The case for the sharing economy

The sharing economy is not only a different way of presenting services such as Uber or Airbnb, but actually a wide range of companies that operate on the basis of shared resources to maximise their utility. Innovations in this area, however, require rethinking  the State’s current authorisation system to give more flexibility to companies, employees and consumers.

Uber’s example demonstrates this necessity. Uber is a carpooling platform that, since its creation eight years ago, has expanded to 66 countries and more than 500 cities around the world. With a single click in an application, users can call a driver, discover his estimated fare and monitor the route he takes to his destination. A five-star rating system allows drivers and passengers to assess each other, improving overall experience. Uber is a more efficient and modern service than any taxi company.

Interestingly, Uber is not just a simple competitor to the taxi industry. There are also a large number of consumers who had not previously used conventional taxi services, deterred by their expense. In this way, one can view the sharing economy as a democratisation of consumers’ lives: they have access to more services with a level of control via the evaluation structure. In systems protected by the State through permit schemes, consumers are obliged to wait for the verdict of an administrator or a company manager if they hope to see an improvement in the service’s offerings.

Defining the “sharing economy” is a huge challenge. It must consist of a platform, separate from both the provider and recipient of the service. Additionally, there must be no transfer of goods or services from the platform itself. The primary objective of the platform is therefore simply to facilitate the exchange.

At the employment level, this definition means that contracts are established on a case-by-case basis. The applicant and the supplier agree to a single provision without a long-term contract for each service.

Consumers apply best practice: if X service is superior, it will be more widely utilised. To take the example of Airbnb, the service becomes very popular in markets with skyrocketing rental prices (which also directly affects hotel prices) and is much less important in regions without shortages in new housing infrastructure.

In the United States last year, the Bureau of Labor Statistics (BLS), a division of the Department of Labor, reported that 55 million workers in the United States are engaging in the sharing economy, representing more than 35% of the American workforce. This already impressive percentage is expected to increase to 43% by 2020.

The sharing economy also provides employment opportunities that previously did not exist for some people. A comment by Benjamin Bell (Head of Public Policy, UKI at Uber), who recently appeared on the LinkedIn social network, clearly shows this: “I was driven home by a man with a hearing impairment, very well rated in the application by Uber passengers, but not in the traditional labour market.” He added: “Technology lowers barriers and raises aspirations.”

It is not in the interest of any country or consumers to regulate the sharing economy to safeguard industries and corporations that have been regulated by the state for decades. If hotels and taxis want to compete with new technologies, they will have to adapt, rather than clinging to government protection. The sharing economy is a necessary technological disruption that benefits everyone.

This article was first published by Values4Europe.

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About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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