 Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Aaron Ross Powell, editor of Libertarianism.org and a research fellow here at the Cato Institute. And I'm Trevor Burrus, a research fellow at the Cato Institute Center for Constitutional Studies. Today on Free Thoughts, we're joined by our colleague Matthew Feeney, a policy analyst here at the Cato Institute. Let's talk about the sharing economy. And I guess the first question is, what is it? But then also, when people talk about it, it's often in the sense that this is something radically new, that the sharing economy is this revolutionary change in the way that we interact with other people or the way that we buy and sell goods. And so on top of what is it, is it actually a new thing? Well, it's a relatively new thing that allows us to do something that's very old. So the term is really used to describe companies that allow people to interact in a peer-to-peer marketplace. But it allows people to do that with goods and services that will be familiar to all listeners. So whether this is Airbnb, which allows people to advertise spare rooms or any other sort of accommodation like houses that can be used by strangers or Uber and Lyft, which both provide ride sharing services to allow people to take rides, that really is the focus of it at the moment. Now, of course, the whole phrase sharing economy is, I think, rightly sometimes made fun of because, of course, this is done for profit. It's not really sharing. These people aren't sharing cars when they're using Lyft. Someone is providing a ride to someone in exchange for cash. It seems new. We talk about this, Uber and Airbnb are fairly new. But in terms of the internet, especially disrupting existing frameworks, it's older than that if we brought it out. For example, Craigslist helped put the newspapers out of business because it took away their classified ads, which was half of what they were running on. So although there are now new ones, maybe the reason we're noticing is because they're challenging more established businesses such as taxicabs and hotels. That's absolutely right. Something that people like to say or people like to mention is that these things have really exploded with the emergence of smartphones. A lot of them are app-based, Uber and Lyft are both app-based. There's also TaskRabbit is another one that has an app. What is TaskRabbit? TaskRabbit is a company that allows people that called Taskers, I believe, who can do a wide variety of different things. If you need a keg delivered or you need someone to proofread something or someone to help put together your furniture, you can find someone via TaskRabbit who will do that for you. Like tile your bathroom, really anything you can do. Really, yeah. There's also a company called Thumbtack, which does licensed professionals as a way to do it. But you're right. These companies are challenging rather powerful industries. So, Craig Bliss, you're right, did a huge amount of damage to newspaper advertising. As anyone who's listening will probably know is taxicabs and hotels are not happy about these new competitors who are on the market. But we'll have to see. These companies, Airbnb and Uber, for instance, are international and they're fighting different fights with different regulations all around the world. I often say that mostly what these companies do, and I'm going to include Craig's List and even eBay in this, going back to the dark early days of the net, mostly they just diminish transaction costs. They connect people who otherwise wouldn't be connected and it's kind of this reorganization principle that economists talked about in our previous episode. What we did with Adam Gerr, we talked about how you can, how the assumptions about perfect knowledge and all the transactions mean that you would create a utopia if all the transactions had occurred. This is similar. There's someone out there with something in their basement that I want to buy for a price that I'm willing to pay and the only thing that's keeping that from happening is that I can't find them and so you can just reorganize the world and make connections and make everyone happier, find rides, find places to stay. It was just the problem not finding those people before. Yes, and it's also the case not only do people have goods that they perhaps don't want that other people might want, but they also have skills and they also have not just stuff but spare space and the interesting thing about this is obviously given the amount of industries this is disrupting, including cuisine. You can have someone who's a very good policy analyst or someone who's a very good bus driver or someone who's a very good software engineer but also happens to be a good cook and can make a little money on the side or someone who is a good driver and can do that on the side. It certainly does diminish transaction costs. I look forward to telling my children that once upon a time dad had to stand on street corners and wave his hand around like a lunatic in order to catch rides. This is, so yeah, it's certainly doing that for sure. Let me ask you about one of the big objections that gets raised against these things, particularly Uber and Airbnb and that's the skirting regulations issue because regulations, I mean we all know that regulations are often put into effect for all sorts of bad reasons but the explicit reason for them and the reason that a lot of people support regulations in some shape or another is because they're meant to protect the consumer. You regulate the taxi industry so that then we know that these cabs are safe, the drivers have been checked out, the cars are okay, they're legitimate business people, whatever you regulate the hotels for similar reasons and so if Airbnb or Uber can start up and offer rides or offer rooms without having to go through these regulatory hoops, aren't they dangerous? I mean isn't that kind of the whole purpose of regulation has been undermined and we're all not safe anymore? Well that's certainly undermining existing regulation