How free exchange and the 'sharing economy' is the best route to peace, love and understanding

Trade - sharing, mutual benefit, fun and freedom

We're in the pub and run into a couple we know from the village. With this couple is another, French, couple who are staying. That's how it's described because the couple we know let out a room in their house through AirBnB. So we chat to them (and the French couple) about the experience - it's a new thing to us and, like Uber, something that's new and a little bit different. Both couples, in their different ways, describe it as a shared experience. Not just a cheap room in a Yorkshire village but a chance to share the wonders of the South Pennines with visitors keen on a different experience.

What this part of that new sharing economy isn't is:

"...the shabby economy, the frugal "make do and mend" society where no-one will buy anything unless they absolutely have to and everyone is running down their existing assets"

The couple we know have a lovely house. They've spent a lot on improving it - not so they can rent it out but so they can enjoy living there. And, while they've a young family, a little extra brass coming in from the rentals helps. And the French couple, they got to stay pretty cheaply in Yorkshire as well as getting lots of hints and tips about what to do and where to go. Plus - as our visit to the pub showed - the visitors are welcomed into a little bit of our community.

Apparently though, all this is wrong:

Indeed the whole idea of the "sharing economy" seems to be based not on the idea of working together to produce something for mutual benefit (the cooperative principle) but on millions of people scraping a living by selling services and renting assets to each other. How does this add value to the economy over the longer term? There is no production. It is entirely consumption.

Now, leaving aside that (unless I've misread all of my economics) the whole point of production is so we can consume, it strikes me that the little example above demonstrates the complete falsity of the argument. The two couples both gained something - part financial (a cheap holiday, a rented room) and part non-financial (the pleasure of a shared experience). It's true to describe this disintermediated economy as:

It's trading.

But the idea that there is not shared experience or mutual benefit in the process of exchange is completely wrong. Let me illustrate with another story.

We've just moved house and were in the market for some new lights. We found what we wanted in a great new shop in Bradford called Artzi. The lights are beautiful (and Turkish - I hope that's not too 'colonialist') but weren't cheap. Anyway, Kathryn goes into haggling mode - this is the woman who haggles with on-line exchange dealers for fun - and a gentle, smiling battle ensues with the shop owner. A deal is struck and, almost together Kathryn and the shop owners exclaimed "I enjoyed that". Trading is a pleasure, the route to mutual benefit - without that mutual benefit there is no exchange. And it doesn't matter whether it's selling a fancy bit of technology, renting a villa in Morocco or hiring a cab in London, without mutual benefit there is no market.

The big thing about the 'sharing economy' is that it opens up the opportunity to trade. In that controlled world of "advanced manufacturing and high-tech services" the masses really are just consumers. In the world of Ebay, AirBnB and Compare and Share, ordinary people are both producers and consumers - the result of the disintermediation these businesses bring is an explosion in that wonderful shared experience of trading. From millions of shuffling drones in 9-5 jobs, we've suddenly the chance to add a little bit to this that's ours not the bosses'.

Over the past few weeks we've been part of that world - as we downsized our home, we've been selling some things on Ebay, giving other stuff away via Keighley Freecycle and taking several car loads to the Sue Ryder shop in Haworth and the council tip at Sugden End. And this experience has introduced us to all sorts of interesting folk - the bloke from Nottingham helping his daughter furnish her first flat, the couple in Somerset buying a bathlift so they don't have to move, and the woman who buys tatty old furniture and paints it up in fancy colours for resale. To describe all this creativity as "shabby, unproductive, stagnant, mean and distrustful" is not just wrong, its really rather rude.

What the 'world wide web', the Smartphone and the innovation of people making use of them is doing is opening up closed corners of the world, spreading the opportunity to trade and doing the thing mutual exchange does - spreading peace, love and understanding (plus a little cash). Long may it grow and succeed.
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The 'sharing economy' is wrong because it stops rent-seeking by governments

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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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