I have to totally disagree with Dean Baker’s recent piece claiming the “sharing economy” is bad for the economy. Specifically, he argues that Airbnb and Uber are bad for the economy. He cites the fact that Airbnb and Uber are less regulated businesses that can not only evade regulatory requirements, but can also evade taxes. That’s probably true to some degree, but it’s not a sign of some flaw in our economy.
The growth of these businesses is just a sign of demand for better services because many of the businesses that currently provide those services aren’t providing what people expect. And so what we’ve seen is growth in competition because the competitors are simply providing a superior product that delivers the consumer a better overall experience.
Take the case of Uber for instance. Uber offers transportation on demand via Sedans (for a higher rate) as well as UberX which is privately owned vehicles operated by part-time drivers (read, anyone licensed as an Uber driver using their own vehicle).
Here in San Diego where the city is sprawling and rides are often 10+ miles this service is simply awesome. First, it’s less expensive than the cabs who essentially have a monopoly and gouge customers on any long ride. Second, the Ubers are cleaner and always nicer than the cabs, even if you use an UberX (the sedans are obviously much nicer though you pay a higher rate). And the drivers undergo a strict background check and in my experience are safer and nicer than most cabbies. They also tell me, universally, that they’re paid better than they would be working for the cab companies. And most importantly, the Uber technology makes getting a ride easy as a few clicks on your smart phone.
All in all, Uber beats the pants off the cab companies. Competition came in, wrecked the cabbie monopoly and improved the outcome in almost every single way. For consumers the growth of this business is a huge win in just about every way.
If you ask me, that’s not a flaw in the capitalist system. It’s precisely what we should be embracing. If the government is too incompetent or slow to evolve and adapt with the pace of changing industries, proper categorization of businesses and technological growth then that’s a problem with our government, not with businesses.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.