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The “sharing economy” is the new big idea:
And like all new big ideas, it has generated its share of consternation, some justified, much not, and all of it a little confused. For me the crux came together a little better after reading Emily Badger’s piece from a few weeks ago discussing some of the challenges in integrating “sharing economy” services into the existing regulatory framework and Daniel Rothschild’s piece on how sharing economy firms empower individuals to operationalize their erstwhile “dead capital.”
The thing I realized, really, is that we already know exactly what these firms do. They leverage economies of scale to provide a regulated and standardized forum to connect buyers and sellers. They are, for all intents and purposes, exchanges.
Financial exchanges have existed for a long time. In some form they may have existed in Rome; they have definitely existed since the late Middle Ages. Financial products are uniquely well-suited to exchanges: economies of scale are high since trading pure institutional claims is low-cost and exchange volumes and aggregate values are high; regulation and standardization are both fairly simple since intra-product shares are almost always equivalent. The thing about exchanges in the past is that, until recently, creating large, standardized, regulated exchanges for more heterogenous asset classes and relatively small consumers and sellers was a logistically monumental project with highly uncertain returns.
The internet, obviously, changed that – and in the long-run, we may see the rise of Internet commercial fora as more important than information fora. eBay has been around for a while, as has Amazon (which hosts other sellers as well as sells directly); and what is Craigslist if not an exchange? The internet also, of course, allowed smaller investors to engage in traditional exchanges.
The sharing economy, then, is basically just the rise of service and rental exchanges. You have a car, I want a ride. You have a house, I need a room. I have an idea, you want to take a flyer on buying it before it’s complete. I need a task done, and you are a rabbit. In the end, it’s just about new kinds of exchanges arising, from a combination of the accelerating technology and penetration of the internet as well as just plain old creativity. Nobody is sharing anything. People are exchanging goods and services. They’re just doing more exchange, and more different kinds of exchange, then they could previously.
And while the article I linked to above highlights some of the potential knock-on effects of this change, the fundamental arc is towards democratization and empowerment. Students need income between classes and studying, so they drive Ubers; homeowners have a room to spare, so they rent out their room to tourists and students. The losers are the people who “made” markets before exchanges could make them, who provided the centralizing, organizing force and reaped the benefits of owning capital – taxi medallion owners, hoteliers. If people stay in Airbnb rooms when they otherwise would have stayed in hotels, that shifts income from billionaires to middle class people and on the margins unlocks valuable land for more productive uses; if it incentivizes new trips, well, it increased human happiness!
But more to the point, when we think about how to regulate these things (and regulate we can and should), we need both to consider the costs and benefits and distributional impacts of the regulatory scheme; but even before that, we need to conceptualize what we are regulating and why. We need to think about what kind of regulatory burden needs to fall on the exchange vs. the participants. Perhaps the kind of certification a hotel or even a traditional B&B receives is not what an Airbnb rentier should require; but if cities streamline the process of certifying Airbnb rooms, should Airbnb then accept more responsibility for enforcing those rules? Is Uber liable when a driver’s error causes harms, even when there is no fare in the back? What should Kickstarter be doing to limit potential catastrophic project failure – if anything? Thinking about these firms as regulated exchanges, as spaces for others to buy and rent the goods and services of others, will give us a clearer idea of how to conceive of them, as well as how to approach the question of “normalizing them.” Especially as international exchanges grow in scope, it’s something we need to think more about. And perhaps it will lead us to think about how we should be regulating the exchanges that already exist.
On a personal note, those out there reading this thing may have noticed that, over the last month, there hasn’t been much to read. There was a good reason for that – life has been totally bonkers. In a good way, but bonkers nonetheless. However, the causes of that bonkerdom are rapidly drawing to a close, first and foremost my education, which is, for all intents and purposes, complete – after two very meaningful but not functionally high-stakes presentations, one this week and one the next, I will officially be a Master of Public Policy; my 22-month roller-coaster of being a full-time worker and a full-time student (not to mention a full-time spouse, full-time homeowner, and full-time hound-parent) is, basically, at an end. Amen.
Therefore, all the things to which I have been unable to devote a sufficient portion of my CPU and RAM for want of time are suddenly, amazingly possible – and while, sorry readers, my wife is more important than you, and I do have many other wonderful friends and delightful hobbies, it really does mean this blog can take a good deal more of my efforts than it has in a whole. Commensurately, expect more posts – and more, as I have plans to not only kick this blog up a notch but expand both its depth and its scope as well. Big promises from a guy who still hasn’t put out his Best Albums of 2013 list (it’s May, I am ashamed) but promises I plan to live up to. Stay tuned.
Yesterday a friend of mine tweeted an invitation via a new service called Feastly. The invitation was to come to her home and eat a delicious, home-cooked gourmet meal in exchange for money. The service, Feastly, is set up to do exactly that – while it is still in private beta (and therefore cannot be fully-explored until one is invited in) it clearly aggregates offerings of that sort, sortable by dietary restrictions, price, attire, pet-friendliness, and other criteria. It’s a great idea, and one I wish I thought of.
On a social scale, I think as we see more services like this that directly connect buyers and sellers – think eBay, Etsy, ebook self-publishing – it will throw further into question whether statistics like GDP/GNI are useful metrics, not just of broader concepts like "standard of living," but of what they purport to measure. Every meal eaten on Feastly and not at a formal restaurant is one that involves an exchange of goods and services for money, and most of them will likely not be counted by current methods of measuring GDP. This issue predates the internet, of course, but the internet’s amazing power to match small-scale producers to buyers will accelerate this trend, as will the advent of 3-D printing.