Sharing Economy


The sharing economy is one of the best examples of permissionless innovation in action today. Just a few years ago, most people had not even heard the term. Today, many of us are active participants in this rapidly evolving sector.

The term “sharing economy” refers to any marketplace that brings together distributed networks of people to share of exchange underutilized assets for profit or fun.

In practice, the sharing economy empowers people to take things they may not be using all the time—such as cars, extra rooms, and even brainpower—and put them to productive use by finding others in need of those items.

Sharing economy platforms harness the communicative power of the Internet to dramatically improve customer/provider feedback mechanisms. User-powered ratings systems help buyers and sellers to overcome “-asymmetric information-” problems that used to complicate exchange—often, these systems work better than traditional regulatory approaches.

The rise of the sharing economy has generated value for users. It has also drawn the ire of legacy competitors and policymakers who are contemplating precautionary regulations. But as Adam Thierer explains in Permissionless Innovation, such policies will serve to undermine the beneficial potential of the sharing economy.

You can find more Mercatus research and commentary on the sharing economy and peer-to-peer platforms below.

Research

Defining Common Carriers: Flight Sharing, the FAA, and the Future of Innovation
Christopher Koopman
June 12, 2017

In January 2017, the Supreme Court of the United States declined to hear a case brought by Flytenow, an aviation startup, against the Federal Aviation Administration (FAA). While Flytenow’s legal challenge ended when the Supreme Court refused to hear the case, the company continues to have the better policy argument.

In “Defining Common Carriers: Flight Sharing, the FAA, and the Future of Aviation,” Mercatus Senior Research Fellow Christopher Koopman argues that the flight-sharing industry was shut down because the FAA designated flight-sharing services as common carriers, which are subject to a higher regulatory burden than private pilots. The FAA’s definition of common carriage is too expansive and was implemented without oversight from Congress, which has been silent on the issue. Congress should intervene by explicitly defining common carriage narrowly via statute to allow flight sharing.

Rethinking Taxi Regulations: The Case for Fundamental Reform
Michael Farren, Christopher Koopman, and Matthew Mitchell
June 2016

New technology can cause significant changes in an industry, potentially improving both consumer welfare and governance. The initial reaction of many regulators to the advent of “ridesharing” platforms such as Uber and Lyft was either to outlaw them or to burden them with the same level of regulations as taxis. But policymakers are now beginning to take a new approach. They are aiming to achieve regulatory parity between ridesharing platforms and taxis by deregulating taxis. In this study, the authors determine that taxi regulation is outdated in light of the transformative technology changes and business innovations of the last few years. Now is an opportune time for fundamental reform of the entire regulatory regime to create a fair, open, and competitive transportation market.

How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the “Lemons Problem”
Adam Thierer, Christopher Koopman, Anne Hobson, and Chris Kuiper
May 2015

This study shows that reputational feedback mechanisms—buyers’ and sellers’ abilities to rate one another and share information about their interactions—can help correct information deficiencies better than traditional regulatory approaches. The Internet and the expansion of the “-sharing economy-” have provided a solution to the information deficiency problem where regulations have been ineffective. The continued use of outdated regulatory approaches may in fact prove detrimental to consumers.

The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change
Christopher Koopman, Matthew Mitchell, and Adam Thierer
May 2015

This paper demonstrates that the sharing economy makes Americans better off by offering new innovations, more choices, service differentiation, better prices, and higher-quality services. Unfortunately, many regulatory agencies now seek to apply outdated rules to these services, without evidence that such restrictions will help average Americans. Continued application of outmoded regulatory regimes may harm consumers by decreasing options and driving up prices. A better option would be to roll back old restrictions that limit competition instead of extending them to new businesses.

Do Governments Impede Transportation Innovation?
Robert Krol
June 2015

In this study, economist Robert Krol demonstrates that governments are more likely to set up barriers to new technology when the performance advantage of the new echnology is small or incremental and lobbying costs are low. Incumbent businesses threatened by a new technology may use the government to block businesses using the new technology from entering the market. Ultimately, government protection of incumbent businesses reduces consumer well-being.

Evaluating the Growth of the 1099 Workforce
Eli Dourado and Christopher Koopman
December 2015

Are we becoming a nation of freelancers? Some fear that traditional employment is ending, a phenomenon perhaps driven by the rise of the sharing economy. Others have raised doubts that any changes are afoot in the labor market.

The authors report on new data received from the Internal Revenue Service that shed light on changes in independent contracting. Their data support the claim that there has been an increase in nontraditional employment, but the data refute the idea that this increase is caused by the sharing-economy firms that have arisen since 2008. Instead, they view the rise of sharing-economy firms as a response to a stagnant traditional labor sector and a product of the growing independent workforce.