but it's not the case that we are less safe because of these new companies. The emergence of the sharing economy has highlighted how badly lawmakers and regulators can keep up with technological changes. Now in the 70s or before the rise of the internet you could perhaps make the argument that look or taxi companies could perhaps make the argument that well we really should have very strict background checks and you really shouldn't allow competitors because if tourists arrive in our town and just get into any car who knows who that is going to be and that argument might have made sense decades ago but it is the case that Uber and Lyft do background checks and it is also the case and this is something that I think a lot of people do like about the sharing economy specifically when it comes to Uber and Lyft that it encourages good behavior on providers and consumers because of rating systems. So if you have a bad Lyft ride and you give them zero stars that is known to the company and if you are a belligerent passenger that is also reflected. Can you explain that a bit more because I know you have deeper knowledge about how the rating system works with the Uber. Let's go through the process. You want to become an Uber X driver. There is Uber black car which are licensed commercial drivers kind of like Lincoln town cars, limousines, so forth type of thing and then the Uber X is just people using their own cars. So let's say you want to become an Uber X driver what do you do? Well it is a comparatively easy process compared to becoming a taxi driver. You go onto the website you submit certain pieces of information that allow Uber to carry out background checks that are done by a third party which is called Hirees. It's one of these Lyft users a company called Sterling Background and they check available court records, county records and other databases in order to make sure that you're not a dangerous person. They check your driving history and then some states require inspections of cars on a periodic basis. If you own one of those states Uber might ask for records on that and then they will give you the phone and you're free. Do they give you a phone or they just give you an app for your phone? Uber gives you the phone for Uber X drivers. Now and then once you're in your car and you turn the app on if someone near you wants a ride you will get a notification. You have a certain amount of time to accept or decline the ride and you pick up your passenger. Now once that is done the passenger rates you as the driver and then you get a chance to rate the passenger. Now of course drivers are under a bit more scrutiny. Passengers can survive with poor ratings. It's up to the driver but drivers with poor ratings do not last very long on the platforms. What is Uber's policy on how low can your rating go? What your first rating can't you can't get below a four point? I was told once by a Lyft driver I believe it was that if you don't secure at least a four rating on your first ride you get dropped and I think that was from a Lyft driver and then I've heard from people who drive Uber X that they have to maintain monthly averages of I think four point six or four point eight quite high rating. And you also mentioned that there's a you can't have a car older than 2004? 2004 I believe yeah exactly. So the cars have to be relatively new which is a good way to ensure that the vehicles are probably in pretty good order. And that's better than taxi caps because certainly they're older than 2004 taxi caps. That's only true. Right so the service is giving us as people who want to get a ride somewhere newer cars with people who have been checked out the prices are often lower than the cab fare would be. There's a high level of convenience because you don't have to stand out there on the side of the road waving your arms. So this is all pretty good and as someone who's ridden an Uber it is it is a quite nice experience. So what has this done to the taxi companies because I know I haven't taken a cab except from the airport where it's not allowed to pick me up since I started using Uber. No it has had a pretty devastating effect. There's been data supplied by people in the taxi industry from San Francisco that's shown a dramatic decline since 2012. I wrote quite recently about there was a manager of a Washington cab company who said that they're seeing large decreases in the amount of rides. And this shouldn't come as a surprise to people who I think have used the service and have compared that to trying to get taxi rides. It was a pretty shocking number that came out of San Francisco right. Oh yeah it was I mean in the tens I think it might have been a 40 percent to 60 percent decline. It's been in the number of taxi trips taken. Now taxi companies have reacted very predictably to this. It shouldn't be surprised these marketing incumbents have you know enjoyed relative success before Uber and Lyft came along as well as a sidecar and other companies now and now that their options are as as market players is is adapt or die right. These are the two options or prohibit. Well so exact the good point. So there was a an app designed called Halo that allowed you to actually hail taxis. They left North America which should send signals to people in the taxi industry that they and you know they are suffering all across the country now to Trevor's point of course they've been working on putting up regulatory barriers all across the country and around the world. The arguments made by people in the taxi industry is that these sort of companies should be regulated as if they're taxi caps which comes with a whole range of different regulations depending on the country. But I think what Uber and Lyft's argument that I think does hold up is that they are not transportation sorry they are not cab companies they're technology companies they're providing a technology that allows someone who's looking for a ride to find a driver they are not providing a taxi service as most people understand it. But even for us