1. The Tragedy of the Anticommons:
Property in the Transition from Marx to Markets
Michael A. Heller

2. Commons:
multiple owners have the privilege to use a given
resource, and no one has the right to exclude another.
Too many owners with privileges of use, leads to overuse
– a tragedy of the commons
Example: depleted fisheries and overgrazed fields

3. Anticommons: multiple owners poses the right to exclude
others from a scarce resource, and no one has an
effective privilege of use.
Too many owners with the rights of exclusion leads to
underuse - a tragedy of the anticommons.
Anticommons property may appear whenever
governments define new property rights in both post-
socialist and developed market economies.
Once an anticommons emerges, collecting rights into
usable private property bundles can be brutal and slow.
Paradigm: Moscow empty storefronts

4. Key Elements of
Socialist Law
• no private property the state own all land
• use rights have state organizations
• conflicts among users of state property were
resolved through a dispute-settlement mechanism

5. 1. Hierarchy of Property
• market legal systems : focus on the scope of individual rights (real and
personal, or tangible and intangible)
• socialist legal system: focused on identity of the owner
Hierearchy:
state socialist property
cooperative property
personal property (family houses, cars, furniture, or clothes)
• Transition: equalize private ownership with a state
The absence of real estate as a legal
category suggests three elements that
distinguished socialist property laws
from market legal systems:

6. 2. Objects of Socialist Property
• Productive assets belonged to "the people as a whole," so no
physical and legal boundaries of private property
• often no record of the line dividing land between two buildings
3. Ownership of Socialist Property
• complex hierarchy of divided and coordinated rights in the
objects (trust)
Socialist vs. market property laws

7. Protection and Performance
• Hypothesis: the more protection property received
under socialist law, the less successful its performance
has been in a new market economy
Residential real estate - less protection better performance
commercial real estate – more protection worse
performance

8. Case Study of Empty Stores in Moscow
• Stores in socialist regimes were
bare because of an economic
policy that disfavored
production of consumer goods
• After privatization many
storefronts in Moscow remained
empty
• On the streets thousands of
metal kiosks, filled with goods
The presence of kiosks can be seen
as a visual indicator for measuring
a transition country's progress
from anticommons to private
property

9. • title to most stores is unclear
• stores are occupied by state enterprises
• practical business reasons
– capital to stock a small kiosk low
– Low cost of inventory
– merchants may be better able to respond to market
demands by changing kiosk location
– less vulnerable to regulatory holdups
– Moscow's hesitation to privatize its commercial space,
bureaucracy, crime, and corrupt government officials as
barriers to retail expansion
– store rents are high (space is scarce)
Why have Moscow merchants not completed the move from
kiosks into stores?

10. Legal Context
• ownership of real estate was decentralized from federal to regional
(oblast) and local government (led to monopolistic control over
property)
• four categories of rights-holders emerged during the transition
(they could block each other from using a store without permission)
1. Owners:
– local government council (Duma)is the formal owner
– empowered to sell, lease, or mortgage assets
– federal government retains some control (rights to specify a sale or lease
process and to define the range of possible prices)
2. Users:
– occupants of commercial property, often workers of the state enterprise
assigned to the space

11. Legal Context
3. Balance-Sheet Holders
– archaic Soviet form of property ownership
analog to trust in the West
– state organization or individual with the
rights to use property formally owned "by
the people”
4. Regulators
– Six agencies must approve all leases,
including the city architect, the Committee
on Preservation of Architecture and
Historical Monuments, and the land-reform
comittee

12. Emergence of the
Anticommons
• During the process of
privatization, existing
socialist and informal use
rights stayed together
with the new set of market
ownership right
– multiple owners must
agree among themselves
to exercise their
"ownership" stick in the
property bundle
– any use of the storefront
requires the agreement of
multiple parties

13. Overcoming the Anticommons
• unifying fragmented property rights into a usable
bundle through:
– markets (nagatotion with all the holders)
• Threats are: transaction costs of bundling exceed the gains
from conversion, or owners engages in strategic behavior
• The market route to bundling may be subdivided into two
types:
1. Legal, selling right through formal,enfocable contracts
2. Illegal market transactions (informal or corrupt channels)
– Governments (redefining and reallocating property
rights)

