Image Image Image Image Image Image Image Image Image

Feb 17, 2015

Airbnb and Uber are here, and they’re growing. It’s time for policymakers to catch up.

February 17, 2015

Governments around the world are struggling to cope with new “sharing economy” technology platforms that allow people to buy goods and services directly from one another in “peer-to-peer” transactions.

Services like Uber for transportation, Airbnb for accommodation and TaskRabbit for personal services are disrupting existing marketplaces in a big way. A study from PwC estimates that revenues from five major sectors of the sharing economy (transport, finance, accommodation, services, and music/video streaming) could reach USD $335 billion by 2025.

These sharing economy platforms raise major issues for governments. On the one hand, they represent a positive force, bringing competition, innovation and consumer choice to some long-stagnant industries. In the process they create jobs and economic opportunity. On the other hand regulations that govern accessibility, safety, and employment in those existing sectors were developed for a reason. Governments need to ensure that they can fulfill their role in meeting key public policy objectives while maintaining a level playing field for both new players and traditional industries.

So far, governments have reacted to these new players as though playing a game of Whack-A-Mole — struggling to contain these new enterprises as more pop up with increasing frequency. Obviously this is an unproductive approach to the problem, so why are governments caught in this cycle?

Continue reading

Part of the answer lies in the way the sharing economy operates. Looking at an occasional Uber driver or part-time Etsy craft seller, it’s difficult for regulators to know what they are dealing with. Should they look the other way, as they would with a garage sale, or regulate them as a licensed business? These questions have always existed for some parts of the economy, however the sharing economy is expanding the scale of those transactions at a rapid pace. This creates a real regulatory risk that some businesses will unfairly be allowed to profit by operating under less stringent rules than their competitors, for example cab drivers or hotels.

The other part of the answer is to look at government itself. The institutional culture of government (often rigid, risk-averse and prone to withholding information) is a poor match for the fast-moving, flexible and decentralized nature of the sharing economy. Many sharing economy enterprises are popular because they offer more flexibility than large private sector bureaucracies can provide. Policymakers also rely heavily on command-and-control approaches to regulation that impose many strict requirements upon businesses and rarely adjust these rules to meet the realities of new technological and social trends.

There are some straightforward things that governments can do to shape smarter policies that better acknowledge the reality of the sharing economy, managing risks while also creating room for innovation. In the short-term, rather than just shut them down, governments can use temporary waivers to let sharing economy enterprises continue to operate (with some rules) while governments study the impacts in real time and craft an appropriate long-term response. It is important to understand why consumers see these new services as valuable, and to take advantage of new ways of doing things.

Governments should work proactively with sharing economy platform operators to use the enormous volume of useful operational data these businesses generate. Access to this data could help governments design a new performance-based approach to regulation, targeting enforcement efforts to areas of concern — for example drivers or apartment-renters with poor user ratings. Data could also help governments design better public services by understanding the real-time dynamics of people’s behaviour or learn more about labour markets, such as what types of skills are in high demand in certain places.

Given the boundary-blurring nature of issues raised by the sharing economy, governments also need to think more about how they can work better across departments and across governments. This could mean a task-force that brings together officials from various departments and harnesses expertise from outside government — a model recommended by a recent independent review of the sharing economy for the UK government.

Governments can’t ignore the sharing economy. It isn’t going away. In fact, it will likely grow rapidly. And trying to either ban sharing economy enterprises or simply apply existing regulatory approaches wholesale would fail in the long run and harm consumers in the short term. It’s time for governments to start proactively adapting their mind-set and their policies. Governments are facing similar emerging challenges from other new technologies such as drones, self-driving vehicles, robotics and 3-D printing. The time is right to re-wire government’s response to 21st century challenges.

Noah Zon and Sunil Johal work at the Mowat Centre and are co-authors of a new report, Policymaking for the Sharing Economy: Beyond Whack-a-Mole, that was released this week.

Read Full Article

Release Date

February 17, 2015


The Mowat Centre


sunil-head-greyscaleSunil Johal

noah-head-greyscaleNoah Zon

Related Reading