Tags: uber | airbnb | startups | peer economy | regulations

Scholars: Give Startups Like Uber Free Rein, Not Govt. Regs

By    |   Tuesday, 30 December 2014 12:11 PM

The rapid growth of the ride-sharing startup Uber and other innovative businesses are changing the way the American consumer operates and have triggered efforts on all levels of government to either ban or impose heavy regulations on them.

But scholars at  George Mason University's Mercatus Center suggest in a new paper that regulating the so-called peer economy hurts, rather than helps, consumers.

"[B]y expanding the range of options and information available to consumers, the sharing economy removes the need for regulation in many cases. In fact, continued application of outmoded regulatory regimes may actually harm consumers," argue the scholars, Christopher Koopman, Matthew Mitchell and Adam Thierer.

Although Uber has been embraced by many consumers, the success of the ride-sharing service has inspired a rash of lawsuits and bans across the nation.

In 2014, at least 12 states and the District of Columbia introduced regulations aimed at Uber, according to The Sunlight Foundation.

In Las Vegas, Uber, a $41 billion company, started operating at the end of October but was put out of business a month later when Nevada’s transportation regulators and a district court declared it illegal, according to the Las Vegas Review-Journal.

The issue of how to regulate and tax of the "sharing economy," which is commonly known as any marketplace which allows individuals to share or exchange services for monetary and non-monetary benefit, has become a heated issue and was the subject of a recent discussion on Capitol Hill hosted by the Congressional Internet Caucus.

While opponents contend Uber, Airbnb, and other companies should be regulated in order to ensure safety and protect consumers, Thierer contends those concerns are justified, but that placing barriers to their growth is the wrong approach.

"The better answer there is to basically put everyone on the same playing field by liberalizing markets and giving innovators more chances to give consumers more choices," Thierer told Fox Business Network's John Stossel.

Story continues below video.

Rather than regulating the peer economy, New York University professor Arun Sundararajan says the shared goal of ensuring safety can be achieved through self-regulation.

"Technology enables digitally mediated self-policing: the reputation systems and monitoring tools that dramatically smooth the safety and friction of peer-to-peer transacting parties without requiring centralized intervention, and which are now creating distributed digital institutions that reduce the need for government oversight," Sundararajan wrote in a 2012 article in Wired.

The Mercatus report echoes that assertion, stating that "modern online feedback mechanisms" actually enhance transparency and "have made it easier for honesty to be enforced through strong reputational incentives."

Its writers add, "Competitive firms are often quicker than regulators to point out the substandard service of their rivals. The result is reasonably well-functioning, self-regulating markets with strong checks on improper behavior."

With both regulators and innovators, not to mention consumers, with a stake it its future, the coming year is likely to see more efforts to define the peer economy.

But the rules governing those limits are still being written. The fact that the services themselves are rendered offline — in areas that the government has traditionally regulated — only complicates matters.

"All of this will continue to play out next year, perhaps with the passage of new laws regulating these companies, and with legal decisions that set precedents about how the companies, and their users, may behave.

"None of this is to say that the sharing economy is doomed; if anything, officials are looking more closely at companies like Uber and Airbnb precisely because they’ve been growing so fast — and, if the past year is any indication, regulatory and legal troubles won’t be enough to reverse that trend," says Vauhini Vara of The New Yorker.

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Scholars at George Mason University's Mercatus Center argue in a new paper that regulating innovative startups like the ride-sharing program Uber — all of which are changing the way the American consumer operates — hurts more than it helps.
uber, airbnb, startups, peer economy, regulations
Tuesday, 30 December 2014 12:11 PM
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