A Fair Share: The fight to regulate the sharing economy

These days most of us are at least peripherally aware of the so-called “sharing economy.” What was, less than a decade ago, the domain of tech hippies and couch surfers has since mushroomed into a popular cultural phenomenon with an increasing share of the market. Pioneering startups like Airbnb, Lyft and Uber are now big businesses used by millions on a daily basis. And as with all subcultural trends that break into the mainstream, there inevitably will be growing pains.

In New York City, those growing pains are already being felt: Questions over whether short-term home rentals and a wider array of taxi options are good or bad for the city have prompted a high-profile tug-of-war between government officials and the companies profiting from the disruptive trend.

While this clash of attitudes fails to cut neatly along generational or ideological lines, it does reflect a very real divide between a newer, idealistic outlook and business as usual in the city. Proponents of the sharing economy argue that their goals of a more affordable and productive city are in fact aligned with the very lawmakers who are incensed with them, and that the two sides are talking past each other. Some lawmakers, by contrast, seem convinced that these new players are nothing more than traditional capitalists looking to cloak themselves in—and cash in on—the sharing economy mystique at the expense of city residents. As is often the case, the truth lies somewhere in between. But to come closer to that truth, it is important to better understand the sharing economy's nuances.

As it is most commonly defined, the sharing economy involves people or companies allowing others to make use of their own physical assets when they aren’t using them themselves. Usually this is in exchange for a fee and is facilitated by a third party, typically a company that handles the logistics and attempts to control for quality in exchange for a cut of the transaction.

So it isn’t really sharing in the traditional sense, if sharing is strictly defined as dividing something into parts and freely distributing those parts among companions. When it comes down to it, it is really just another niche in the free market. Some even criticize the term “sharing” as deceptive.

Giana Eckhardt and Fleura Bardhi, both professors of marketing at London-based universities, have described this market as an “access economy.” In the Harvard Business Review the pair argued that it has “disrupted mature industries, such as hotels and automotives, by providing consumers with convenient and cost efficient access to resources without the financial, emotional, or social burdens of ownership.”

With a service like Zipcar, they point out, users don’t have any interest in knowing the other people who have also used the car—there’s none of the camaraderie you would find in a traditional sharing situation. No social exchange is taking place, which Eckhardt and Bardhi write is essential to the concept of sharing.

“Consumers are paying to access someone else’s goods or services for a particular period of time,” they write. “It is an economic exchange, and consumers are after utilitarian, rather than social, value.”

It is also worth noting that the activities of some companies associated with the sharing economy, such as the car service Uber, do not always fall under the definition of sharing (or access) at all: Uber's primary business in New York City revolves around connecting passengers with drivers whose only purpose is to transport those passengers from pick-up to drop-off point. This activity is largely indistinguishable from that of a traditional car or taxi service.

Alternate sharing economy models, sometimes referred to as “peer-to-peer” or “collaborative consumption,” do not always involve the exchange of services for money. The website couchsurfing.com, for example, hosts a worldwide community of travelers who stay with hosts in foreign places, free of charge. In these cases there is some expectation of hosts and guests spending time together, however. The host may take the guest out to experience the local culture, and in return, users usually open their own homes to other travelers.

Academics trace the rise of this concept back to the mid-1990s, when thousands of people began contributing open-source software to the free computer operating system Linux. In 2002, a Harvard law professor named Yochai Benkler was the first to prominently articulate the philosophy of “commons-based peer production” in reference to collaborative projects of this nature.

In idealistic terms, proponents of the sharing economy point out that the world’s resources are finite and that the value of an asset is wasted when it isn’t being used. Benkler’s article “Sharing Nicely” extends the idea of commons-based peer production to sharing the resources we have when they are not in use, so as to get the maximum benefit out of them. For example, when hosts rent out their homes or a room, they turn an unused resource into cash to help pay the bills. Many residents who use websites like Airbnb offer that exact justification. 

Helping the working class is something elected officials usually jump at the chance to celebrate. But a bevy of New York lawmakers say this is not the case when it comes to companies masking larger commercial operations that undercut those who play by the traditional rules in the hotel and car service industries.

Still, many perceive the clamor for new regulations as an attempt to protect special interests from disruptive companies that have yet to curry the favor of elected officials. This is a concept that state Sen. Liz Krueger—a leading voice for regulating the emerging industries—pushes back on strongly.

“I want these companies to follow our laws. That’s the history of capitalism,” Krueger said. “Companies want to do anything they can to maximize their profits, and the job of government is to make sure that it’s done within the boundaries of the impact on the broader community.”

Yet following the law is not always as simple as it sounds, since many of the statutes governing the industries shaken up by the sharing economy were written long before the Internet was even conceived. 

Finding that balance is the struggle facing both the government and the industry. Posturing and public opinion can have a dramatic impact on the outcome, and right now both sides fight are battling for that advantage in two key industries—hotels and car services. And two multi-billion dollar companies have become the faces of their respective industries—Airbnb for hotels and Uber for car service.

Read Wilder Fleming's take on Airbnb.

Read Sarina Trangle's take on Uber.