Regulation and the Sharing Economy: An Economist’s Perspective

Uber Driver looking from the back seat of a car driven by and UBER Driver
Regulation and the Sharing Economy: An Economist’s Perspective
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About the Author

Linda Nazareth

Linda Nazareth

An economist, author and broadcaster, Linda is also the Senior Fellow for Economics and Population Change at think tank The Macdonald-Laurier Institute. Linda lives in Oakville with her husband and daughter. She campaigned in the 2014 Municipal Election for Ward 5.

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Like it or not, the sharing economy is everywhere. I’ll go as far as saying it will be one of the big economic stories of 2016, although its influence will extend far longer than that. It’s a different way to do business, and it works for a lot of people and a lot of businesses. But not for everyone.

Two stories about the sharing economy got my attention today, and each had a quote that stuck out for me.

The first was a story about a borough in Quebec called Rosemount-La Petite-Patrie, whose leaders apparently see the potential of the trend. They are all over it, in fact, that they want to change zoning bylaws in town to allow for more short term rentals. For example, if there is a church parking lot that is only used to capacity on Sundays, they would like to change the bylaws to allow the church to rent out the space the rest of the time.

“Don’t discourage a behavior that would be beneficial to all just because it happens to be against the regulation already in place that was put there a long time ago before all this was possible’, Guillaume Lavoie, the councilor spearheading the initiative, is quoted as saying.

Contrast that attitude with the words of a lawyer in California who, according to this article from Mother Jones, thought about lawsuits almost as soon as she heard about Uber. “Why should we tear apart laws that have been put in place over decades to help a $50 billion company like Uber at the expense of workers who are trying to pay their rent and feed their families?” says Shannon Liss-Riordan, an attorney who likes to sue large businesses on behalf of workers.

Changing the rules is not something that tends to get done without some dissent. And yes, it does require tearing apart laws that were appropriate at another time when different technologies were in place, and different attitudes as well.

What is wrong with Ms. Liss-Riordan’s statement is that it fails to recognize that the success of Uber does not just help the owners of $50 billion company. Rather, Uber’s existence helps everyone who is tired of the frustrations that go with using cabs and would prefer to try something else. The Ubers of this world do not prosper because someone in Silicon Valley wants them to; rather they take root when people want their services. Not to mention, having businesses do well rather than have them fail tends to be better for the economy as well.

And yes, as companies like Uber expand, they will change how work is done. Up to now, we have mostly spoken of the sharing economy as it relates to Ebay or Etsy or AirBnB or Uber, looking at the efficiency of the way that it can provide a sales platform. The flip side of things is that the sharing economy is about how the nature of work has changed. Whether or not they would have chosen it, Uber drivers are independent contractors, and sellers on Ebay and Etsy are running businesses. Like it or not, large companies are also moving to employing more working on a contract basis rather than taking them on for life.

It is a brave new world, and we may indeed need regulations to make sure it runs properly. But they need to be of-the-minute regulations, not something that was created for an economy that no longer even exists.


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