Regulation of Platform Markets in Transportation
Steward Dompe and Adam Smith
October 2014

This paper analyzes how entrenched competitors have sought regulation to undermine new sharing economy upstarts. Threatened taxicab firms are spending scarce resources on contesting wealth instead of creating it, or rent-seeking. The goal of rent-seeking is to create higher profits by lobbying politicians to impose costly regulatory burdens, such as licensure, safety prescriptions, and price controls, on new competitors. This is how entrenched interest groups, citing something like public safety, use government to protect their privileges and stifle market innovations.

Public Comment and Testimony

The Sharing Economy: Issues Facing Platforms, Participants, and Regulators
Comment to the Federal Trade Commission
Christopher Koopman, Matthew Mitchell, Adam Thierer
May 2015

In its announcement for the Sharing Economy Workshop, the Federal Trade Commission posed this question: “How have sharing economy platforms affected competition, innovation, consumer choice, and platform participants in the sectors in which they operate? How might they in the future?”

The authors identify five ways the sharing economy is creating value for both consumers and producers: It allows underutilized assets or “dead capital” to be put to more productive use, makes markets more competitive and allows greater specialization, cuts transaction costs and expands the scope of trade, diminishes the problem of asymmetric information between producers and consumers, and allows suppliers to create value for customers long underserved by those incumbents that have become inefficient and unresponsive because of their regulatory protections.

Videos

Commentary

How the FAA Killed Uber for Planes
Andrea O’Sullivan at Reason
June 27, 2017

Ride-Sharing through the Fog of Labor Laws
Christopher Koopman at The Hill
February 12, 2016

Does Regulation Serve the Public Interest?”
Christopher Coyne and Rachel Coyne at CapX
January 21, 2016

Profits Are What Drive the Economy
Adam Millsap at Inside Sources
December 15, 2015

The ‘Independent Worker’ Proposal: A Step Sideways Rather than Forward
Michael Farren and Adam Millsap at Concentrated Benefits
December 10, 2015

Attempt to Level Taxi, Ride-Share Playing Field
Michael Farren and Adam Millsap at the Philadelphia Inquirer
December 9, 2015

An Uber Good Way to Even the Playing Field
Ryan Friel and Liya Palagashvili at U.S. News and World Report
December 8, 2015

Regulating Your Neighbors for Fun and Profit
Michael Farren at InsideSources Syndicate
November 27, 2015

Uber under Attack: What Critics Get Wrong
Liya Palagashvili and Nawaphon Sittisawassakul at the Fiscal Times
November 27, 2015

A Common-Sense Solution to the Uber vs. Taxi Wars
Michael Farren and Matthew Mitchell at the Los Angeles Times
November 19, 2015

An Uber Lesson for Europe’s Cold War Against Innovation”
Michael Farren at U.S. News and World Report
October 26, 2015

With Broward on Board, Uber, Lyft Can’t Be Kept out of Miami-Dade
Michael Farren at the Miami Herald
October 25, 2014

Lessons from the Uber-De Blasio Showdown
Liya Palagashvili at Inside Sources
August 10, 2015

Expensive Licensing Can Drive Away Entrepreneurs
Christopher Koopman at the Richmond Time-Dispatch
July 18, 2015

Confronting the Sharing Economy
Christopher Koopman at The Hill
July 15, 2015

Monopolies Are Good When Government Creates Them?”
Robert Krol at Real Clear Markets
July 9, 2015

Sharing Economy Innovators Shouldn’t Be Shackled by Rules for a Bygone Era
Michael Farren at U.S. News and World Report
June 22, 2015

Opportunity and Mobility in the Sharing Economy
Christopher Koopman at Real Clear Technology
May 19, 2015

What is the Sharing Economy?”
Christopher Koopman at Cato Unbound
February 27, 2015

Curbing the New Corporate Power
Adam Thierer at the Boston Review
May 5, 2015

Today’s Solutions, Tomorrow’s Problems
Christopher Koopman at Cato Unbound
February 17, 2015

Don’t Regulate the Sharing Economy
Christopher Koopman and Adam Thierer at the Daily Beast
December 30, 2014

An Uber Challenge to Tacky Taxis
Matthew Mitchell at the Washington Times
August 28, 2014

Virginia Regulators Should Let Lyft and Uber Roll
Jerry Brito at Reason
June 16, 2014

Transportation Apps Offer Alternative to Taxis
Matthew Mitchell at the Richmond Times-Dispatch
June 14, 2014

If You Like Uber, You Would’ve Loved the Jitney
Michael Farren at the Los Angeles Times
June 12, 2014

Ride-Sharing Shows How Slow Governments Can Be
Christopher Koopman and Matthew Mitchell at the Pittsburg Post-Gazette
June 6, 2014

Share and Share Alike: Regulatory Burdens Threaten to Overwhelm Sharing Services Like Uber and Airbnb”
Matthew Mitchell at U.S. News and World Report
April 15, 2014

Photo Credit:By Colin@TheTruthAbout [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons