In a segment
during his most recent episode of HBO’s “Real Time with Bill Maher,” Bill Maher
stated that the sharing economy is the result of Americans adapting to income
inequality in a “greed is good world.” He also called the sharing economy the
“desperate economy,” because as a millionaire himself, Bill Maher apparently thinks
it is sad that people are so desperate for money that they would share their
home or car. He finished the segment by saying: “The one thing we’re not
sharing are the profits. Somehow they forgot to make an app for that.”
It is clear from
this segment that Bill Maher does not understand how the sharing economy operates.
He even called it a “barter economy” at one point.
The sharing economy incentivizes entrepreneurial activity. While “profit sharing” may not be the apt term to describe how the sharing economy makes people better off, workers in the sharing economy are contractors; therefore, they create their own work, display their own skills, and are compensated directly for their own services. Each worker is essentially operating his or her own business. The sharing economy empowers workers and consumers through the use of reputational feedback mechanisms and peer-to-peer transactions, so the profits are being spread among the millions of users every single day. (See this recent Perspectives from FSF Scholars for more on the importance of reputational feedback mechanisms.)
The sharing economy incentivizes entrepreneurial activity. While “profit sharing” may not be the apt term to describe how the sharing economy makes people better off, workers in the sharing economy are contractors; therefore, they create their own work, display their own skills, and are compensated directly for their own services. Each worker is essentially operating his or her own business. The sharing economy empowers workers and consumers through the use of reputational feedback mechanisms and peer-to-peer transactions, so the profits are being spread among the millions of users every single day. (See this recent Perspectives from FSF Scholars for more on the importance of reputational feedback mechanisms.)
Bill Maher claimed
that the sharing economy is increasing income inequality and that workers have
no choice but to engage because of a stagnant labor market in the U.S. If this
is true, it makes the sharing economy a solution for workers, not the problem
Maher claimed it is. He even made the following misguided statement about
Airbnb: “Do you really think anyone wants to have total strangers living in
their apartment for a week?” Well, clearly some people do want this,
considering that Airbnb has had over 1.5 million listings in 190
countries around the world. Maher never explained how he thinks the sharing
economy is harming the poor or exacerbating income inequality. But I can tell
you he is wrong.
In May 2015 Free
State Foundation scholars submitted comments
to the Federal Trade Commission regarding the sharing economy. In the
comments, we discussed the results of a March 2015 paper entitled “Peer to Peer
Rental Markets in the Sharing Economy,” which empirically found that, for a
couple reasons, sharing economy markets have an even greater beneficial impact
on low-income persons than high-income persons.
As we explain in
our FTC
comments, the sharing economy raises the standard of living for poor consumers
by creating access to goods and services that they would not have otherwise:
Due to the accountability and transparency that many
sharing applications provide about their users, the emergence of trust between
individuals to share their goods and services has shifted consumer preferences
from owning to renting. People who could not afford to own a house, car, or
even a power saw can now more easily rent them from others and ultimately enjoy
a higher standard of living than they would have otherwise. Additionally,
people who would have owned a car or power saw in the past might now rent them
instead, saving a significant portion of their income.
Of course, consumers with high-incomes gain from the
sharing economy as well. But the savings accumulated from a shift in owning to
renting is more valuable to consumers with lower incomes. In economic terms,
this is the law of diminishing marginal returns. All else being equal, each
dollar earned is valued less than the previous one.
We also explained
how the sharing economy creates entrepreneurial opportunities for poor people
that would not exist otherwise:
Similarly, low-income consumers who already own goods
that can be rented out stand to gain more from these transactions than
high-income consumers. The extra income from sharing a car with someone is much
more valuable to a poor college student than it is to a wealthy professional.
Airbnb, for example, makes traveling less expensive, not only because it
provides competition – and often lower prices – to traditional hotels, but also
because travelers can share their living space while away. In other words, as a
result of the sharing economy, the same traveler on the same trip may realize
economic benefits in his or her capacity as both a lessor and lessee.
If Bill Maher were
to stop criticizing successful businesses, maybe he would be able to appreciate
the real economic benefits that the sharing economy enables, especially the benefits
it brings to low-income individuals. But the fact that Bill Maher thinks the
sharing economy exacerbates income inequality makes it clear that he has no idea
how the sharing economy actually operates – through reputational feedback
mechanisms which enable bisymmetrical trust and enhance welfare between
consumers and workers.