The success of companies such as Airbnb and Uber created a massive sharing economy. The idea grounding the sharing economy is an old one: people provide goods and services as individuals rather than as employees or businesses. A classic example is paying a neighborhood kid to mow lawns or babysit. Another is paying a friend’s gas money for a ride to the airport. The new version of sharing changes the traditional model, probably in ways that make it sharing in name only. One difference is that the old sharing economy was usually an informal system while the new sharing economy is organized by companies. As an example of the old sharing economy, your neighbor might tell you about the teenager she hired to babysit her kids or mow her lawn. As an example of the new sharing economy, you might use the Uber app to pay a soccer mom to give you a ride to the airport in her mini van. Unlike the old sharing economy in which your neighbor (probably) did not take a cut for connecting you to a sitter or mower, these companies get a cut of the proceeds—which could be justified by the services they provide.
The new sharing economy has been praised and defended based on the claim that it makes it easier for people to make money in challenging economic times. For example, the ideal is that anyone can make extra money by driving for Uber or Grubhub. However, the sharing (or gig) economy has been harshly criticized since its inception.
As might be suspected, early critics of the sharing economy included people whose livelihoods and profits were threatened. For example, Uber’s conflicts with taxi services routinely made the news. Some people dismissed these criticisms as the usual lamentations of obsolete industries while others take them seriously. As the sharing economy has embedded itself deeply over the years, there have been ongoing criticisms.
One point of concern is regulation. In most (if not all) cases, the sharing economy exploits loopholes in the informal economy, which is regulated less than the formal economy. For example, professional cab drivers are subject to many strict regulations while an Uber driver is not. As another example, the hotel industry is regulated while services like Airbnb were largely unregulated, although this has changed over the years. These companies also used the strategy of simply ignoring whatever regulations got in their way.
Some proponents of the free market might praise the limited (or nonexistent) regulation, and this praise might have some merit. After all, it has long been contended that regulation impedes profits. However, there are at least two legitimate concerns here.
One is, obviously enough, fairness. If taxi drivers and hotels are subject to strict regulations that also involve additional costs, then it is obviously not fair that companies like Uber and Airbnb can offer the same services while evading these regulations. One obvious option is to impose them on the sharing economy (which “the left” tends to favor). Another obvious option is to reduce regulations on the traditional economy (which “the right” tends to endorse). In any case, fairness would seem to require comparable regulation for comparable industries.
The second is safety and other concerns relating to the public good. While some regulations might be seen as burdensome, others exist to protect the public. For example, hotels are held to certain standards of cleanliness and safety. Since the new sharing economy puts people at risk in similar ways, it seems reasonable to impose comparable regulations on the sharing economy. After all, whether you are getting a hotel room or going through Airbnb, you should have a reasonable expectation that you will not perish in a fire.
It might be countered that the new sharing economy should still fall under the rules of the old sharing economy. For example, if I ask a friend to take me to the airport and she has an awful car and is a terrible driver, it is not the business of the state to regulate my choice (although the state should address any traffic violations). As another example, if I sleep on a friend’s couch, it is not the business of the state to make sure that the couch is properly cleaned and that the house is suitable (beyond being up to code).
While this does have some appeal, there are two main arguments against it. The first is that the informal economy is largely unregulated because it is informal and hence difficult to regulate because there is no central organizing entity for the state to deal with. Once a company like Uber or Airbnb gets into the picture, the economy is now formal—there is now a company organizing things. This allows a practical means of regulating what is now commercial activity.
The second is scale. When the informal economy is relatively small, the cost and difficulty of regulating for the public good can be prohibitive. For example, regulating neighborhood babysitters or people who give the occasional ride to friends and get gas money would impose a high cost for a little return. However, when part of the informal economy gets organized by a company and greatly expands, then there is more at stake and hence paying the cost of regulating for the public good becomes viable. For example, regulating people occasionally giving friends or associates rides is one thing (a silly thing), but regulating large numbers of people driving vehicles for Uber is different.
A Philosopher’s Blog is Now on Substack!
You can subscribe and read for free.