14. Street Kiosks: Appearance of the Kiosks
• During the early years of transition, kiosk
merchants were also faced with an anticommons:
numerous parties, holding both formal and
informal rights, could block street access
• by the early 1990‘s , merchants could acquire
informal rights on the streets to set up commercial
outlets (corruption contracts with local
government rights-holders and protection
contracts with the mafia)
• By routinizing the corruption process,
entrepreneurs quickly reduced the
transaction costs

16. • Kiosks provided an early solution to the problem of
establishing commercial outlets in a country desperately
short of retail services
• success of kiosks have reduced pressure to overcome the
anticommonsin stores
• kiosk system does not generate the levels of economic
activity like well-functioning retail sector
• People are in the informal economy because the formal
legal system drives them there
• one path to overcoming a tragedy of the anticommons may
be by tolerating informal corruption contracts
• quasi-private property rights operate at a lower level of
economic efficiency

17. Disappearance of the
Kiosks
• Moscow city government has tried to eliminate kiosks
from the streets
• As storefronts become more available, rents drop, and
merchants decide to replace kiosks with storefronts
• Alternatively, the decline in the number of kiosks is not
linked to resolution of the storefront anticommons, but
the city enforcement existing laws against kiosks.
• That worsens the local retail economy and creates even
higher repressed demand for retail space
• ideally, kiosks should die out of their own, as owners
move into more stable premises

18. Individual Apartments
• In socialism local government or enterprise assigned an
apartment to a family, the family owned a lifelong inheritable
tenancy
• no one could sell or lease the unit at market rates
• residential privatization laws offered to the sitting tenant,
either for free or for a very low price
• privatization gave tenants control of a property rights bundle
• most people were given apartments with negligible or
negative net present economic value because of poor
maintenance, high energy costs, or bad location
• By contrast, a small number of well-connected aparatchiks
(high officials of the old regime) used their previous positions
to receive high-value, well-maintained apartments in city
center

19. • The apartment example suggests that avoiding
anticommons tragedy and achieving distributive
goals is possible by transferring bundle rights
• New housing markets have been remarkably
successful across the former socialist world

20. Communal Apartments komunalkas
• komunalkas were mostly large prerevolutionary apartments, well-situated
in downtown apartment buildings
• At some points in Soviet history, several dozen people might have shared
one komunalka
• Each family, comprising up to three generations, assigned one room
• Kitchen and bathroom facilities were shared
• During privatization, tenants received some ownership rights in their room
and, indirectly, the right to block others from using the whole apartment as
a single-family or office space
• Each owner could keep any other owner from renting out the entire
apartment
льная ра

21. • This represent spatial
anticommons, distinct from
the legal anticommons
• owner may have a relatively
standard bundle of rights, but
too little space for ordinary use
• If all the owners were to sell
their rooms and leave the unit,
the whole apartment could be
marketed as a single piece of
real estate
• well-situated komunalkas
could be converted to private
property by exchanging the
owners' rights to rooms for
complete apartments on the
city outskirt

22. value of the entire apartment 500‘
tenants 4
value of each of four communal rooms 25‘
anticommons value 25‘ x 4 = 100‘
Gain from converting to private property +400‘
value of apartment in outskirt 75’
value for substitute apartments 4 x 75’ = 300’
tenants gain 75’ – 25’ = 50’
value of the apartment 500’
relocation costs - 300‘
transaction costs -50‘
Profit for Property Bundler 150‘

23. • Some property bundlers have achieved conversion
quickly by intimidating or murdering tenants
• Tenants are mostly elder people
• consequence of creating anticommons property the
creation of a group of komunalka tenants who are
particularly vulnerable to predatory

24. Transaction Costs and Strategic
Behaviors in Bundling
What allowed anticommons property in well-situated komunalkas to
be overcome while ground-floor stores in the same buildings often
remain empty?
1. Type of Anticommons Owner:
1. Public :
•Storefront owners have more power and protection
and may not be as easily intimidated
•Instead, public and corporate owners must be bribed
•Problem “whom to bribe?”
•public owners may not behave in profit-maximizing
ways