fans of creative destruction and free and open competition wouldn't it be the case that given that the taxi companies are already heavily regulated and these are the regulations they're trying to extend to Uber that their ability to compete is effectively hamstrung to some degree by the fact that they're regulated so Uber can do things that they can't do. So even if they wanted to compete they're going to have a harder time of it. Yeah I actually do have quite a bit of sympathy with taxi drivers who make this complaint which is you know me and my colleagues and the company have invested a lot of time and often time money into complying with these regulations and getting all the relevant licenses sorted out and now someone comes along that is competing with you and they don't have these cars I understand that that is a frustration especially given that you're going to be getting less profits from it but I think the response to that if you're a policymaker should be to deregulate the taxi industry not try to regulate this new disruptive competitor as something it is not which is you know we shouldn't be regulating technology companies as if they're taxi companies and we shouldn't be regulating tech technology companies as if they're hotels you know this is not the right way to do policy. I agree I have some sympathy with them but I also have little in the sense that some of the things that they could have done I mean they definitely have restraints hoops that they have to jump through that Uber doesn't but some of the things in here in DC that they could have done is a have an app have the app should have happened years ago but they were so immune from competition that they didn't do it and then second for a long time DC cabs didn't even take credit cards it was almost impossible to get one to take credit cards this meant that I didn't take cabs essentially at all before Uber so this brings up a different point which is that sometimes they're taking business and this applies to Airbnb I think even more sometimes they're taking business from existing players but sometimes they're actually the people who are doing this are people who wouldn't have been using cabs or been using hotels in that sense I use Uber way more than I've ever used cabs and I use it because it's uber and all the conveniences that cabs didn't offer me so it's not taking my business from cabs it's making me take more rides yeah I am in the same boat I very rarely took taxis before Uber came along and this is this is something I think taxi companies need to realize is building on Trevor's point if there was such a thing as a free app that you could hail taxis with you would hope that it would succeed but as I pointed out earlier you know Halo failed and I believe you know the people at Halo cited the fierce competition between lift and uber as their reason for exit from North America they just couldn't now that doesn't mean that someone who works in the taxi industry won't come up with a great idea or great app but it's I'm left wanting to see what that is and once it does appear I think you know the one come as a surprise given this is Cato but I'm a big fan of your customers having lots of choices and the more choices the better but I think the market should decide which one survive and which ones die let me ask a question about another complaint that got leveled against uber not from taxi companies but from customers and especially early on in ubers days and one that goes to economic theory which is a topic that we talk about a lot here I'm free thought and that's this surge pricing yeah can you tell us what that is so surge pricing is something that is done by uber lift have a very similar policy which is that at times of high demands the prices go up and it can go up two times you know double or it can be up to 9 11 times it starts pouring do you start pouring Halloween predictable busy times and this is because as as was mentioned these are not professional drivers these are people in their spare time providing rides and a lot of people during new years or Halloween they have okay do I want to go out and give rides or do I want to join in the festivities and a good way to incentivize drivers to get out is to provide means by which they can get more profit now this has been criticized by people because a lot of people have gone out partying and woken up and realize that they've spent you know literally hundreds of dollars to get home now this is this is a great example of you know supply and demand working itself out but I think it's worth listeners who are not familiar with the app to realize that when surge pricing is in effect uber makes you punch in the amount of the surge and there is a fair estimate button on the app so I have you know sometimes I remember a few Saturday nights I've thought about getting an uber but then I see that surge pricing is in effect and I consider well I could get the metro I could wait you know this is and that's a good thing I think if you have such pricing in effect the people who are getting rides the people who want the rides the most and I think that's something that taxi companies if they did come up with a good app would should probably consider implement that was what I mean that seems so interesting to me about the uproar about surge pricing and the kind of moral condemnation of surge pricing that we saw right because it's like gouging is because it's I mean surge pricing is like textbook basic economics you know like there's a lot of people want the service and so the price for it goes up which then attracts more people to provide the service which then brings the price back like this is exactly how economics says things work and how you create an efficient marketplace but and it happens all the time all around us but the problem that uber ran into is they made it transparent they made it obvious they were like here's what's that we are showing you the basic economics behind the system and when people could actually see it they just freaked out when we look at the