The inexorable logic of sharing economy
- By Michael Spence
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E-mail China Daily, October 9, 2015
Indeed, in order to encourage infrequent e-commerce users, innovators and investors are exploring ways to combine the evaluation databases of separate, even rival, platforms. Whatever the legal and technical issues that must be overcome, down the road we can surely imagine the kind of data consolidation already practiced internally by retail giants like Amazon or Alibaba.
Some sharing models－perhaps most－rely on both labor and other assets: for example, a person and his or her car, computer, sewing machine, or kitchen (for home-delivered meals). This throwback to the cottage industries that preceded modern production is possible today because the Internet is lowering the costs of dispersion that once compelled the concentration of work in factories and offices.
Perhaps inevitably, regulatory issues arise, as Uber is now discovering from California to Europe. Taxis and limousines are to some extent protected from competition because they need licenses to operate; they are also regulated for customer safety. But then Uber invades their market with a differentiated product, subject largely to its own regulations for vehicles and drivers. In the process, it threatens to lower the value of licenses just as surely as any official decision to issue new licenses would. No wonder the taxi drivers of Paris and other French cities－hitherto protected from competition－have protested so vehemently (and, on occasion, violently).
An intriguing question is how far the financial sector will embrace the sharing economy. Peer-to-peer lending and crowd-funding already represent new ways of matching borrowers with investors. Clearly, issues relating to liability and insurance will have to be addressed in all sharing-economy models, especially financial ones; but these are hardly insurmountable obstacles.
The truth is that the Internet-led process of exploiting under-utilized resources－be they physical and financial capital or human capital and talent－is both unstoppable and accelerating. The long-term benefits consist not just in efficiency and productivity gains (large enough to show up in macro data), but also in much-needed new jobs requiring a broad range of skills. Indeed, those who fear the job-destroying and job-shifting power of automation should look upon the sharing economy and breathe a bit of a sigh of relief.
The author, a winner of Nobel Prize in economics, is professor of economics at New York University's Stern School of Business and senior fellow at the Hoover Institution.
Project Syndicate
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