Michael Heller vs. Richard Epstein on the Gridlock Economy

234944758_e081ae9afdOn Friday Jerry Brito’s new tech policy program at Mercatus sponsored a debate between Michael Heller, author of The Gridlock Economy, and Richard Epstein. The argument of Heller’s book, which he presented in his talk, is that poorly-designed property regimes can lead to situations where a single resource is subject to numerous overlapping claims, making it extremely costly to get permission to do anything useful with it. For example, Heller talks about Eyes on the Prize, a famous documentary on the civil rights movement. Eyes on the Prize, like most documentaries, includes excerpts of hundreds of copyrighted works—music, speeches, video snippets, graphics, etc. The creators of the documentary secured the right to those works for the initial release, but the license agreements they secured didn’t apply to new media. As a consequence, it would be virtually impossible to release Eyes on the Prize on DVD or put it on the Internet, because tracking down hundreds of now-fragmented rights would be prohibitively expensive.

Heller argues that this pattern is repeated elsewhere in the economy. I’ve written before about the way the patent system impedes progress in software by subjecting potential innovators to a large number of overlapping patent claims. And a similar problem has been created by the growth of CDOs in the mortgage market. Traditionally, a borrower who got behind on his payments could call up his bank and re-negotiate the terms of his mortgage. But if your mortgage has been bundled into a CDO, the rights to your mortgage are going to be fragmented among dozens or even hundreds of parties. There’s no one with the authority to change the mortgage terms. As a result, homeowners wind up in foreclosure even if it would have been better for both borrower and lender to re-negotiate the terms of the mortgage.

Heller’s argument strikes me as clear, correct, and totally uncontroversial from a libertarian perspective. Heller’s book is in the same vein as Hernando de Soto’s work on the early history of American property rights, which also focused on the ways poorly-designed property rights impeded progress. Creating a well-functioning property rights system is difficult, and a property regime can err in the direction of creating too many property-like claims just as it can err in recognizing too few.

Libertarian legal theorist Richard Epstein had a puzzling response: he spent the bulk of his talk arguing that big government creates more problems than gridlock. In a wide-ranging discussion, he talked about collective bargaining, minimum wage laws, the Food and Drug Administration, and land use regulations, showing in each case how excessive regulation is responsible for a variety of ills. I’m sympathetic to Epstein’s analysis in all of these cases, but I was confused about why he was making these points in a debate with Heller, who hadn’t said anything in defense of big government in his talk.

I think Heller responded in exactly the right way: he endorsed most of what Epstein said and then pointed out that problems can (and usually do) have more than one cause. Gridlock and big government are not mutually exclusive explanations for the world’s problems. And he emphasized that his focus was on analysis rather than advocacy: that his goal was less to push specific solutions than to convince people that there was a problem.

434724008_b69abec94aEpstein seems to have fallen victim to “if you’ve got a hammer, everything looks like a nail” syndrome. His life’s work has been focused on the debate between free markets and big government. In those debates, he has consistently (and brilliantly) defended the pro-property side. And so when he’s approaching a new problem, his instinct is to side with whichever perspective seems to be advocating more property rights, and to assume that the other side must be defenders of big government. This framework doesn’t leave much room for an argument like Heller’s, which tries to draw nuanced distinctions among possible property-like regimes. Heller isn’t “anti-property” in general, and he doesn’t necessarily advocate new state interventions as the solution to the problems he identifies. But criticizing big government is Epstein’s strong suit, so he plays it even though it doesn’t seem terribly relevant.

As we saw last week, the danger of depending too much on a high-level intellectual framework is that you won’t notice when the facts on the ground have changed in ways that don’t fit with your theory. Building an operating system or a documentary film isn’t like building a skyscraper, and this fact means that the analytical tools you honed on problems in real property law may not work as well for patent or copyright issues. But you’ll only notice if you’ve invested the time to understand how the affected industries work in some detail.

Heller was on the guest on a recent episode of David Levine’s excellent “Hearsay Culture” radio show/podcast.

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