we analyze it even deeper let's say you're in New York before uber and lift everything and it's New Year's Eve so you decided to go to watch the ball drop and interestingly enough if I remember stat correctly that there there has not been a new New York taxi cab medallion issued since the 30s I think there's there many New York cabs right now as there were in the 30s this and these cab medallions are owned by very large corporations is the last one time that one went on say on the market this is a permission to run a cab in New York City it sold for nearly a million dollars yeah and the supply as an increase so you so when you on the New Year's Eve and you're trying to hail a cab it's going to take you an hour ages you can't get a cab no matter how much and that's the new price right the now the new price is waiting it's just this is now basic economic analysis it's not as transparent it's just like how much would you pay to not wait an hour like well I'd pay four times more and then the but the added bonus that uber has that New York tax caps note is that they can increase the supply by giving more rewards as you said to the drivers who are willing to provide it yeah I think the the medallion system in in New York is a great example of how silly existing regulations are you in in a city that has seen population growth since the 30s they a little bit then you would think that the need for taxis would also increase with an increase in population but you know these these medallions which essentially you buy permission to run a taxi is essentially what it is and you're buying permission from the state yes from the and you bid and you know when is get the rights to run taxis the these things have I think I read correctly these have been better investments than the stock market they explode in value but you know it is absolutely the case that they restrict the number of people that can supply a popular service and Uber subverts this and it shouldn't be a surprise to anyone that it's popular given in those situations where there is a big demand for the service but isn't the argument that if we were to allow the supply of taxis to increase for the supply of Uber which is going to drive down fares because there should be more competition for fares that we're going to make it impossible for these drivers to earn a living I don't think the the the race to the bottom argument is something to that we should necessarily overlook but I think the the question you asked a highlight something I think is interesting is I think that what the sharing economy highlights is that we're just going to view getting services in a very different sort of way so you say well maybe taxi drivers won't be able to make a living now number one I'm not sure if that's true but number two that might be because if it is true that because the idea of that being full-time professional taxi drivers might eventually become a thing of the past and that companies like sidecar and Lyft and Uber just come to dominate the industry which is 100% part-time people or 100% sorry not 100% but but that this sort of service is run by people who use apps whether the black car or Uber X Lyft sidecar this sort of thing I've had some very interesting drivers who were one was a pilot for Ethiopian Airlines another one was a was a policy analyst at a think tank here in town and and this is they just do this on the side they think it's fun and they like to talk to people and so yes maybe that's the new equilibrium and the the idea of a career as a taxi driver is itself a state enforced yeah and this is something that you can also see as potentially being a problem with Airbnb in hotels because people might say well won't hotels go out of business and maybe in 50 60 years after I tell my children well you know dad one day you know once upon a time had to wave his hand around I might be saying well once upon a time there were these giant buildings that had rooms and you know you would walk in and you'd be given one but anyone who's been to a city looks out of a hotel room and sees thousands of houses that probably have spare bedrooms or probably have maybe some of the whole houses themselves are spare and Airbnb provides a great way of those spare bedrooms or spare pieces or property to be used so it might just be the case that what we're seeing at the moment is a sign of pretty significant things to come it could really change the way that people feel and do searching for services this is the change that people seem to fear when there's arguments so there's there's the arguments about whether Uber is effective or safe or whatever that you hear often from taxi cab companies and sympathetic people and that side but there's also this this argument about the kind of shift in the economy that the sharing economy represents that is the same argument that goes back to like the decline in good paying union jobs that that we're shifting are we shifting from an economy where people had high quality high paying employment for life and the security that came with it to an economy where we're all kind of trading ad hoc goods and services and our income is basically a handful of low paying hobbies and hoping well I think anyone who works in policy should be very wary of making good predictions but I do think that what it should not come as a surprise if in the future an increasing number of people make money doing a wide variety of different things this this micro entrepreneurship it's been called might become increasingly common but if it's if it's not going to be the way that people get most of that money it it's probably going to remain a way that people just make a little bit of extra cash whether it's being an Uber X driver or being a task rabbit or you know using a spare bedroom on Airbnb I think that shouldn't come as a surprise to anyone well actually we mentioned Airbnb a couple times and and maybe we should talk about that process too so we can fill in the blanks what is it and then if you want to become an Airbnb host or even guest what