The "Sharing" Economy

The "sharing" economy is various groups of people that share many resources in exchange for services, ideas, other goods, a place to sleep, money, a parking spot, and so on.  The internet has paved the way for collaborators to connect and share resources.  Why buy something off the runway, when you can rent a Nicole Miller dress for $75?  Realistically speaking how often would one wear a runway dress anyways?  The "sharing" economy has evolved for many different reasons and ideologies such as a need to conserve financial resources, a desire to be more environmentally friendly, an interest in creating more of a sense of community online, and as a means to use an exchange other than currency.

The trend is rising in popularity among the Generation Y demographic.  The linked article attributes this phenomena to the fact that few 18-29 year-olds are married and looking to the prospect of buying a home, having children, and saving for retirement.  Generation Y is immersed in the fast-paced world of technology and wants to be happier now rather than happy later.  Nowadays renting is not perceived the same as it was several years ago like customers at Rent-A-Center.

The "sharing" economy faces several challenges such as a plethora of legal issues, tax consequences, zoning laws, licensing requirements, insurance protection, and other forms of regulation and compliance.  I foresee in the near future passage of more laws specifically prohibiting practices of the "sharing" economy.  I think the "sharing" economy collaborations will make for some interesting tax laws.  I'm sure one could easily trade their tax expertise for, I don't know, miming lessons.  Does the "sharing" economy pose a threat to the traditional business model, and if so how will the traditional businesses respond? 


Dave Tufte said...

Miz Ava: 100/100. I let you slide on "anyways" which is not considered to be standard usage.

I think this is an interesting area, and I wonder how this will all look in 10 years. What I do know is that conventional market mechanisms exist to solve problems with transaction costs like fixed costs and reputation effects. My sense is that these transaction costs are not as well handled by sharing economies as some people think. So I wonder if there is a romantic factor associated with these sorts of transactions that will wear off with the passage of time.

FWIW: As a professor, I'm continually surprised by the efforts put out by students to find non-standard ways to access class materials. On the other hand, this makes me intensely suspicious of students who can't find class materials that I post in standard ways.

BTW: I participated in my first (serious) non-standard production exchange this past year. I bought a Bug-a-Salt. It's a "gun" that fires table salt like a shotgun at flies (this will come in very useful in our cow town in the summer). In this case, the design existed, and the production was ready to go, but enough people had to pony up the money to purchase the product before they'd start making them. I'm happy with how it worked out.

Jon said...

I think that a lot of people are more involved in a “sharing” economy currently because of the past recession. People value their money more now and would rather trade something that they do not value as much. Also, with websites like Craigslist, it has made it a lot easier to find people who want to barter. There is even a new show on the A&E Channel called “Barter Kings”. On the show, two guys start off with something of small value and continuously barter for things with greater value until they have made a significant amount of money.

BTW: I would like to know where I could purchase a Bug-a-Salt. It sounds awesome. Maybe I’ll ask for one for Christmas.

Dave Tufte said...

Jon: 50/50.

For my part, I think interest in the "sharing economy" has a lot more to do with reduced transaction costs to bartering than anything else.

I can confirm that my Bug-a-Salt works. You can get one at bugasalt.com

Nathan said...

I am intrigued by the sharing economy and the comments made thus far. Being inspired by the television show Barter Kings, I listed an integrated Bluetooth car phone under the barter section on Craigslist. I had all sorts of offers but decided to accept a trade for a handgun. The FMV of the item I had listed for sale was far superior to that of this particular make and model of handgun. Despite the consideration of FMV, the handgun would prove far more useful and valuable to me than the Bluetooth car phone.
My second thoughts are merely in contemplation of the discussion a few class-mates and myself had during a break tonight in Managerial Economics. Chad traded his motorcycle for some cash and manual labor. The manual labor was established to be performed on the construction of a shed and outdoor BBQ island. It was interesting to observe that Chad solicited suggestions from the class as to what custom features this shed could have. It seemed as though he was seeking to squeeze every last penny of work, and then some, from the trade he negotiated.
The sharing economy maximized the derived benefit in each of the highlighted scenarios by giving greater flexibility to each consumer. By virtue of agreeing to conditions and outcomes of each trade, both parties were equally enriched.

Dr. Tufte said...

Nathan: 50/50

Actually, it's probably just the opposite. Instead of maximizing the benefit, it's very likely that sharing didn't lead to as much surplus as some other form of transaction. Having said that, transaction costs could be big enough to make it worthwhile.