June 21, 2016 at 5:00 am ET
There’s no shortage of issues on which politicians and their constituents don’t see eye to eye. That divide is especially intense when it comes to the modern “sharing economy,” which allows individuals to connect via app-based technology and create markets for goods and services in a new way. Although a Pew survey released late last month shows the new interactions enabled by platforms like Uber and AirBnB are wildly popular and growing more so every day, politicians aren’t always on board.
U.S. Sen. Elizabeth Warren, for example, recently called for redefining the sharing economy to conform with outdated notions of income and employment, threatening the flexibility and ease of access to jobs that these platforms provide. She’s only the latest politician to do so; across the country, officials have taken even stronger steps to denounce, restrict, and control this emerging market—even forcing it out of town in some cases.
That’s the wrong approach. The sharing economy has proven immensely successful—especially with younger people who value flexibility and choice—and that success is a sign that something is working. Rather than punish the peer-to-peer pioneers or try to force us into the past, politicians should get out of the way and let the new economy thrive.
The sharing economy is the collection of direct, peer-to-peer transactions of goods and services enabled by internet application and website platforms. Some of the most notable sharing economy platforms are retail facilitator eBay, ride connector Uber, lodging coordinator AirBnB, and crowd-funder GoFundMe. This brand new set of markets is set to contribute $335 billion to the global economy in less than ten years, and the research publication eMarketer estimates that 27 million Americans will take part in it this year alone.
Last month’s Pew study found that consumers of all ages enthusiastically support the freedom and choice afforded by the sharing economy. The study noted “near-universal agreement” that the sharing economy saves “time and stress” and provides good jobs for those seeking flexibility. It’s especially popular with younger generations, with as many as one-in-ten 18-29 year olds in urban areas participating on a daily or weekly basis.
The survey also answered the question of whether the public believes the sharing economy needs stronger regulation. Roughly 70 percent of those surveyed reported feeling safe interacting with the individuals they meet through the sharing economy, and strong majorities of those surveyed believe sharing economy activity should not be subject to the same regulations as older, established providers of goods and services. This attitude even bridges the traditional divide between left and right—users of both parties believe that sharing economy participants should be “free to operate outside of existing regulatory structures.”
Many politicians—at every level of government—feel very differently, to say the least. Even in Austin, Texas, a place that prides itself on embracing innovation, city officials imposed onerous regulations on ridesharing that caused companies like Uber and Lyft to cease operations in the city. Arrests, fines, and confusion occurred in Florida last year as counties and cities enacted their own sharing economy regulations of varying severity, which one county executive justified by saying, “Sometimes, we have to protect people from themselves.” New York State Attorney General Eric Schneiderman has labelled thousands of AirBnB listings illegal.
And even in smaller cities, such as Athens, Ohio, sharing economy participants are treated like criminals for using their own property. One Athens Millennial tried to rent out a spare bedroom but was threatened by the city council with a misdemeanor charge and $500 in daily fines unless he stopped.
So who’s right in this debate—the millions of Americans benefitting from the sharing economy, or the politicians who seek to control its innovative actors?
The evidence is on the sharing economy’s side. Ridesharing alone—the largest segment of the sharing economy—generated $519 million in economic activity between 2010 and 2013, creating over 100,000 jobs in the process. As for the validity of the regulations lawmakers have in mind, a report by the Federal Trade Commission find no basis for many of the regulations politicians seek to impose. With ridesharing as just one example, regulations such as limits on the number of cars permitted to rideshare, such as proposed by Mayor de Blasio, just “waste resources and impose a disproportionate burden on low income people.”
Nor are politicians’ claims about promoting safety valid. Sharing economy platforms often have tools embedded in their software that empower participants to instantly rate and review each transaction. This peer regulation increases safety and quality far more effectively than politicians can. Echoing the results of the Pew study, 64 percent of consumers surveyed by the accounting firm Price Waterhouse Cooper believe that peer regulation of the sharing economy is more important than government regulation.
The economy of the future is already here. My generation in particular has become accustomed to the convenience and ease of access that makes the sharing economy so unique. The sharing economy represents the best of innovation and entrepreneurship, and society is better off for it.
A clear majority of Americans see it that way, so why don’t our politicians?
Albert Downs is an economic policy analyst at Generation Opportunity.