25. 2. Private:
• The transaction costs of negotiating with private
owners may be lower
• Komunalka owners are private individuals, often
elderly not well-positioned to resist market
pressures
• Komunalka owners traceable
• No holdouts among komunalka owners (sharing
the economic gains of conversion, or engaging in
intimidation)
Type of Anticommons Owner

26. 2. Number of Anticommons
Owners/Homogeneity of Interests
– Fewer owners, with more homogeneous interests,
in komunalkas
– larger number of corporate and state owners,
with more heterogeneous interests ranging from
current income to long-term bureaucratic survival
− Bribes to one bureaucratic owner may not bind
other owners even within the same organization,
at least until such bribery channels are
routinized

27. 3. Boundary of the Anticommons
– Each komunalka could be easily bounded as private
property
– store boundaries are not as transparent
• workers' cooperative may claim that the single bakery that
they occupy constitutes the object of property subject to their
private ownership
• state bread making enterprise, may claim that the entire chain
of bakery outlets is a single asset
• local administration may claim that all bakeries belong to it

28. 4. Spatial or Legal Anticommons
– Overcoming a spatial anticommons
(privatized komunalkas) is less difficult
– In a storefront legal rights were handed
out to too many owners
5. Starting Point in Transition
– Komunalka tenants received relatively
standard legal bundles
– stores often began empty, as part of
the holdings of bankrupt state and local
organizations

29. Contingent Values in Anticommons
Property
• Different types of uncertainty about the future give
rise to speculative value in an object
– premium for the possibility that oil or diamonds may be
discovered underneath
– discount for the possibility that government may change
zoning or tax laws
• Two of these speculative values affect the value of a
right in an object but do not affect its private property
value (option value and the contingent value)

30. • option value: expected gain from converting anticommons
property to private property (economic value)
• contingent value: expected gain from rent-seeking that
privileges one owner at the expense of the others (political
value)
– In komunalka contingent value set to zero, in stable environment
concentrated to option value
− Kiosk owners also place no contingent value on holding
streets empty, because redefining property rights in a
way that would legalize the clusters of kiosks is unlikely.
They focus on maximizing current economic value
− Storefront owners
•if expect stability, may convert their rights into
private property when they can overcome
transaction costs and holdout problems
•If expected instability owners may prefer to keep
their stores empty and use the rights in political
battles rather than in economic markets

31. The outcomes for owners of
komunalka and storefront
anticommons property are
likely to differ
Marke value in private property form
Anticommons value
Anticommons value
Option value
Contingent value
Transaction costs
Transaction costs
Komunalka is converted
Storefront is not converted

32. Conclusion
• Once anticommons property is created, markets or governments
may have difficulty in assembling rights into usable bundles
– Deviant strategic behaviors, ordinary transaction costs, and
contingent values may block bundling
• individual apartments show governments have avoided creating
anticommons property
• Kiosks show the benefits and costs of taking the path from
anticommons to illegal quasi private property.
• komunalkas, property bundlers were able to convert
anticommons to private property legally
• storefronts seem to represent a paradigmatic case of the failure
of bundling and appearance of the tragedy of the anticommons
•Governments are tempted to create anticommons property, to
respond to pressure by existing stakeholders, or to address
short-term distributional concerns
•Downsizing of government functions created intense
competition among threatened bureaucrats to hold onto
plausible property rights
•existing stakeholders demanded protection and inclusion

33. Part II – The Tragedy
of the Anticommons
• Private property vs. anticommons
• For classical theorists, property is a thing and
property theory defines the relationship
between a person and a thing.
• During 20th century, property theorists
defined property as a bundle of rights.
• The difference between private property and
other property types depends on three
elements

34. Characteristics of Private
Property
1) The possibility of full ownership: PP requires
that one owner have full decision making
authority over an object
2) Rights and bundles: all of the infinite number of
potential relations people may have with each
other over any particular object
3) Restrictions on extreme decompostion:
restraints on breaking up property bundles too
much

