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Like Uber, but for Local Government Law: The Future of Local Regulation of the Sharing Economy

November 1, 2015
By Daniel E. Rauch, David Schleicher

This paper, written by Yale Law School associate professor David Schleicher and published in the Ohio State Law Journal, examines how local and state governments could choose to work with peer-to-peer or sharing economy services, such as Uber or Airbnb.

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This paper, written by Yale Law School associate professor David Schleicher and published in the Ohio State Law Journal, examines how local and state governments could choose to work with peer-to-peer or sharing economy services, such as Uber or Airbnb.

Instead of fighting to extinguish peer-to-peer services, local and state lawmakers are likely to incorporate such businesses into existing development plans, learning to love them, Rauch and Schleicher write.

To date, discussion of these local ‘sharing wars’ has embraced an unstated assumption: if the sharing firms survive the current fight, their future will be mostly free from government regulation,” Rauch and Schleicher write. “In this telling, cities will either shut sharing firms down, or they will leave them largely alone. This assumption, however, is inconsistent with how local governments generally behave. The industries sharing economy firms participate in—e.g. taxi transport, housing, hotels, and restaurants-have long been subject to extensive local-level policymaking. Cities subsidize firms in these industries, regulate them to achieve the ends of social policy, tax them, promote them to tourists and visitors, and rely on them to help provide government services. This focus is no accident.

“Cities have long had both the political incentives and the legal powers to closely regulate activity in these sectors to ensure local market depth and efficient matching and to minimize effects on urban congestion,” Rauch and Schleicher write. “Potential residents will only be willing to pay high urban property prices if cities provide access to ‘agglomeration gain’ like those generated by deep markets in these goods and services. Thus, promoting and regulating such industries is an essential part of urban development policy.”

Instead of working to kill peer-to-peer economy services, lawmakers are likely to embrace them as partners in government plans, Rauch and Schleicher write.

“The sharing economy will be no exception to this trend,” Rauch and Schleicher write. “Instead, as sharing firms permanently establish themselves in industries like transportation, hospitality, and consumer goods, local governments will increasingly harness such firms to realize nuanced urban development goals.