The protester in Paris was not the first person to allude to terrorism when discussing ridesharing companies. In 2014 the president of the Pennsylvania Taxi Association said, “I try to equate this illegal operation of UberX as a terroristic act like ISIS invading the Middle East.”
These protests provide an opportunity to remind people that sharing economy companies operate much more like Radford’s middlemen than they do radical Islamic fanatics. Like those who disliked Radford’s middlemen, people seem to think that those who only trade information—whether it is who has coffee to trade or who has an extra room—are not adding any actual value.
It might strike many readers as bemusing that companies that merely trade in information can be valued at billions of dollars. Like some POWs critics of middlemen regard Uber’s and Airbnb’s profits not as “reward for labour, but as a result of sharp practices.” Not too long ago a friend of my family remarked that he didn’t understand why Uber was worth so much money when it doesn’t “make anything.”
Unfortunately, many people remain skeptical or ignorant of the fact that the total welfare within a group can dramatically increase without an increase in available goods. All that is needed is voluntary exchange. This won’t come as a surprise to those who are familiar with the “brown bag” experiment.
What makes the sharing economy so successful is that it allows users to more easily engage in voluntary exchange by dramatically reducing transaction costs (costs that prevent a transaction from taking place). Uber isn’t producing new cars, but it’s providing car owners with a way to find people willing to pay for rides.
It would be a mistake to regulate Uber as if it were a taxi company. Uber is a technology company that connects drivers with passengers. It’s not a taxi company
True, in many jurisdictions taxi drivers have had to invest time and money into securing the opportunity to do business. Clearly, it’s frustrating to have diligently complied with taxi regulations and then to have Uber arrive on the scene without having dealt with the same regulatory hurdles.
Nevertheless, instead of regulating Uber and Airbnb as if they were taxi companies and hotels lawmakers should deregulate the taxi and hotel industry, thereby allowing taxis and hotels to compete on a level playing field. But why stop there?
There are many industries where middlemen are needed but are held back. You’d think in 2016 it wouldn’t be too much to ask for alcohol to be delivered to your doorstep or for you to be able to invite people into your home for a meal without risking running afoul of the law.
The alcohol delivery service Klink can deliver to those lucky enough to live in the nation’s capital. But, thanks in part to alcohol regulations, Virginia residents like myself don’t have access to its services. This is regrettable considering that I’d gladly pay for a liquor store driver to deliver booze to my front door. The problem is I don’t have a cost‐effective way of finding those drivers without Klink, In other words, I need a middleman, but regulators are preventing me from finding one.
There are also so‐called “underground supper clubs,” which might sound nefarious, but are really just places for people to gather to eat. Granted, sometimes these “clubs” are operated out of someone’s home and are not inspected like restaurants, but that shouldn’t prevent entrepreneurs from openly and freely connecting talented amateur chefs to hungry mouths to feed.
Duke University’s Michael Munger foresees the growth of a “middleman economy,” which he describes as the “third entrepreneurial revolution.” Clearly, people are willing to pay for lowered transaction costs, and we should expect that trend to continue and for more companies to seize the kind of opportunities the founders of Uber and Airbnb saw years ago. But it shouldn’t be a surprise if suspicion of middlemen as well as anti‐competitive market incumbents hamper the spread of this revolution, if only temporarily.
But unfortunately, the hatred of middlemen is eternal, whether it is in POW camps or anti‐Uber protests.