What Do Licensing, the Rhine, and the Silk Road Have In Common?
In my last post I explained the history of the music fight, and in this post I wanted to look forward to the problems music users fear if they can no longer get full work licenses from ASCAP and BMI. The biggest issue is from what law professor Michael Heller described as the tragedy of the anticommons. This tragedy might sound complicated, but it’s actually a simple way of describing a wide range of coordination breakdowns that can come from too much ownership of a single resource.
The Bloody History of the Anticommons
The tragedy of the anticommons is not merely academic: it actually has a very interesting and sometimes bloody history. The tragedy has been developed by a number of economists and scholars to describe a wide range of modern problems, like hold-up, double marginalization, patent thickets, and submarine patents. However, one of the clearest examples of the tragedy comes from toll collectors along the Rhine River in medieval Germany.
The Rhine River was the commercial superhighway of Western Europe from around 800 AD. As such, the Holy Roman Empire closely guarded the tolling rights along the river and kept tolls low to promote trade. However, local German leaders, usually low-ranking nobility, erected unsanctioned castles along the Rhine River to collect tolls without permission. These “robber barons” would stretch chains across the river to prevent passage without payment. As the total cost for traveling the Rhine went up, merchants started to avoid the Rhine entirely. Each baron was acting in their own self-interest by taxing a resource common to all stakeholders: the commerce along the river. In the aggregate, however, these individually rational decisions turned out working to everyone’s disadvantage. It actually became cheaper for merchants to take much more difficult land routes to their destinations. This of course had a disastrous effect on trade and the income from sanctioned toll collection.
The solution came in the form of the Rhine League, which actually led military campaigns against the robber barons and destroyed their castles. Today, the oldest surviving international organization – Central Commission for Navigation on the Rhine – was actually formed in part to coordinate fees and duties among the countries along the Rhine River.
The Rhine is not the only place in history where the tragedy appears. It seems that the prosperity that came from the trade of goods and culture between Europe and China starting in the early 1300s was due to the consolidation of lands by Genghis Khan under the Mongolian Empire. Prior to Genghis Khan, the route from Europe to China went through many countries that were unsafe and demanded tribute from merchants transporting goods. These taxes and dangers cut into the profits of traders and the trip was not especially attractive. Genghis Khan’s conquest greatly diminished the amount of tribute gatherers and, along with the prioritization of safety, led to the rise of the Silk Road. The trade that resulted introduced Europeans to a wide variety of goods, spices, and gunpowder. Important ideas were also exchanged, leading to the introduction of bills of exchange, deposit banking, and insurance to Europe.