Today’s technology has helped usher in what is commonly referred to as the sharing economy. This is a broad term we use for an economic system where services are provided in exchange for a fee, via a third-party facilitator.
The most common examples of the sharing economy are ridesharing and homesharing apps, such as Uber, Lyft, Airbnb, or HomeAway. On the surface, escorting people around town in a car or renting out a spare bedroom aren’t exactly technologically advanced ideas.
It is the digital platforms or apps that have centralized the process and provided a certain level of comfort as a virtual middleman that has led to the explosion we are witnessing.
We see this in many other areas of our life as well. Peer-to-peer websites or apps, whether it’s Yelp, Facebook, Google reviews, and others, do a better job of providing feedback to potential customers than any government inspector.
Sure, government grades restaurants, but most people make their decisions on where to eat based on feedback from past customers. If an establishment was dirty, you’d read about it there, rather than from a government grade.
A common example of a profession that depends on positive feedback is home bakers, who are part of the rapidly growing cottage food industry. In deference to the incumbents who have paid a regulatory price, Mississippi limits what you can sell, where you can sell it, and how much you can make before you bow to the government and seek permission.
While many have attempted to warn us of the dangers of cookies or brownies baked at home in a non-government approved kitchen, we can find high-quality food via reviews from happy (or unhappy) customers.
Once again, we’ve always had word of mouth reviews among friends, but technology has helped bring that to the masses, elevated peer reviews, and forced businesses to bring greater attention to customer satisfaction.
In fact, if you suffer from repeated negative reviews, you will no longer be able to rent your house on Airbnb, nor will you be able to drive for Uber.
All of this is occurring naturally, rather than with the help of government. The response from those whose industry has been interrupted is not surprising. But it is unfortunate how government has attempted to intervene in the free market in too many instances.
When Uber first made its way to Mississippi, the reaction from many localities was to enact strict regulations. After all, the taxis had spent years building their industry cartel working alongside government. Now, you had a group doing it without government’s blessing.
One of the most egregious examples of an overzealous government was in Oxford, a college town who has a greater need for this service than most. They coordinated with the local taxi companies on regulations that effectively banned ridesharing options.
Today, Uber and Lyft operate freely in Mississippi thanks to the legislature pre-empting municipalities and opening ridesharing statewide. It is clear that the legislature’s work is not done in supporting consumers and entrepreneurs in the face of local government interference.
A map of current Airbnb rentals is a good indicator of places people want to visit. One might assume those governments would want to welcome visitors, but we have seen Gulfport and Biloxi take adverse actions, with Starkville considering new regulations that would limit the number of nights you could rent your house and enforce a residency requirement.
Meaning, you can’t buy a house and rent it out, something relatively common in a college town with SEC football. The net result would be fewer options for visitors.
The incumbent companies will complain that the playing field isn’t level with the new technologies. If that’s the case, we should regulate down, rather than up. We should make it easier for everyone to do business safely. Yes, it should be easy to rent out your house. Just like it should be easy to open a new hotel.
All of these new technologies are inherently positive. They are positive for the entrepreneur, who may need supplemental income and flexibility with their job so they can pursue an education and/or care for family. Regulating up and making it harder for these services to exist will hurt the people who need jobs the most. And they are a positive for the consumer who now has new options in what they can choose.
This is voluntary exchange and we should be encouraging it.
This column appeared in the Clarion Ledger on November 7, 2019.