REVIEW #5: Change the Legislation, Not the Sharing Economy: The Czech Perspective

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The sharing economy is currently a very trendy term. Politicians, bureaucrats, journalists, traditional market players organized in guild associations – all of these agents have recently been faced with the question: What exactly does a sharing economy mean for my own wellbeing? And so, for politicians, a sharing economy is a new way of interacting with their voters, but also a playground for collaboration with business interest groups. Bureaucrats are faced with a new regulative challenge. For journalists, a sharing economy means a new area for future stories and criticism. Guild associations experience the risk of losing their positions. But for all of them, a sharing economy is something new, unknown and potentially dangerous. This, however, is an absolutely wrong interpretation of the term.

A sharing economy represents technological progress in all its purity. It is a new way of collaboration between various agents; an efficient way of transforming an existing network of assets into more economic activity. A sharing economy is not a thing, it means thinking! People find out they can transform their old behavior patterns into new ways of doing things on platforms which enable individuals to satisfy more needs, and therefore create more wealth. Paradoxically, the two most obvious groups of agents within the scope of a sharing economy have not been mentioned in the very first paragraph of this article – namely, suppliers and their customers. Nevertheless, these are the subjects who have no difficulty analyzing the meaning of the term itself. Actually, they do much more than just define it – they use it! And they increase their utility in various sharing economy markets.

If people understood the term ‘sharing economy’ correctly (as thinking, not as a thing), they should be open to the discussion that it needs a new legislative environment. No one can prevent people from consuming smart economic goods for lower prices. It would be simply wasteful and, moreover, banning such solutions would be a strong incentive for moving the sharing economy into the shadow economy That is just a fact.

PROBLEMS WITH REGULATION

A standard regulation goes hand in hand with the prohibitio ordinem1 approach, i.e. the approach in which a regulative body sets up rules of the game for all related subjects under the threat of punishment for those who do not respect it. The actual control is conducted by the means of a selective method – everyone knows they could be controlled any time, so they should always respect the existing rules.

Historically, this approach has been the only way of supervising behavior patterns within the society – costs for further (individual) controlling were so excessive that a temptation to cheat was being eliminated by very high penalties2. Due to the fact that the motivations of cheating subjects to hide these activities are far greater than the motivations of state regulators to invest their effort in uncovering frauds but also because the regulators’ capacity to watch and control all subjects and transactions is limited, a probability of the transgressions being revealed decreases regardless of the increasing of the potential punishments.

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1 Prohibition by force: a government lays down the rules and penalties for violations.

2 Economics and crime: According to Gary Becker, criminals rationally evaluate the benefits of their crime and the costs such as the probability of apprehension, conviction, and punishment, and their current set of opportunities. Read more in Becker, G. S. (1968), “Crime and punishment: An economic approach” [in]: The Economic Dimensions of Crime (pp. 13-68), Palgrave Macmillan UK.

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