To Regulate the Sharing Economy, Let Users Choose Their Risk Level
In the last few years, technological innovation has facilitated the rise of the so-called “sharing economy,” where information technology allows owners of cars or homes to rent-out their property to interested customers. The most prominent examples of this are Uber, where people pick up passengers in their personal vehicles, and Airbnb, where property owners rent out their homes (or part of their homes) to travelers.
In Missouri and elsewhere the sharing economy has faced strong resistance from the regulatory state and existing businesses. Hotels and for-hire vehicle operations are traditional revenue sources for local governments (who treat hotels especially as piggy banks for pet projects), and dominant companies are geared toward a highly regulated status quo. When residents demand access to the sharing economy, regulatory bodies downplay the extensive web of regulations and high tax rates they have created, and instead fall back on appeals to public safety. Background checks, inspections, and in Saint Louis, fingerprinting, have become the motte to which regulators have fled, no doubt hoping to retake the entire regulatory bailey once their attackers have run out of steam.
While the claims of protecting health and safety make sense on their face, on closer inspection everything seems very arbitrary. Why does a vehicle need an inspection by a taxi commission; wouldn’t any auto-body shop do? If the vehicles need to be inspected anyway, why require an additional inspection at all? Why should background checks need to go seven years? What’s wrong with five? And so on.
The core problem is that a group of regulators, not the individuals actually using the services, are deciding what is safe enough. So instead of companies differentiating themselves and letting people make their own decisions, cities give an arbitrary, one-size-fits-all solution. And it is usually a conservative solution.
It does not have to be this way. In an innovative approach, Austin’s mayor has proposed a plan called “Thumbs Up Austin” as a compromise on fingerprinting for Uber and Lyft drivers. Instead of forcing all drivers to get fingerprint checks, those who chose to do so would get a “Thumbs Up” badge. Uber users would be able to see this badge before choosing a driver, and could decide whether they required their driver to have the badge. The mayor believes this could also work for other sharing economy services, like Airbnb.
If the idea proves successful, it would open the possibility of allowing those who are providing a service and those who are using the service to decide their level of regulation.