June 22, 2015

Sharing Economy Innovators Shouldn't Be Shackled by Rules for a Bygone Era

Michael D. Farren

Research Fellow
Summary

The sharing economy has the potential to create enormous economic gains while enhancing the quality of our everyday lives. The important thing is to allow innovators and entrepreneurs to find the new ways that this can be accomplished without shackling them to work according to the rules developed for a bygone era.

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Whether or not you're a father who received a new table saw for Father's Day, you can still enjoy the smell of fresh sawdust thanks to the rise of the sharing economy.

Communication innovations like the Internet, smartphones and the emergence of platform firms (like Craigslist, eBay, Airbnb and Uber) allow greater individual-to-individual communication than ever before. This expands each person's social network and the corresponding informal economy, lowering the cost of access to goods and services – especially those that we only occasionally need – and enhancing our quality of life by freeing up money and resources to be spent on other things.

A great example of this is the humble stud finder. Most of the time stud finders simply occupy space and get in the way of finding your other tools, but when you want to hang your new flat screen TV they are absolutely indispensable. Before the advent of the sharing economy this meant that most households ended up with their own combination stud finder/dust collector. Now with smartphone apps like 1000 Tools and NeighborGoods, rather than paying $20 for something that you only use a couple times each year (at best), the option exists to borrow or rent it from a nearby neighbor for a couple dollars. Even better, you could rent out your own and turn your dust collector into a money-maker.

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