do you do to go through that process Airbnb is a company that allows people to advertise spare properties or spare rooms for people who are traveling so now for users this is comparatively easy you go to Airbnb calm and you create an account and then like travel OCD or other travel sites you search you put in you know where you're staying for how long and how much you'd like to pay and then you're given a selection of options to choose from and then it works ratings and they have ratings as exactly now to become a host you have to you know provide a bit more information and also information that allows Airbnb to verify that you are who you say you are and those sort of things now these people obviously competing directly with hotels which has got hotels very angry there's a whole range of regulations that dictate how much taxes hotels have to pay and also access for people with disabilities these sorts of things now Airbnb says on its site that everyone has to obey local laws but I think Airbnb could be an interesting example of regulators really getting into the business of regulating people's houses because it's worth keeping in mind that while it is worth praising the existence of new competitors the the sharing economy has introduced a very strange regulatory gray area they used to be a very clear distinction between private cars and taxis and they used to be a very clear distinction between private homes and hotels but Uber, Lyft, Airbnb have sort of introduced a blurry gray area that regulators are struggling to deal with and I think moving forward people should be wary of what sort of regulations lawmakers are going to come up with. And Airbnb the other interesting thing about Airbnb is that it's we'd mentioned how I'd take Uber's at a rate that I didn't take taxis are not exactly taking business from the taxis but Airbnb has numbers that they produced internally that have that being incredibly stark that the people who use Airbnb are not hotel users I mean not many of them are not hotel users who decide not to use hotel it's not the guy you want it's not the case that the businessman who wants to go stay in Times Square in a Ford or a night hotel if given the option to sleep on someone's couch will be like oh well stay on someone's couch it's providing in New York particularly it's providing people with who wouldn't even be able to go to New York because hotels are so expensive with the ability to actually go to New York and stay and pay their tourism dollars it's a different type of traveler it's like put someone who stays in hostels versus someone who stays in hotels very different type of travel right and as opposed to the businessman who flies to New York or Chicago for a two-day business trip or something people at Airbnb are quite likely to go to local bookstores or eat at local restaurants or to you know inject money into local economy I think there's a lot of interesting work that could certainly be done on on that aspect of the sharing economy and you know that that's something people should should welcome speaking of New York it's interesting that close to three quarters of Airbnb listings in New York City were declared illegal by the Attorney General there now what what is interesting about that is that the Attorney General was saying that these people are not complying with hotel regulations and all these other sorts of you know laws that are in place but what is particularly of note is that Airbnb does kick people off its platform that they do not feel exhibit the Airbnb ethos and their culture they don't like a lot of people just running you know apartment buildings like the hotels and you know doing all this sort of stuff they like host to be part of the experience they like being personal and that that shouldn't be a surprise right people when when consumers are looking for something I think especially Airbnb consumers really enjoy the fact that they're going to be in a house in a city they're looking forward to exploring and that's very different to a hotel our our hosts protected in all this because I'm you listen to this and like well so the idea is I sign up on this web page and then strangers come and live in my home and and that seems I mean it's one thing with the the uber where it's like it's my car that I bought you know if it has to be a late model I may have bought it just to be an uber driver and I'm in it and I'm the one driving around but it seems like quite another to just turn over the keys to my house to someone I've never met yeah so there are a number of things to say about this the first is that it may be does provide coverage for property damage and these sorts of things there so I think it's a it's quite a high value guarantee the second thing to say about it is and this goes back to what we mentioned at the very beginning is that this isn't something that's actually that hold a concept for strangers to mean people staying in your house right so you know and people with roommates will understand this people say oh by the way a friend of mine is staying crash on the couch or do you mind if my my parents show up there in town for the weekend or something like that that is yeah but you know my roommates friends or my roommates parents could trash the place and host a rager this is a possibility but the fact that Airbnb provide some sort of guarantee should reassure hosts as should the fact that people who use Airbnb to trash a house have a very low incentive to do so because they will almost certainly not be allowed back onto the platform and number two the people investigating that will know exactly who you are and will be able to investigate the crime if you engage in property damage if I wanted to rent out my house for a week to someone an Airbnb and I gave them the keys and I came back and the place was trashed well I know who did it and you know I and they are going to incur the costs dovetailing that slightly I also want to mention that the safety complaints of Uber X and lift drivers has been raised and I think what what's