were a lot of open air kiosks, but also a lot of empty stores. Upon investigation, he concluded that because many different agencies and private parties had rights over the use of store space, it was difficult or even impossible for a startup retailer to successfully negotiate for the use of that space. Even though all the persons with ownership rights were losing money with the empty stores, and stores were in great demand, their competing interests got in the way of the effective use of space.

Critics cite this as another example of the tragedy of the commons; one whose problems were largely, if not wholly, created by prior state distortions of the market.

[edit] Patents

Patents often are cited as examples of the tragedy of the anticommons because a patent owner has exclusive rights over the use of the patented technology. If the creation of a certain product involves the use of many techniques and components patented by different people or different companies, then it can be very difficult to negotiate effectively with all the patent holders at once, and the result may be that one has to pay so many license fees that it becomes too expensive to create the desired product. Thus, a product that is in great demand may not be produced because costs associated with patents are too high.

According to theory proponents, the would-be manufacturer loses, the patent holders lose, and consumers in need who could have benefited from the technology lose. If medical technology is involved, people can lose their lives. And since the ones responsible for this (the patent holders) are also consumers, they lose twice. This phenomenon is a form of market failure. Paradoxically, when the patent holders act "rationally" to maximize their self-interest, they win nothing, everyone else loses, and they lose more than everyone else.

According to proponents of the theory, different industries have different ways to deal with this problem. In a few industries (e.g., pharmaceuticals) a single patent is all that is required to produce a marketable product that can be protected from competitors in the marketplace. If it becomes necessary for someone other than the patent holder to produce the product to meet demand, only negotiation with a single owner is necessary, and a license can usually be worked out. For example, if a patented anti-viral drug is needed in far larger quantities to quell an epidemic, the government can usually enforce a license agreement with a single patent holder in order to meet society's needs.

However, in most industries, a manufacturer will need to negotiate to use several patents in order to legally create a product. For example, a DVD player contains about a dozen devices that are patented by different companies. A single microchip can contain over 5,000 different patents. As such, theory proponents claim that no one could create a DVD player or a microchip unless every one of the patent holders agreed to license their patent to other manufacturers. In many industries, patent holders either agree to cross-license their patents (i.e., you can use ours if we can use yours) or work out a common licensing agreement that make the product affordable. This generally means that for DVD players, computer components and other consumer electronics, the cost of licensing the patents is rarely much more than the manufacturing costs. For example, the license costs for the patents of a DVD player are about $20.00 (U.S.) for the cheapest models.

Due to the ease of patenting biological discoveries, it is likely that anyone working in biomedical research will have to use several patented procedures in order to create a marketable product. However, since those patents are short lived and only a few patents result in a marketable product, those developing new treatments or processes often find that negotiating a licensing agreement with the patent holders is prohibitively expensive and will result in the product being unmarketable. In fact, a patent holder can often say that mere research is an infringing use, and demand a license fee even though the chance of developing a marketable product is slim.

However, according to proponents of the theory, even one questionable patent can make marketing a product legally impossible. The recent dispute between Research In Motion and NTP, Inc. is over a single disputed wireless e-mail patent that is a key element of the BlackBerry. This resulted in an injunction that would have prevented the sale of the BlackBerry in the United States, but the injunction was stayed on appeal.

[edit] Copyrights

In the same way, competing use of copyrights can prevent a product from coming to the marketplace at a reasonable price, resulting in lost royalty income for the copyright holders. For example, WKRP in Cincinnati was one of the most popular syndicated sitcoms of all time, and many television shows from that era have been successfully released on DVD. However, for many years, WKRP has not been available on DVD. When it was a television program, an agreement was in place between television producers and music licensing organizations such as ASCAP and BMI wherein a standard licensing fee was paid for each song that was played on a television show. As such, the producers could determine how much money would be paid for their use of music clips and budget accordingly. However, there is no similar standard agreement for use of music on DVDs (which ASCAP and BMI do not control), and the producers are now faced with the prospect of negotiating individually with several dozen composers. The current owner of the show, 20th Century Fox, released a DVD of the show starting in the first half of 2007, using "soundalike" versions of music for which they could not obtain rights.

[edit] Eminent domain

The owners of this Chongqing "nail house" refused to leave it, thwarting plans for a shopping mall. Chinese law doesn't include eminent domain.

In order to construct roads, railroads, and similar transportation arteries, eminent domain has long been considered necessary. Although the benefit to society from the transportation route may be substantial, without eminent domain every single one of the property owners along the way must agree in order for the route to be built; this provides the conditions for the tragedy of the anticommons, as even if hundreds agree, a single landowner could stop the road or railroad. The ability for one person to veto the construction drastically increases the transaction costs for such projects.

[edit] See also

[edit] References

This article or section includes a list of references or external links, but its sources remain unclear because it lacks in-text citations.
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Rose, Carol M. (1986) The Comedy of the Commons: Commerce, Custom and Inherently Public Property, 53 Univ. of Chi. L. Rev. 711 , reprinted as chapter 5 in: Rose, Carol M., Property and persuasion: Essays on the history, theory and rhetoric of ownership, Westview Press 1994
Heller, M. A. (1998): "The Tragedy of the Anticommons" Harvard Law Review, January 1998.
Heller, M. A. and Eisenberg, R.: Can Patents Deter Innovation? The Anticommons in Biomedical Research, Science 280, 5364 (1 May 1998)
Hickman, J. and Dolman, E.: "Resurrecting the Space Age: A State-Centered Commentary on the Outer Space Regime," Comparative Strategy, Vol. 21, No. 1, 2002.
Depoorter, B., Parisi, F. and Schulz, N.: "Fragmentation in Property: Towards a General Model", Journal of Institutional and Theoretic Economics, Vol. 159, 594-613, 2003.