The sharing economy: Sharing and the city

The sharing economy: Sharing and the city

Phuah Eng Chye (25 November 2018)

Nestor M. Davidson and John J. Infranca highlights that the intriguing dynamics between sharing activities and cities is an under-appreciated aspect of regulating sharing platforms. “Unlike earlier generations of information or technology-based enterprises, sharing enterprises rely on a critical mass of providers and consumers who are sufficiently close to each other or to other amenities to make their platforms work, often finding value in the very fact of the beneficial spillovers from proximity. These conditions foster the ability to rent spare bedrooms, take on additional riders on a commute, or offer spot labor and niche services.”

Hence, the “dense urban geography creates inefficiencies and challenges but also opportunities, and it is the very scale, proximity, amenities, and specialization that mark city life that enable sharing economy firms to flourish.” Hence, “the rapid growth of sharing economy companies is due in substantial part to the innovative solutions they provide to recurring frustrations of city life.”

The important insight from Nestor M. Davidson and John J. Infranca is that the sharing economy is “firmly rooted in urban geography, with a flow of information through technology that remains highly dependent upon the spatial dimensions of the market relationships it facilitates. As such, the sharing economy is an entirely new type of information network, one that remains profoundly place-based.”

This is reinforced by the “important role that reputational mechanisms and other features of sharing-economy platforms play in overcoming endemic problems of trust.” They emphasise “mass anonymity and the lack of social trust have long been understood as defining aspects of city life, and…sharing-economy reputation tools can be understood as a new technological response – an anonymity workaround, as it were – to this classic urban challenge.” Hence, “the sharing economy’s reputation methods can be reconceptualized as a means to address conditions of mass anonymity particularly associated with urban living.”

There are significant implications for regulation from their analysis. Whereas “the earlier waves of technological innovation primarily faced federal (and international) regulatory scrutiny, sharing enterprises are being shaped by zoning codes, hotel licensing regimes, taxi medallion requirements, insurance mandates, and similar distinctly local legal issues.”

Hence, Nestor M. Davidson and John J. Infranca points out that “as sharing enterprises and local governments confront each other, each side is iterating and adapting amid a rapidly changing landscape of innovation. This distributed clash is not just shaping the sharing economy and local regulatory responses to it. It is also spurring broader changes to the urban environment. We are beginning to see new approaches, for example, to real estate development, land use, and transportation, as the private sector reacts to new configurations of use and ownership.”

In this regard, “the rise of companies like Uber and Airbnb represents a reaction to urban regulatory regimes that exacerbate the frictions of urban life. These regulatory conditions can limit or skew the supply of urban amenities, giving value to the excess capacity that sharing economy firms exploit to fill demand for services like ride sharing and alternative accommodations. As a result – intentionally or not – many sharing economy companies have flourished through a kind of regulatory arbitrage that leverages local regulatory challenges.”

This has generally pit the sharing platforms against the local governments and industry incumbents. As a backstop to support its aggressive strategies, the sharing platforms have sought “to rapidly establish a base of both consumers and providers who are invested in the given model and then to use that base to push the political discourse.” The conflicts between the sharing platforms and “city governments across the country are not only setting the terms of the sharing economy, but also are changing the nature of local government regulation in three key ways”.

Nestor M. Davidson and John J. Infranca point out that first, “it is compelling local governments to more clearly articulate and justify their regulatory objectives. Participation in the sharing economy makes certain forms of local regulation more visible and salient.” Second, local governments are seeking access to the substantial data owned by sharing platforms – “through either voluntary partnerships or legal action.” Third, the sharing economy is “having spillover effects that will lead to heightened expectations of transparency for local government regulation more generally.”

Hence, Nestor M. Davidson and John J. Infranca conclude that “understanding the sharing economy as an urban phenomenon highlights how the sector is altering not just the urban landscape and the social experience of living in cities but also how individuals interact with local government and the political economy more generally. It also reveals the need for a new, holistic approach to regulating the sharing economy at the local level that accounts for how deeply entwined the sector is with urban space and city life.”

Nestor M. Davidson and John J. Infranca’s insights are significant for shaping policy choices in the future. The sharing of information and crowding into cities are reinforcing. Sharing expands the production of information and participation in response to the information challenges of modularity, autonomy, information asymmetry and transience. This also suggests that the regulatory challenges posed by sharing are more effectively addressed at the local rather than federal level. This suggests that policies should be oriented towards promoting greater decentralisation of decision-making and information transparency to foster higher levels of self-organisation.

References

Nestor M. Davidson, John J. Infranca (2016) “The sharing economy as an urban phenomenon,” Yale Law & Policy Review: Vol.34: Iss. 2, Article 1.  http://digitalcommons.law.yale.edu/ylpr/vol34/iss2/1

 

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