35. Property rights that make up the
bundle of rights
• The right to exclusive possession
• The right to personal use and enjoyment
• The right to manage use by others
• The right to the income from use by others
• The right to the capital value
• The right to security
• The power of transmissibility by gift, devise, or descent
• The lack of any term on these rights
• The duty to refrain from using the object in ways that harm others
• The liability to execution for repayment of debts
• Residual rights on the reersion of lapsed ownership rights held by
others

36. Privileges of Inclusion /
Rights of Exclusion
• Multiple privileges of
inclusion are non-exclusive.
Owners may use an object
without permission from or
coordination with other
such owners.
• Multiple owners of rights
of exlusion in an object
each have a veto on others’
use. Such owners may
prevent others from using
the object.

37. Anticommons Property
• A property regime in which multiple owners
hold formal or informal rights of exclusion in a
scarce resource
• In this regime, it is rights, rather than bundles,
that are the locus of property endowments
• Multiple owners hold a core rights in the same
object
• There is no hierarchy among these owners or
clear rules for conflict resolution

38. Anticommons Property
• Ownership of AP includes the ability by each owner
to exclude other owners from exercising a core
bundle of rights in an object
• AP may be created in objects for which use is
perferable to non-use
• A legal anticommons emerges when multiple
owners hold less than a core bundle of rights in an
object; a spatial anticommons occurs when multiple
owners’ core bundles are in an object too small for
efficient use

39. Anticommons Property
• Keeping the objects in anticommons ownership
means that the object may not be alienable, may not
be available for productive use, and has no clear
hierarchy of decision-making authority among
anticommons owners
• Non-private property may be analyzed as
anticommons property if rights of exclusion
dominate or as commons property if privileged of
inclusion dominate

40. Tragedy of the Anticommons as a
Prisoner´s Dilemma
In this situation, the domimant strategy for
both players is to exclude. This results in
stores reamining empty.
Storeowner B
Cooperate Exclude
Storeowner A Cooperate 5,5 2,6
Exclude 6,2 3,3

41. Rewarding Individual Cooperation
For example, if government increases the
security of property rights generally, the
net pay-off from cooperating could
increase.
Storeowner B
Cooperate Exclude
Storeowner A Cooperate 7,7 4,6
Exclude 6,4 3,3

42. Rewarding Joint Cooperation
Improvements in enforcement
of long-term leases ot the
development of the property
insurance markets could
improve the payoff by 2, but
only if both cooperate
Storeowner B
Cooperate Exclude
Storeowner A Cooperate 7,7 2,6
Exclude 6,2 3,3

43. Punishing Individual Exclusion
By devaluing each player’s contingent claims,
so they do not attempt to exercise them in
political markets
Storeowner B
Cooperate Exclude
Storeowner A Cooperate 5,5 2,4
Exclude 4,2 1,1

44. Punishing Joint Exclusion
By imposing a vacancy tax on
each empty storefront, that
would translate into a negative
payoff of -2 for each
storeowner
Storeowner B
Cooperate Exclude
Storeowner A Cooperate 5,5 2,6
Exclude 6,2 1,1

45. • Markets may operate to bundle anticommons
property by generating institutions that reduce
transaction costs or by encouraging cooperative
norms to evolve over time
• Relatively modest changes in the property rights
regime may change the dominant strategy
• Initial incentives may be sucht that no cooperative
outcime will emerge and governments may need
to intervene directly to end the game

46. Applications and Implications
• Anticommons property may emerge in develope
markets and transition economies wherever new
property rights are being defined and pressures to
ratify multiple rights of exclusion are great.
• Examples:
- Rapid enterprise privatization and slow
restructuring
- The Quaker Oats Big Inch Land Giveaway
- Post earthquake reconstruction of Kobe, Japan
- Fractionation of Native American allotted lands

47. Conclusion
• AP is prone to the tragedy of underuse
• Once it appears, neither markets nor subsequent
regulation will reliably convert it into useful private
property
• Governments must take care to avoid creating AP
• The content of property bundles and not just the
clarity of peoperty rights matter

48. внимание
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