Juliet Schor Response to Curbing the New Corporate Power

It is important to pay close attention to the market power of platform companies, but we can do better than the public utility model.

I confess a lack of enthusiasm for solutions rooted in the first half of the twentieth century. I’ve heard too much in recent years about New Deal 2.0 and the Green Marshall Plan, ideas that so far have fallen flat. Sabeel Rahman’s assumption that the state can adequately regulate the market is only part of the problem. Like other nostalgic approaches, the regulatory model does not recognize the potential of digital technology to remake economic relations. It betrays a lack of imagination about transforming the market, about how it can be made more democratic, egalitarian, and sustainable.

I will focus on sharing-economy platforms, which I have been studying for a number of years. In addition to Airbnb, Uber, and their competitors—Lyft, Sidecar, BlaBlaCar, and Couchsurfing—this sector includes labor services such as TaskRabbit, Postmates, and DogVacay and neighborhood sharing sites Yerdle, Freecycle, and Peerby. (There is vigorous debate about whether these sites actually promote sharing, but I will leave that aside.)

Rahman notes that economies of scale and social importance were the leading criteria for regulating private companies as public utilities. Most sharing initiatives are characterized by economies of scale, largely on account of network effects. As numbers rise, there is more value to be generated in the markets. It is easier to match buyers and sellers. Social and moral importance is a mixed bag: pet-sitting services are hardly compelling; there is a stronger case for ride sharing.

There are, however, important differences with public utilities, whose classic cases are capital-intensive industries. In the sharing economy, the capital owned by the platforms is software. A good app or Website is not cheap, but its cost is trivial in comparison to that of a railway or power plant. On the labor platforms, there is almost no physical capital.

For Airbnb and Uber, the capital stock consists of rooms and vehicles, but these are owned by “peers,” the individuals who provide the services. Canonical sharing platforms are peer-to-peer, which means the market is organized as individual-to-individual, and there is open access and exit. The platforms provide tools, such as apps, insurance, and reputational data, that allow the individuals to exchange. The platforms do not provide the services.

Peer-to-peer structure and peer ownership of capital undermine the argument for private ownership of platforms and, by extension, for the public utility model. That is not to say there isn’t a strong public interest in this sector—there is. But the compelling feature of these entities is that most of the value in the market is produced by the peers, not the platforms. This suggests that platforms can and should be owned and governed by users. If they are, we can worry less about rent extraction, concentrations of political power, and the other concerns Rahman raises.

That can is important here. User-owned platforms are more than a lefty fantasy. What are platforms’ founders and investors doing that peers couldn’t do for themselves? The software is fairly similar across the sharing sector and may be cheaply replicable before too long. Once a market is large, peers can self-insure, thereby obviating platform-provided policies. And service-specific, crowd-sourced ratings and reputational information can be de-linked from individual platforms. It is more efficient, and fairer, for this data to be portable, under the control of individuals, and available across platforms. Indeed, this is already starting to happen. Finally, if platforms are user-owned, concentrated ownership groups can’t extract rents from monopoly positions.

User ownership doesn’t solve all the current and anticipated problems of these companies. There will always be tension between providers and consumers, although when people are active on both sides of the market, as many Airbnb users are, that problem is mitigated. Race-to-the-bottom dynamics are another concern. But market-wide regulation, such as minimum wages, is preferable to regulation of individual companies.

The critique of concentrated ownership is growing louder in the sharing sector, in part because many of its participants take the rhetoric of sharing seriously. In response, the economics of user-owned platforms are compelling. At a time when the market is generating increasingly dysfunctional outcomes, we must think beyond outdated paradigms of state regulation to challenge the ownership and governance of property itself.