Gridlock Economy

Excerpt: Preface

A few years ago, a drug company executive presented me with an unsettling puzzle. His scientists had found a treatment for Alzheimer’s disease, but they couldn’t bring it to market unless the company bought access to dozens of patents. Any single patent owner could demand a huge payoff; some blocked the whole deal. This story does not have a happy ending. The drug sits on the shelf though it might have saved millions of lives and earned billions of dollars.

Here’s a second high-stakes puzzle: What’s the most underused natural resource in America? The answer may be a surprise: it’s the airwaves. Over 90 percent of it is dead air because ownership of broadcast spectrum is so fragmented. As a result, our information economy is hobbled. Wireless broadband coverage in America lags far behind that in Japan and Korea. The cost of spectrum gridlock may be in the trillions of dollars.

And another: Why do we waste weeks of our lives stuck in airports? The answer here is real estate gridlock. Since air travel was deregulated thirty years ago, the number of fliers has tripled. But how many airports have been built in America since 1975? One: Denver. You can’t build new airports, not anywhere, because multiple landowners can block every project. Twenty-five new runways at our busiest airports would end most routine air travel delays in America.

What caused the potato famine that resulted in a million people starving to death in Ireland in the mid-nineteenth century? Why is African-American farm ownership 98 percent lower—98 percent lower—today than it was a hundred years ago? How come we can’t get clean wind energy from Texas, where it’s windy, to the coasts where people actually want green power?

All these puzzles share a common cause. Private ownership usually creates wealth. But too much ownership has the opposite effect—it creates gridlock. Gridlock is a free market paradox. When too many people own pieces of one thing, cooperation breaks down, wealth disappears, and everybody loses.

There has been an unnoticed revolution in how we create wealth. In the old economy—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. And it’s not just high tech that’s changed. Cutting-edge art and music are about mashing up and remixing many separately owned bits of culture. Even with land, the most socially important projects, like new runways, require assembling multiple parcels. Innovation has moved on, but we are stuck with old-style ownership that’s easy to fragment and hard to put together.