As a child, I was brought up to believe that sharing was a good thing to do. It makes sense to share things we don’t need to use all the time. It’s a way of making and keeping friends. It often comes with an emotional reward. And it’s a sign of a civilised society at work: not every exchange of valuable goods requires a transaction.
As an adult, I find I’m now being brought up to believe many of the same things about the sharing economy. In a world where space and resources are becoming increasingly constrained, it makes sense for people to share their under-used parking spaces, power tools, homes, cars and clothes with one another. Shared resources foster a closer sense of community. And the financial and emotional rewards can be significant: according to The Economist, the average Airbnb host in San Francisco earns $9,300 a year and car owners who rent out their vehicles using RelayRides make an average of $250 a month.
The case for the sharing economy is compelling. But despite all the positivity, I’m having second thoughts.
To begin with, the sharing economy is an oxymoron: sharing involves a good being given freely; the sharing economy doesn’t. The moment “sharing” becomes a transaction, it ceases to be worthy of the name. Students of economics recognise the “sharing economy” for what it is: charging rent for an under-utilised asset. Personally, I have no problem with this, but it’s disingenuous to dress up rental as altruistic or civic-minded by giving it a cute name. Admittedly, a more accurate term – ‘peer-to-peer asset management’, for example – doesn’t have quite the same ring. But at least it isn’t designed to mislead.
None of this really matters, as long as the sharing economy results in a more efficient use of resources. But I wonder about this too. Let’s take a popular sharing economy example: parking spaces. The argument goes that if people who live in cities can charge for their under-used parking spaces, it will be cheaper and easier for everybody to find somewhere to park. This is a simple matter of supply and demand. The resultant rise in available parking spaces might mean that fewer multi-storey car parks are built and everybody – pedestrians included – would be happier as a result.
Would this happen? Perhaps. But car parking spaces are usually owned as part of a property. Property owners who find that they can charge rent on their driveways will also find that they have more valuable properties as a result. Any expected rental income would be factored into the value of the property. So in a sharing economy, people who already own property – houses, car parking spaces, drills, cars – will see the value of that property increase. The ability to “share” a San Francisco home could add as much as $100,000 to its value – whether or not its current owner actually chooses to do so. This can’t be good news for anybody aspiring to own a home in the city. Thousands of people could be priced out of home ownership and forced into the rental market, putting pressure on rental prices. Society may become wealthier overall, but at the cost of greater inequality of income and wealth. We’ve already seen this happen in the UK, with the introduction of the buy-to-let property market. A 2008 report by the National Housing and Planning Advice Unit (NHPAU) found that buy-to-let mortgages had raised UK house prices by up to 7.4%. Understandably, a lot of people are seriously annoyed about this.
Separating ownership from use is not necessarily a good thing. And it doesn’t always lead to more efficient resource use. It has the potential to drive up prices and to expose renters to speculative bubbles in asset prices. It denies them the opportunity to accumulate wealth of their own. It creates the possibility that wealth and income will concentrate further in the hands of a privileged minority. It drives an unpredictable wedge between the “haves” and the “have nots”.
I’m not arguing that the sharing economy will necessarily lead to higher and more volatile prices, or to greater inequality, but I certainly think these are worth worrying about. An asset worth renting (or “sharing”) is an asset worth investing in. And an asset worth investing in is an asset worth speculating on. If we are serious about making the sharing economy work, we need to confront these issues. They seem precisely the opposite of what sharing is supposed to achieve: bringing people closer together and reducing the distance between “having”, “needing” and “using”. There’s a very real risk that the economic rewards offered by the “sharing economy” will crowd out the emotional and social benefits of sharing. I get to experience these myself; for example, when I drive my wife’s car, or borrow a film from a friend, or see my little niece dressed in my daughter’s old fairy outfit.
I doubt I would feel the same if we’d charged her for it.