worth mentioning is that taxi drivers do have a very dangerous job they are picking up strangers and they carry cash which makes them you know high you know targets for robberies and violent assaults and things like that and the homicide rate for taxi drivers is way way higher than the average U.S. worker now Uber X and lift provides great ways to make that experience safer for drivers which is the there's no cash involved which these payments are made automatically so you wouldn't get into a lift or an Uber car in order to steal cash and also it's safer because you know who the passenger is I mean if you if you wanted to commit a crime in an Uber or lift car you would have to want to be caught it seems to me because there's you have an account people know who you are and where you were so I think that makes it safer not just for passengers but also for drivers so if it's safer for drivers and the amount that they earn is pretty good and they can work whenever they feel like it then why do we see taxi drivers protesting Uber I mean just recently taxi drivers blocked off San Francisco airport yeah yeah it's like I understand why the taxi companies would be up in arms about Uber but why the drivers why wouldn't they just switch over well some of I think as Trevor perhaps mentioned earlier is that some of them do I think I don't think that there's been hard numbers on what percentage of taxi drivers do eventually slip because they certainly as you point out they have transferable skills that would but yeah there's a whole range of reasons why they might not do this I think something that probably really is an important reason for a lot of these people is something that isn't considered very often is that taxi drivers are often times very proud of the fact that their taxi drivers and that they've invested a lot of time into it and this is especially true in London it is very especially true now and the London example is interesting because they've also invested a lot of time and money in order to gain the privilege of being a taxi driver and if they just thought well I'll quit and become a Uber or Lyft driver you know to them they might consider it a waste of time and money that they spent in order to become a taxi driver and it's also if you want to be an Uber X driver well you've got to have your own vehicle so these taxi drivers might not have a vehicle that would be up to spec for Uber or Lyft and they'd have to invest in getting a new vehicle so those are a few of the reasons why it might not happen some of the issues that we've seen I know you've told me some stories about because Uber and Lyft and Airbnb all these are inevitably going to find themselves with problems of some sort that might be publicized and of course as supporters of this economy to say well no one ever said that there wouldn't be problems we're going to figure it out there will be robberies there will be violence whatever behavior by executives or that yes and but you mentioned a couple of times on the case where someone hit a person on a crosswalk and the question of whether or not they were at that time an Uber driver these are interesting stories that we're still trying to work out yeah so the the story that Trevor is referencing happened in San Francisco when an Uber X driver hit and unfortunately killed a young girl now what's interesting about the case is that he didn't have a passenger in the car at the time but the Uber app was on so he's in a phase where he's looking for passengers but he doesn't have one in it and of course Uber is saying what did say sorry at the time well we're not liable you know this is in our car and Uber does have a have a liability of a million or so that so that but that kicks in when the passengers in the car right that that million dollar liability insurance now for the phase that this driver was in where the the kid got hit Uber provides coverage that kicks in if a personal auto insurer declines a claim it's a sort of umbrella coverage that comes down to help you out now in Colorado and California that have passed right share legislation they've mandated that that coverage be primary so it's not that just to kick in if you have an insurance claim to client is that it's supposed to be their first but you're right then this is what I mentioned earlier about the the gray area it's it's very awkward situation where you have someone in a yeah a private vehicle just with a phone on looking for passengers it is a interesting regulatory area that's going to be explored I bet you in the coming years for the bigger picture question which I think all this sort of leads to and ties in with other episodes we've done on free thoughts about why libertarians like this so much why we should like this so much and what it what it adds to the basic questions we have about for example regulation so some of our episodes with Peter van door we talk about when maybe regulation or public utility regulation is needed because there's not enough competition right yes and so you might need to guarantee as you mentioned like in the 70s you might need to guarantee taxis because the tourists would come and get in any car and have a horrible experience but different the competitive element helps solve these other problems right so you can try and guarantee safety by by regulation or you can try and guarantee safety by radical competition that's open with rating systems and all these things like that and then the whole world starts to look different in this interesting way right hotels one of the reasons hotels exist and hotel chains exist is so people can look at the brand and know what they're getting and now you don't need that anymore now you can look at a rating on Airbnb right and one of the reasons that name brand food McDonald's exists so people drive you across America could look at the brand and know what they're getting and now we have Yelp so that's getting so now you have radical competition that's maybe solving some of the problems that regulation was supposed to solve in this interesting