In July, Free State Foundation President
Randolph May and I published a paper regarding the positive impact the sharing
economy
has on consumers. Despite this, many state and local governments still consider
banning or at least restricting the services provided by leading sharing
economy companies like Airbnb.
Airbnb is an application that connects
hosts who are willing to share their living space with guests who are looking
for a place to stay. For example, Airbnb lowers the cost of going on vacation
and incentivizes tourism. Not only can vacationers often find cheaper
alternatives than hotels and/or cleaner alternatives than hostels, they can
also capitalize off of the service by sharing their living space and earning
some extra income while they are gone.
Airbnb may be especially helpful in
Europe, where more than half of its business occurs according to a New York
Times article. Airbnb’s
service is a great complement to the European Union’s (EU) free migration
policy. For individuals who want to travel throughout many European countries, staying
at someone’s house or apartment is good way to experience the local culture.
In our paper, we specifically discussed
Airbnb’s regulatory battle in New York. But unfortunately, Airbnb is not just
being regulated in the United States; it’s receiving fights from European
governments as well. But the policies are not consistent throughout the
continent. For example, Berlin and Barcelona have banned Airbnb’s service,
while Paris and Amsterdam have encouraged more sharing.
Airbnb faces regulatory hurdles because
policymakers see the company as a threat to local businesses. But as we
described in our paper:
“It always harms
consumers when public policymakers attempt to ‘level the playing field’ by
subjecting entities to regulatory restrictions that are not needed. The proper
way to respond to ‘level the playing field’ claims is to remove unnecessary
regulations wherever they apply, not to expand them to new entities.”
But even legitimate concerns for
regulating Airbnb, such as consumer protections, should be dismissed because
markets have self-regulating mechanisms:
“If purveyors of
sharing applications engage in harmful, unhealthy, or unsafe activities,
competition is probably the most important regulatory mechanism to address any
real problems. In competitive markets, poor consumer satisfaction generally
means that a company will lose market share, or even fall out of the market. If
a company is not operating safely or if it is putting its users in unhealthy
conditions, a competitive market allows for unsatisfied consumers to choose
alternatives.”
And the market is quite competitive.
Airbnb, HouseTrip, VRBO and Roomorama all offer similar services in Europe.
Since many EU
countries are small and contiguous, inconsistent policies on sharing services,
like the ones offered by Airbnb, add significant costs to individuals who want
to travel freely throughout the EU. Whether the traveler avoids cities like
Berlin and Barcelona or visits them but is forced to pay more money for a traditional
hotel, policies restricting or banning sharing services in European cities make
“free” migration much more costly.
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