Consumers are the winners in sharing economy

By Aaron Rice
October 15, 2018

As the sharing economy expands, consumers win thanks to greater options and lower prices.

It is the free market working as it should. An individual has a service they can offer, they sell it on the market via a mobile app, and they are rated on their performance by the user. Other users can then make decisions based upon whether previous users had a great experience, a poor experience, or something in the middle. It is the definition of accountability, and doesn’t require government involvement.

But, of course, government must involve themselves. Solely in the name of consumer safety, because you or I apparently cannot make a decision without the government’s blessing.

However, we know those decisions are usually centered around the government’s interest in protecting the established monopiles. Those monopolies have already asked for and received the blessing of the government and feel it is their task to protect the moat around whatever industry they are in.

We saw this with the ridesharing economy a few years ago. As Uber and Lyft entered the mainstream, some localities in Mississippi took it upon themselves to ban ridesharing companies if they didn’t operate in the same fashion as the taxi monopolies. That included cities such as Jackson, Gulfport, Biloxi, and Oxford. In Oxford, law enforcement even threatened to arrest Uber drivers for running an unlicensed taxi service. After all, the city council in Oxford had adopted new ordinances after meeting with taxi drivers and owners.

Fortunately, the state acted and passed statewide regulations for transportation network companies in 2016, overriding local regulations that stifled the ridesharing economy. A year later Uber announced that they will be available statewide. And even without doing research, we can presume students at Ole Miss enjoy having Uber available.

Carsharing is another form of how individuals can make money from their car in the sharing economy. With carsharing apps, such as Zipcar, Turo, and Getaround, consumers can rent a car from an individual for a short time period as you currently do with traditional rental car companies like Enterprise and Hertz. Naturally, said car rental companies are fighting the carsharing industry.

Airbnb has had a similar experience with government regulators. Just this summer, a Biloxi city councilman, who also happens to be the president of the Mississippi Hotel and Lodging Association, announced his intentions to increase regulations and enforcement on Airbnb rentals in the Coastal city. The Mississippi Hotel and Lodging Association is the state arm of the national association that has been pushing for homesharing regulations throughout the country.

The sharing economy should be celebrated and encouraged, but all it does is provide options.

An Uber ride is not automatically better than a ride in a traditional taxi simply because it’s an Uber ride. Nor is a house or room rented on Airbnb automatically better than a stay in a traditional hotel. If enough users have a poor experience, no one will continue to use that service provider. There is a great incentive in providing high quality services. After all, people vote with their feet.

But having these options available allows the consumer to make better, or more complete, choices. They can decide what they use based on what they need at that moment in time. And price is usually a central part of that decision.

The reactions from “traditional” companies is to be expected. They worked hard in pursuing regulations that limit competition. But when new players enter their arena, they then often complain about the unlevel playing field.

That would be less ironic if they didn’t create that playing field. But their reaction is understandable. However, the answer isn’t to impose outdated regulations on the new economy, but to deregulate existing industries. And for government to rely on the free market and trust their citizens to be able to make the best decisions for themselves.

This column appeared in the Meridian Star on October 12, 2018. 


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