way yeah and I think that is a reason why free market advocates are fans of this the is popular to amongst libertarians and a lot of people who aren't libertarians but I think for for libertarians it's a very very interesting issue because it highlights a lot of public choice problems about the fact that incumbent industries can make very powerful friends if they invest a little bit of time and money into making the right you know friends with regulators but it also highlights the value of competition and how when someone comes on to the scene that incumbents were expecting it can really light a a flame under their feet to get them to innovate and to change their behavior but I bet I think it we libertarians might be singing a different tune and in a five ten years when the sharing economy is much more firmly established because companies that are facing a lot of political problems now and are dealing with regulations are probably going to behave exactly the same as most private businesses do once they become established players someone is alive now maybe they're in high school at the moment who has an idea that's better than Uber or has an idea that's better than Airbnb and they're going to come up with this idea and try and make money off it at which point we should expect Airbnb and Uber to behave as sort of like hotels and tax industries they are going to want to protect their their share of the market so while at the moment they are being portrayed for better or worse as libertarian heroes we should be wary of the fact that that might change potentially let's talk a bit more about the future I'm curious looking forward and I know you earlier didn't want to make concrete predictions but I'm going to ask you to do you see other areas of the economy other goods and services that seem ripe for the sharing economy that that high school kid with his great idea might be able to latch on to oh no well to all the high school kids listening I think a few areas I think you should look at I think medicine is an area where something like this could really become popular people interacting directly with doctors or for medicine to become increasingly decentralized education is another area that I think technology will disrupt education in a very very big way we'll just launch a little marketplace where you could I think I received an email about this they they just launched a marketplace where you could set yourself up as an expert in something and then offer basically online tutoring through a direct I well I want to be on that email this now but this is there's something similar people listening might have heard of Khan Academy which started with someone who started making online videos I think for his nieces and nephews to help them study for the SAT exam and they sort of blew up and now now you know Khan Academy is used all over the world I believe certainly in the United States and it's where you know teachers who are good at that job can make videos and share them and they can be found by anyone with internet access yeah and I certainly think in in the coming years teachers are going to be complaining about this because once you're a very talented math teacher and you say look I'm just going to charge two dollars a day per pupil in order to teach calculus or something and you get millions of children watching your videos that's gonna you know could become increasingly profitable this seems like it represents an interesting shift in the way that we go about judging expertise or or predicting expertise from someone who we haven't met yet because in the old-style economy it was the the company that the person worked for the the institution they worked for represented expertise so you would go you know the fact this person was in this yellow cab that was from some cab company meant that they had been vetted by the cab company and were what an expert in getting you from where you are to where you want to go or the the hotel is has a certain level expertise in providing somewhere to stay or the teacher you go to a university and you know that people who work at a university are experts in their field but this gets us away from that there's now you're you're interacting with people on an individual basis and there's these reputation scores that we may have but it does I mean you mentioned brands but it seems to go against that model of judging quality in in the sharing economy your reputation is currency and this and I there was a site launched recently I'm frustrated I forget the exact name but it's a way for you to sort of like a credit score get your different ratings from different sharing economy companies into one score there's something like that in the early 2000s that was kind of one of the hip things a reputation but I remember a handful of companies popped up that were kind of free standing reputation scores so there's one it's called like rep leaf or wrap leaf something like that and the idea was you would create an account and then friends would vouch for you which contribute your reputation and other people could rate you which contribute your reputation and then you were supposed to have a score or Corey D'Octoro the technology writer and futurist and science fiction writer had a novel I think I'll down and out in the Magic Kingdom that was based around this kind of reputation economy where everyone if I looked at you my virtual reality glasses or something would show some numeric that was like here's Matt's reputation yeah that I well as we mentioned earlier I this is going to become I think much larger section of the economy this is way an increasing number of industries are going to start working and with that will I'm sure come ways for people to get get all their different scores clumped together which might mean well someone's you know a very nice Airbnb host but they're actually a bit of an obnoxious passenger in a new car like that that is something that would be really interesting to see and you know the effects that that could have on employment whether people