fbpx

The Sharing Economy’s Online Agency Advances Material Equality

The sharing economy is an equalizing economy. On the supply side, it more easily allows people who own such property as houses and cars to earn income. Of course, wealthy people also own houses and cars, but these items are a much smaller portion of their assets than for most people. Earning money from Airbnb, for instance, also provides non-wage income that rich people get mostly from securities. Thus, it is a form of diversification which is valuable even beyond the dollars earned, because it is not perfectly correlated with other risks, like the danger of being furloughed for a few days or having hours cut.

The sharing economy is also an equalizing economy on the demand side, because the online agency created by the sharing economy creates consumption that redounds to middling classes. The essence of the sharing economy is that it uses online agency to ease entry into markets in such areas as short-term housing and transportation. Of course, the rich can make use of that supply as well, but the additional supply is not as likely to be on the very high end. Agency costs tend to be relatively fixed for a particular good or service. Thus, those costs constitute a larger share  of the total value of the exchange  for less expensive goods or services, inhibiting markets. Before Airbnb, it was practically impossible to rent a room in someone’s house for a day or two because of the search and trust costs that online agency helps solve.

Moreover, the rich can already afford high end  goods, like pricey hotels. Airbnb, in contrast, makes it more affordable for people of modest means to visit expensive cities both because it provides lower cost accommodations and permits people to earn money from their own empty homes when traveling. Travel of course was once mostly the province of the rich. Home sharing services is another step in its democratization.

The substitution of online agency for physical agency itself is also an equalizing trend. Ronald Coase long ago pointed out that one result of high transaction costs is that corporations have many agents on the payroll. It makes economic sense to perform many services internally when transaction costs with outside contractors or suppliers are high. Similarly, one of the defining features of being rich through the ages has been employing people within the household to avoid the transaction costs that inhibit the  market. For instance, it is often hard to be sure of obtaining instant and reliable transportation by relying on a spot market for transportation. But by hiring a chauffeur, the rich could enjoy quality on-demand transportation services.

But now online agency offers a substitute for servants. Summoning a car with smartphone anytime anyplace is lot more like have a chauffeur than hailing a taxi in the rain or the even calling up a generally unreliable radio car service. (Their unreliability in San Francisco is actually what sparked the idea for Uber). Online agency allows one to make effective searches for the just the right hotel or other product that the rich always had secretaries to do.

In short, the sharing economy is another example of how the dematerializing nature of the world can be a boon to the middling classes. We need to account for such equalizers before concluding that the world is experiencing greater material inequality.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on March 16, 2018 at 13:19:52 pm

Earth to McGinnis:

The last thing your neighbors, who likely have invested most of their working lives buying the property next door, want is you renting your property to short term transients. Or maybe you know that and you just hate your neighbors.

Further, it is a recurring theme amongst statists with a social agenda that zoning codes are racist, sexist, xenophobic, the whole nine yards, and they are perpetually attacking zoning, the last bastion of local cohesion and freedom of association, on these grounds.

Is that your agenda, too?

read full comment
Image of EK
EK
on March 16, 2018 at 13:28:04 pm

"...the dematerializing nature of the world..."

Did anyone else instinctively think of the "transporter" on the Starship enterprise?

What on earth, or better, in the heavens, does "dematerializing the world mean?

Paging Spock!!!!

read full comment
Image of gabe
gabe
on March 16, 2018 at 15:11:59 pm

Maybe its an expression of existential despair as in "nothing matters anymore."
Or "dematerializing" could mean the resurrection of faith at the expense of crass materialism.
Or maybe anarchists of the Left now (also) repudiate even Einstein's Law of Mass Energy Equivalence thus dematerializing nature.

Dunno,
Just sayin maybe!

read full comment
Image of timothy
timothy
on March 19, 2018 at 11:00:02 am

“In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets, and steal loaves of bread.” Anatole France, Le Lys Rouge [The Red Lily] (1894), ch. 7. In other words, a policy can be neutral on its face, yet unequal in its consequences.

I chided McGinnis’s earlier post for saying that Airbnb promotes equality, noting that the advantages Airbnb provides are available to rich and poor alike. But upon reflection (and without retracting my views on the merits of equality before law), I concede McGinnis’s point: the “sharing economy” can be understood to make many of the luxuries of the wealthy available to people lower down the income scale. The neutrality of the policy does not imply a neutrality of consequences.

read full comment
Image of nobody.really
nobody.really
on March 21, 2018 at 08:57:59 am

[…] Northwestern University law professor John McGinnis explains how the sharing economy is reducing eco…. […]

read full comment
Image of Some Links - Cafe Hayek
Some Links - Cafe Hayek
on March 21, 2018 at 09:48:35 am

[…] Northwestern University law professor John McGinnis explains how the sharing economy is reducing eco…. […]

read full comment
Image of Some Links | Me Stock Broker
Some Links | Me Stock Broker
on March 21, 2018 at 09:49:46 am

[…] John McGinnis, professeur de droit à la Northwestern University, explique comment l'économie …. […]

read full comment
Image of Some Links – Courtier en Bourse
Some Links – Courtier en Bourse
on April 16, 2018 at 12:16:13 pm

Ironically the policy you seem to be advocating, “I don’t like how my neighbors want to use their property and I’m going to use the power of the state to stop them”, is basically the definition of being a statist. It doesn’t change things when you use a euphemism like “maintain local cohesion”.

Few things are more annoying than busybodies who feel they have a right to tell their neighbors how to live, act, and use their property. I agree it’s a tough situation, because of course who your neighbors are and how they act impacts you profoundly. But I think we could all do with a healthy dose of live and let live. When those “transients” start leaving trash on your lawn you can object, until then mind your own business.

read full comment
Image of Goz
Goz
on April 16, 2018 at 13:46:24 pm

Happily for yourself, the vast majority of libertarian ideologues will never own property and never have to conform their behavior to the standards of their community. You'll never have to worry that your neighbor will decide to start a hog farm, rattlesnake ranch or 24 hour drum school on her half acre fee simple next to yours.

Really, calling town zoning ordinances statism is laughable when the the state and federal government are trying to destroy those same ordinances.

read full comment
Image of EK
EK
on April 16, 2018 at 15:54:55 pm

Zoning and local ordinances are also backed by the power of the state. (What happens when you don’t comply?) If all anyone ever used local ordinances for was to require that 24-hr drum schools had sufficient sound insulation to prevent noise pollution we wouldn’t have a disagreement. But often this power is used to require others to “conform their behavior to the standards of the community” as defined by the most politically powerful and/or loudest busybodies in the neighborhood.

read full comment
Image of Goz
Goz
on December 31, 2018 at 05:47:09 am

[…] And yet at the end of 2018, I fear for the future of classical liberalism. To be sure, much of the reason for my concern has little to do with Trump. Many of our universities, mine very much included, are places of ever greater political correctness and ideological orthodoxy that nurture a coming generation of social justice warriors. The Democratic Party has lurched to the left and radical leftists, like Bernie Sanders and Alexandria Ocasio-Cortez, are given glowing mainstream media treatment. And the disruption of technology quickens, making many people feel insecure and more open to the “protections” of the state, even if the benefits of this technology, like internet search and social media, are often free and are more broadly shared than almost any innovations in human history. […]

read full comment
Image of 2018: A Gathering Storm for Classical Liberalism
2018: A Gathering Storm for Classical Liberalism

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.