Tag Archives: regulation

I agree with Dean Baker most of the time, but find his oddly strong distaste for the “sharing economy” puzzling. The focus of his concern is the regulatory limbo under which many of the services in question (Uber, Airbnb, etc.) operate, and the taxes for which they are responsible.

Understanding the purpose of consumer regulation is in order. For one, most occupational licensing is a way to keep the rich richer, whether we’re talking about millionaire medics or medallion-owners. That is not to abdicate all purpose of sensible regulation. I think we are all happier knowing that the FDA ensures the safety of our drugs and that airlines are required to comply with a slew of safety features. 

But sometimes these regulations get onerous, and plain absurd. Baker worries about the safety of someone renting a house without facing a number of meaningless regulations:

Hotels are regularly inspected to ensure that they are not fire traps and that they don’t pose other risks for visitors. Airbnb hosts face no such inspections – and their neighbors in condo, co-ops or apartment buildings may think they have the right not to be living next door to a hotel (which is one reason that cities have zoning restrictions).

The argument he seems to be making is that these houses are safe for millions of people to live in for many days of a year, but not safe enough for a temporary visitor for a few days while the owner is gone; he similarly wants to argue that Uber cars are safe enough for the many that drive in them on a daily basis for a full-time job, but not for a temporary passenger!

It is fair to argue that perhaps the new era sharing services harm the old guard unfairly as they are beholden to a higher standard of regulatory oversight. The column then should have been militating against the many useless regulations that brings about a need for this sort of service in the first place. 

Consumers would not be using the wildly popular sites apps such as Uber and Airbnb is they were repeatedly unsafe.

In fact, their existence is a shining example of the failure that is the American regulatory system: over-regulate things that should be left alone (food trucks, marriages, and private property) and ignore the toxic weapons ready to blow up (guns and money markets, mostly). 

The irritating part of his post is the disdain towards the “scam-facilitators” and “rip offs” in the sharing story. It is peculiar for a liberal economist to think so. UberX is used by students and immigrants looking for flexible ways to facilitate a comfortable living in an era of stagnant wages. And it’s really bad economics to assume that these services don’t increase taxes. Even if no direct taxes are paid (and despite what the article would suggest, this is plain false) it gives a lot more spending power to those likely to spend it which, through the multiplier, is a key driver of local taxes in the urban areas where these services thrive.

Many of the more specific worries in this post are also highly improbable:

Others in the economy will lose by bearing an additional tax burden or being forced to live next to an apartment unit with a never-ending parade of noisy visitors, just to cite two examples.

In apartments where people have paid for a level of guaranteed quiet and comfort – usually fancier places with doormen and apartment associations – this behavior would not be tolerated. In the case that these safeguards do not exist, if the neighbors are actually loud and disruptive to an illegal extent, it is in the neighbor’s power to stop. If not, well you don’t get what you don’t pay for. That’s the moral part. More practically, the reason this matters in a hotel is that the whole building is filled with a constantly moving bunch of people. In the number of times I’ve stayed in an Airbnb, not only have I not hosted rowdy parties, I have not run into tenants on my way up and down. 

I would be happy to bet Baker, and anyone else, that were these services to vanish, tax revenues would fall.

The article boils down to just a number of platitudes:

If these services are still viable when operating on a level playing field they will be providing real value to the economy. As it stands, they are hugely rewarding a small number of people for finding a creative way to cheat the system.

Where is the evidence for this, I don’t see a single number. 

But what I do know is that while these services may be valued in the billions for its founders, the real value comes not just from convenience to the customer, but giving poorer people an easy way to supplement their income. It is beyond me how Baker feels bad for a millionaire with a medallion that finally has to more than grumble at this customer but not the many immigrants and lower-income Americans employed many hours a week because of this service.

The final moral victory of the sharing economy is something Baker touches on, but dismisses in one paragraph:

The good thing about the sharing economy is that it facilitates the use of underutilized resources. There are millions of people with houses or apartments that have rooms sitting empty, and Airbnb allows them to profit from these empty rooms while allowing guests a place to stay at prices that are often far less than those charged by hotels. […] Other services allow for items to be used productively that would otherwise be gathering dust.

What a waste it is for a city to loose the value of empty apartments and unused cars. Surely in an economy where we can share more consumer durables is also one where we need produce fewer consumer durables: and thereby emit fewer greenhouse gases. The alternative to a sharing economy is a non-sharing economy: and any kindergarten teacher will tell you this is a bad idea.

So yes, if you think Uber and Airbnb get an unfair advantage by all means write about it. But ask Bill DeBlasio to get rid of archaic and stupid regulations rather than take away the livelihood and lifeblood of the thousands reliant on a better system. 

Scott Sumner notes that the market wants easy money. This shouldn’t be coming as news to anyone, but we do have Congressmen that confuse governments and households. What really interested me about Sumner’s post was a little comment about youth unemployment towards the end:

On the other hand I agree with Tyler’s more recent post claiming the US labor market has structural problems.  Unlike Tyler, I think more AD could help fix those structural problems (by pushing Congress to lower maximum UI from 73 weeks to 26 weeks).  Tyler’s right that the big problem is among the young.  The fact that we are thinking of again boosting the minimum wage boggles the mind.  The recent rise in youth unemployment can NOT be fully explained by the recession.

I’ve argued that increases in the minimum wage have a particularly devastating effect on  youth and minority workers. I don’t think any wage controls should be implemented without well-thought exceptions for our youth, like the United Kingdom. Indeed, I would prefer that certain minority-concentrated areas also get exemptions from a wage control, but that would just be racist.

However, I really don’t understand Sumner’s claim that recent youth unemployment can’t be explained by the recession.


Now, immediately looking at this graph, one might say Sumner is right: the minimum wage law that was passed in 2007 takes full effect in 2009, precisely the time youth unemployment rises relative to real unemployment. However, I’m very unconvinced that the wage increase has anything to do with this dynamic. For example, in 1997 the minimum wage was raised to $5.15/hr, and we see a sharp relative decline in youth unemployment through 2004.

Indeed, even after 2007 and 2008 when the minimum wage was set at in interim $5.85/hr and $6.55/hr the relative youth unemployment falls. This is not to say the minimum wage has no effect on the youth, but that there’s no conclusive evidence that the current state of youth unemployment – which is always higher than civilian unemployment – is something uniquely structural, beyond the recession.

There is a signaling problem: the New York Times recently reported that it’s impossible to find even a menial job without a degree. This is particularly exacerbated by the recession where underemployment of the skilled crowds-out the truly unskilled.

We both agree that there’s a strong case against an unqualified minimum wage and tight money. We don’t agree that there’s some special and odd “recent rise in youth unemployment”.