The sharing economy and regulation

I recently listened to an econtalk podcast with Mike Munger on the Sharing Economy. This talk focused on new “sharing” services like Uber, AirBnB, and FlightApp. It was a great podcast and definately worth listening to. I had a couple of thoughts while listening.

1) The issue of regulation. Some localities are moving to make it illegal for individuals to use Uber. It reminds of a paper I read recently by Diana Thomas and Peter Leeson titled The Brewer, The Baker, and The Monopoly Maker. This paper looks at the evolution of brewing regulations and policies in Bavaria in the 14th to 16th century. The abstract from the paper:

This paper examines how productive entrepreneurial activities, such as innovation, influence unproductive entrepreneurial activities, such as regulatory rent seeking. We argue that the former may increase the latter. Confronted with a situation in which innovation erodes their monopoly returns, legally protected producers and policymakers reregulate industry to recapture lost rents. Regulation policy under such reregulation tends to be more encompassing, and thus produces more unproductive entrepreneurial activity than pre-innovation regulation policy. This reflects the greater number or variety of producers that new regulation policy must encompass for reregulation to recreate rents. To investigate our argument we consider Bavaria’s brewing industry in the 14th and 16th century.

I see several parallels between these two topics. When innovation occurs (adding hops to the brewing process / using Uber instead of a cab) the monopoly producers (the brewers’ guilds / cab companies) seek to enact legislation to further regulate the industry. How this will play out for Uber, I don’t know. I foresee some reregulation, and whether this be in favor of Uber, will depend on which group holds the biggest prospect of rents for policy makers.

2) The second thought is full utilization of resources. How many of us drive to work with 1 to 5 open seats in our car? How many of us have a guest bedroom that is occupied less than 1% of the year? The primary care clinics in the hospital I work in only sees patients for 1/3 of the day. How can we capatilize on these underutilized resources? There is a lot of wasted capacity…I challenge you to look for ways to fully utilize the resources you have available.


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