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Peer-to-Peer Economy

The rise of the peer-to-peer sharing economy has dramatically changed multiple industries ranging from Uber and Lyft for transportation to Airbnb for hotels.

The Issue

New technologies have empowered both the entrepreneur and consumer to undertake new business arrangements which avoid the regulations and high startup costs of traditional businesses. These new businesses offer new innovations, lower prices and improved customer satisfaction. Peer-to-peer services rely heavily on individual reviews and word of mouth for marketing, this close relationship allows businesses to be more responsible to consumers, and people are flocking to the new services.

Entrenched competitors have rapidly pushed back against the new upstart businesses, arguing the new peer-to-peer services have an unfair advantage from not facing the same regulations they have. Intense lobbying has led several state and local governments throughout the United States have been attempting to regulate or even ban some of the newest Internet-based businesses.

Christopher Koopman, Matthew D. Mitchell and Adam D. Thierer of the Mercatus Center argue in a 2104 study paper, “The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change,” that these regulations are unnecessary, the internet market will develop the private regulations to manage the new businesses. “We argue that the Internet, and the rapid growth of the sharing economy, alleviates the need for much of this top-down regulation, with these recent innovations likely doing a much better job of serving consumer needs. When market circumstances change dramatically--or when new technology or competition alleviates the need for regulation--then public policy should evolve and adapt to accommodate these realities.”

Our Stance

Heartland Institute policy advisor Jeffery Tucker argues these new businesses should be embraced, not banned. “In order for the new sharing economy business models to succeed in enhancing overall consumer welfare and our nation’s economy, a market-oriented and deregulatory perspective must become a shared vision, wrote Tucker in a article.

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