Questions & Answers
What Is Government's Role in the Sharing Economy?
Arun Sundararajan, professor of Information, Operations, and Management Sciences at New York University Leonard N. Stern School of Business, notes that governments, to encourage economic growth, will have to be supportive of peer-to-peer exchange.
Transcript
What is government's role in the sharing economy?
As peer-to-peer exchange becomes an increasing fraction of our economy, local governments will find that they have to be supportive of and inclusive of this kind of peer-to-peer exchange, in order to enjoy greater levels of economic growth. I think a larger and larger fraction of work will happen through peer-to-peer marketplaces rather than full-time jobs. As a consequence, local governments that allow their citizens to participate as suppliers in peer-to-peer marketplaces are going to see faster rates of growth and work, and more healthy employment. The benefits that seem to be coming from these peer-to-peer marketplaces are disproportionately enjoyed by below-median-income consumers. And as a consequence, local governments can see encouraging the sharing economy and peer-to-peer marketplaces as a strategy for inclusive growth.
The challenges that arise come from the fact that, unlike digital disruptions of the past where it was all in the digital realm, these peer-to-peer marketplaces are disrupting real-world services—familiar services, services that already had a preexisting form of supply, like hotels for short-term accommodation, taxis for point-to-point transportation. And as a consequence, there are existing regulations that have been put in place to support providing the services the old way—the analog way, so to speak. A challenge for local governments is in coming up with transition plans as the economy moves away from this old form of providing accommodation of transportation and toward these new forms.
Another challenge, which is related, comes from the fact that the peer-to-peer marketplaces are blurring the boundaries between personal and professional in the provision of commercial services. It used to be either you were a taxi driver full-time or you weren't. Maybe you would take your friend's kids to baseball practice periodically, sometimes you'd lend your apartment to a friend, you'd have people over for dinner—but we didn't feel there was any need for special licensing there. That was personal. Professional providers had to be licensed and regulated in certain ways. Now we are sort of blurring the lines between the personal and the professional, and I think that's at the heart of a lot of the regulatory challenges that cities and states are facing when trying to accommodate the sharing economy.