Thursday, 29 May 2014

The 'sharing economy' is wrong because it stops rent-seeking by governments


This is the conclusion of one Dean Baker writing in the house journal of government planners and regulators (The Guardian):

"...the downside of the sharing economy has gotten much less attention. Most cities and states both tax and regulate hotels, and the tourists who stay in hotels are usually an important source of tax revenue (since governments have long recognized that a modest hotel tax is not likely to discourage most visitors not provoke the ire of constituents). Bit many of Airbnb's customers are not paying the taxes required under the law."

See what this man is saying? The rents that local government is able to claim from having regulatory authority, rents that go to pay for well-paid officials and the funding of critical (i.e. re-election sensitive) projects, are undermined by the fact that people have found a way to stay in a private flat or use a private car rather than an expensive taxi.

This 'sharing economy' isn't just disrupting the industries concerned - hotels and taxis - but threatens a crucial revenue for the city governments. You can understand how these interested parties might wish to regulate - so as to protect their shared interests. But it's a step further to suggest as Mr Baker does that such disruption is a bad thing (offers no 'net benefit' to the economy) simply because the new model falls outside existing regulatory regimes. And more to the point, that it is very difficult given the nature of mobile technology models, to find a way - should of an outright ban - to prevent this disruption.

Mr Baker is the director of a think tank - a "progressive" think tank no less. So I guess it's no surprise that the liberating application of technology - freeing us just a little from the rent-seeking of governments and their partner industries - is a problem to Mr Baker.  After all his think tank depends on these city governments and their client big business to provide its very comfortable Washington DC living. It is a case of the rent seeker protecting the rent seeker!


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