Like Uber, But for Local Governmental Policy: The Future of Local Regulation of the 'Sharing Economy'

62 Pages Posted: 16 Jan 2015

See all articles by Daniel Rauch

Daniel Rauch

Yale University - Law School

David Schleicher

Yale University - Law School

Date Written: January 14, 2015

Abstract

In the past five years, “sharing economy” firms like Uber, ZipCar, AirBnB and TaskRabbit have generated both huge market valuations and fierce regulatory contests in America’s cities. Incumbent firms in the taxi, hotel and other industries, as well consumer protection, labor and neighborhood activists, have pushed for regulations stifling or banning new sharing economy entrants. Sharing firms have fought back, using their popularity with consumers and novel political strategies, lobbying for freedom to operate as broadly as possible without government interference. But to date, both participants and observers of these “sharing wars” have relied on an unstated assumption: if the sharing firms win these fights, their future will be largely free from government regulation. Local governments will either shut sharing down, or they will leave it alone.

But this assumption is almost surely wrong. If sharing firms prevail in the current fights over the right to operate (and indications suggest they will), it is unlikely that cities and states ignore them. Instead, as sharing economy firms move from being upstarts to important and permanent players in key urban industries like transportation, hospitality and dining, local and state governments are likely to adopt the type of mixed regulatory strategies they apply to types of firms with whom sharing firms share important traits, from property developers to incumbent taxi operators. Using tools of agglomeration economics and public choice, this Article sketches the future of such policy regimes.

Specifically, local and state governments will adopt some combination of the following policies in addition to insisting on consumer/incumbent protections: (1) subsidizing sharing firms to encourage expansion of services that produce public goods, generate substantial consumer surplus and/or minimize the need for excessive regulation of the property market; (2) harnessing sharing firms as a tool for redistribution; and/or (3) contracting with sharing firms to provide traditional government services. The future of sharing economy regulation will be very different from its present, and the changes will pose profound legal, political and ethical questions for our cities.

Keywords: AirBnB, city services, consumer protection, consumer surplus, contracts, government regulation, income redistribution, public goods, sharing economy, state, subsidies, Uber, urban development policy

JEL Classification: H70

Suggested Citation

Rauch, Daniel and Schleicher, David, Like Uber, But for Local Governmental Policy: The Future of Local Regulation of the 'Sharing Economy' (January 14, 2015). George Mason Law & Economics Research Paper No. 15-01. Available at SSRN: https://ssrn.com/abstract=2549919 or http://dx.doi.org/10.2139/ssrn.2549919

Daniel Rauch

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

David Schleicher (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

HOME PAGE: http://www.law.yale.edu/faculty/DSchleicher.htm

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