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The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives Hardcover – July 8, 2008
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Every so often an idea comes along that transforms our understanding of how the world works. Michael Heller has discovered a market dynamic that no one knew existed. 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.
A thousand scholars have applied and verified Heller’s paradox. Now he takes readers on a lively tour of gridlock battlegrounds. Heller zips from medieval robber barons to modern-day broadcast spectrum squatters; from Mississippi courts selling African-American family farms to troubling New York City land confiscations; and from Chesapeake Bay oyster pirates to today’s gene patent and music mash-up outlaws. Each tale offers insights into how to spot gridlock in operation and how we can overcome it.
The Gridlock Economy is a startling, accessible biography of an idea. Nothing is inevitable about gridlock. It results from choices we make about how to control the resources we value most. We can unlock the grid; this book shows us where to start.
- Print length304 pages
- LanguageEnglish
- PublisherBasic Books
- Publication dateJuly 8, 2008
- Dimensions6.25 x 1 x 9.5 inches
- ISBN-100465029167
- ISBN-13978-0465029167
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Lawrence Lessig is a Professor of Law at Stanford Law School and founder of the school's Center for Internet and Society, as well as CEO of the Creative Commons project and the author of Code, Free Culture, and The Future of Ideas. In an exclusive guest review for Amazon.com, Lessig shares his praise for The Gridlock Economy and its sizable contribution to the economic policy debate.
For forty years, "the tragedy of the commons" has set the frame for an extraordinary range of social, economic, and legal thought. It oriented policy prescriptions. It set the baseline on reasonable policy alternatives. Its strong conclusion in favor of assigning property rights whenever possible has had a profound effect on everything from intellectual property policy to spectrum regulation. Its simple, intuitive analysis became second nature to a generation of policy makers.
Heller's book, The Gridlock Economy, completely inverts this framework for some of the most important policy questions we will face in the digital age. His clear and beautifully crafted analysis is absolutely compelling, and will fundamentally change the debate in core policy areas. There are very few books that reorient a field. Almost none that reorient many fields. This is in that "almost none" category: Paradigms will shift. Many of them. --Lawrence Lessig
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Product details
- Publisher : Basic Books; First Edition (July 8, 2008)
- Language : English
- Hardcover : 304 pages
- ISBN-10 : 0465029167
- ISBN-13 : 978-0465029167
- Item Weight : 1.15 pounds
- Dimensions : 6.25 x 1 x 9.5 inches
- Best Sellers Rank: #3,217,615 in Books (See Top 100 in Books)
- #564 in Property Law (Books)
- #759 in Income Inequality
- #1,120 in Microeconomics (Books)
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About the author
Michael Heller is one of the world's leading authorities on ownership. He is the Lawrence A. Wien Professor of Real Estate Law at Columbia Law School where he has served as the vice dean for intellectual life.
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Another big positive of the book is it's nice to give credit where credit is due, and Heller invented the study of this stuff. It's great to hear it right from the horse's mouth.
And, what is definitely most important, it is accessible to any audience. If you are just leaving high school and want to know a good collection of injustices created by capitalism run amok, you would want this book.
If you are a free-market economist (or a college econ student) and want to have a thorough understanding of this form of inefficiency, you would want this book.
But I think this book is best for people that look around and feel like the country has so much potential, so much brainpower, and technological ingenuity, and yet for some reason our economy is on life support. There are a lot of books that point fingers at the failures of officials, and businesses, and individuals, etc. This one not only defines problems but points to solutions, something you almost NEVER come across in popular reading today. A great read all around.
William Forbes
The trouble is that in the real world, transaction costs are nontrivial. To sell a piece of property, you need to engage the services of a lawyer to draw up the contract and need to pay various fees to various government agencies to maintain the records of who owns what. This isn't just "bureaucratic friction"; it's essential to the system's functioning.
So the Coase Theorem doesn't apply in the real world. To his credit, Coase understood this; his work is where much of the economic study of institutions starts. Humans establish institutions, goes the story, when their own uncoordinated actions would lead to manifest market failures. In a world with positive transaction costs, institutions spring up to bring us somewhat closer to the world predicted by the Coase Theorem. "The Gridlock Economy" is, in part, an exploration of these institutions. And it's a fun read.
There are cases in which Coase breaks down rather viciously; these are the cases that Professor Heller tackles in "The Gridlock Economy". Not all private property is created equal. Sometimes land is unavoidably split and cannot be put back together without political changes -- as, for instance, with the Rumaila oil field shared by Iraq and Kuwait. In these cases a prisoner's dilemma can develop: without coordination, and enforceable penalties for violation, both Iraq and Kuwait will extract as much oil as they can, as quickly as possible, from the ground beneath them. If they don't, they know that the other guy will.
This story of competing for a resource when property rights are split, leads to the longest and most fascinating story in "The Gridlock Economy", about the fight between Virginia and Maryland over oyster-harvesting rights. The fight lasted 300 years, led to untold deaths, and was a real-world example of how property rights matter.
The general theme is that often property rights are divided in such a way that they prevent optimal use of a resource. Too many people with divergent interests need to be coordinated before the whole mass of them can move. Heller's clearest and most entertaining example in this direction (what Daniel Dennett would call an "intuition pump") is the Quaker Oats Klondike Big Inch, whereby those who bought Quaker products 40-some years ago each got a deed on a single square inch of Alaskan land. It was all very clever at the time, but what happens to that land when someone wants to develop on it years later? Any potential developer needs to track down every last "big inch" owner and buy up his land. Quaker didn't, of course, register all of those who owned big inches, so the costs even of finding those owners are prohibitive, not to mention contracting with them.
Imagine, instead, that those big inch owners were regularly in contact with one another (they've all established a Big Inch Alumni Club, say). Word starts getting around that a developer is buying up their inches. Pretty soon owners stop selling, or they jack up the prices at which they'll sell. The developers must, of course, realize that this will happen before they even start buying. So smart developers will either buy up the land slowly -- as big-inch owners die, say -- or they'll establish many front companies to convince owners that the buying effort is uncoordinated. This obviously imposes huge transaction costs. These transaction costs are as high as they are because each big-inch owner has something akin to monopoly power: one owner out of a million can block the entire transaction. It's private property like any other, but it's private property done wrong.
Cities normally use eminent domain to get around this monopoly problem: forcibly buy land at fair market value, then hand it over to a private developer. But eminent domain is pretty ugly, and isn't voter-friendly. (As it happens, eminent domain is exactly how Alaska got around the big-inch problem with this bit of land.)
The endorsement on the cover from Larry Lessig suggests to potential buyers that we'll be encountering gridlock in the copyright and patent domains, and indeed we do. As Lessig and many others have pointed out, the new "mashup economy" can't work if every mashup artist needs to contact the source of every song he's sampling. Songs go unproduced. Here's where Heller asks us to add a word to our vocabulary: rather than just thinking about "overuse," which the tragedy of the commons forces us to consider, Heller's tragedy of the anticommons makes us think about underuse -- for instance, underuse of music samples that could otherwise be put to profitable use, or big inches laying fallow in Alaska.
For a sub-200-page book, "The Gridlock Economy" is highly enlightening. I know of few other books which capture patent, copyright, real-estate law and transaction costs under a single simple, readable framework. In a just world, Heller's book will change the way we think about markets and property. By the time it's finished, Heller sees gridlock everywhere, and so do we.