are going to check these things at the moment it's not unheard of for employees to check Facebook and Twitter to see this a job applicant so maybe yeah maybe one day we'll be checking up people's sharing economy scores and I should add just as a plug for other things that we do at libertarianism.org another instance of the sharing economy was our other podcast which I assume all of our listeners are already listening to called excursions which is a series of audio essays from the author George H Smith on the history of libertarian thought but when we wanted to turn those essays into a podcast we went to a site called audible exchange which is a directory of narrators who are all freelancers and have a portfolio up there in ratings and we found a really terrific narrator named James Foster who now narrates these things for us. The this is part of the bigger I think bigger story here how disruptive this actually is and that's what I sort of I think is like the final kind of note to this is that the reason I love the sharing economy so much not only because it provides me with really cool things that I've done I did Airbnb in Brussels I do Uber all the time it's a great but it it does a few things that are really helpful to libertarians one it shows the seams of the state to people and I think a way that they hadn't much thought about it in a way that we think about all the time here especially Cato but I think before Uber a lot of people probably never knew there was a taxi cab cartel enforced by the state that was provided them with really poor service and then Uber comes along and gives them all this service and then people say well this taxis they just they're really they suck they're really horrible and you start to see this all over the place of the things that the state was supposed to be doing for you but actually making your life worse worse so you get the secondary element of the technology moving faster than the state and people start being like this state thing is so slow and boring and outdated and why can I call a tax cab my phone why can I pay my taxes on my phone all this thing in the search breaking through the seams in this exciting way no this this reminds me of something that of Bradley Balco who used to be at Cato used to be a recent magazine he he said libertarianism is something that happens to you and I feel like that context he was talking about cops he was talking about you know when cops literally do kick in the door and shoot your dog and all this other stuff but I think that that idea that this this the rise of the show economy is getting people aware of the cumbersome nature of regulations is I think a good thing because once people realize that all uber X is is someone giving you a ride and then you're told this is illegal because a group of people who don't want competition have a certain degree of influence and there are these outdated pieces of legislation that is what is going to start frustrating people and especially when it comes to things like you know accommodation and cuisine and potentially help the underground supper club. This is people cooking in their basement for people they found online I'll throw a dinner party you throw in 10 bucks these are illegal they're called illegal underground supper class that they're often run by top chefs. Yeah they can do well I I've mentioned this to Trevor before but there's a there's a chef in in Britain called Jamie Oliver and when I was living in Britain I saw a channel for documentary I think it was channel for apologies to the BBC but they but he traveled to America to do a show about documentary series about American cuisine and there's one part where he's in New York and they he visits an underground Peruvian restaurant and the camera is shot below the hips of the people running this thing because you know they are breaking the law or it could get in trouble for regulations and that is something I hope that people watching that thought and their faces are not yeah well that this is certainly weren't seen and I think that that is a moment where people should think this is someone cooking food that they have bought in their home for people who want to be there and they feel like they are in trouble now that that is something that that sort of feeling and those sort of stories are really going to be highlighted the more the sharing economy expands and I think that's only a good thing and I also think that that the second thing that libertarians need to be happy about with this is that it shows that competition works in a very in the way that we've always in a way that people have maybe forgotten and they ask these questions of oh well how could you have schools and make sure that they were good if you didn't have public schools because oftentimes the biggest barrier to liberty is like a merely a lack of imagination that you cannot think of another way it could be done and then entrepreneurs come along create this way of doing it and create this radical competition with rating systems and and not it can make things cheaper it can make things better obviously more innovative and also safer than than all the things that the regulations were supposed to be there for in the first place. Yeah and I think it's also making us more social and I like the fact that as you know Ubrex drivers have interesting stories lift drivers have interesting stories I like that when I travel to cities I don't have to sit in the same sterile hotel rooms I get to meet locals and I get to you know they get local food and all this other stuff and I think that's only a good thing for people to explore the world in a more direct way while doing something very very familiar. Thank you for listening to free thoughts if you have any questions or comments about today's show you can find us on Twitter at Free Thoughts Pod that's Free Thoughts P-O-D Free Thoughts is a project of Libertarianism.org and the Cato Institute and is produced by Evan Banks. To learn more about Libertarianism visit us on the web at www.libertarianism.org