A Controversial Take on Property Rights

Most business book authors don't stray far from the herd, building on the philosophy and experiences of others with just a big enough tweak to call their work original. The author of newly released The Gridlock Economy (Basic Books: July 15, 2008) is not among them. In fact, this book is based on a premise that contradicts conventional wisdom about property rights. It's bold-- and a little scary (think Karl Marx). But you can't write off author and academic Michael Heller because his credentials are golden (he's the Lawrence A. Wien Professor of Real Estate Law at Columbia Law School).

Heller's basic premise is that while private ownership usually creates wealth, too many people owning parts of a single resource creates gridlock that stifles innovation and productivity. "Ten or twenty years ago you invented a product and got a patent; you wrote a song and got a copyright, you subdivided land and built houses. Today the leading edge of wealth creation requires assembly. From drugs to telecom, software to semiconductors, anything high tech demands the assembly of innumerable patents...Innovation has moved on but we are stuck with old-style ownership that's easy to fragment and hard to put together."

Here are some examples: Scientists at a drug company found a treatment for Parkinson's disease but they can't test the drug without getting access to dozens of patents; any single patent owner can hold the process up for a huge payoff or even block the whole deal, so the drug company has shelved the cure.

Airports are an example of real estate gridlock, according to Heller. "You can't build new airports, not anywhere, because multiple landowners can block every project," he writes.

Fragmented ownership of subprime mortgages resulted in mass foreclosures because no one had strong incentives to underwrite mortgages carefully and no one could approve restructuring of troubled loans, writes Heller.

Heller makes a good case that when too many people have a piece of the pie, things can get messy. But he's treading on hallowed ground: Private property rights are a hallmark of capitalism that requires protection. However, he offers some general principles for addressing the gridlock problem that can be applied in ways that preserve individual rights. He suggests that people can profit from finding creative ways to bundle ownership; philanthropists can assemble patents for disease cures, and political advocacy can play an important role.

But to undo gridlock, you have to be able to spot it first. Ownership issues have become so complicated that it's gotten harder and harder to see the forest for the trees.