18.5.14

INSTITUTIONS EVOLVE TO CONSERVE ON TRANSACTION COSTS.

The collectivist mindset is oft troubled by some of the conspicuous duplication of private property that often sits idle: the parking lots full of cars whose owners are riding the train to work or flying somewhere for business or pleasure; all those backyard swimming pools; those garages full of bicycles and garden tools and those lawnmowers.  So here comes Jeremy Rifkin with yet another attempt to reduce the conspicuous duplication, by enlisting the Internet to lower the cost of forming sharing groups.
The distributed, collaborative nature of the Internet allows millions of people to find the right match-ups to share whatever they can spare with what others can use. This is a different kind of economy -- one far more dependent on social capital than market capital. And it's an economy that lives more on social trust rather than on anonymous market forces.
Apparently, the internet makes the establishment of crash pads (to use the 'Sixties locution) simpler and children's toys can be passed along from child to child as long as the toys don't break before the youngsters tire of them, and clothing can cascade without the intermediary of the thrift shop.  And yet, incentives matter.
These new economic models seem so benign. Sharing represents the best part of human nature. Reducing addictive consumption, optimizing frugality, and fostering a more sustainable way of life is not only laudable, but essential if we are to ensure our survival.

ut even here, there are winners and losers. The still-dominant capitalist system believes it can find value in the collaborative economy by leveraging aspects of the sharing culture toward new revenue-generating streams.
To Mr Rifkin, that's a bug. Again, it's nothing new.  The environmentalists of the 1970s suggested that there'd be no development of alternatives to fossil fuels until Mobil figured out how to profit by them.  A more likely "profit by them" would be General Electric, but perhaps the Fortune 500 turns over every twenty years as new companies figure out how to profit by new things.  I fear, though, that he expects too much of the new ethos of sharing gently used stuff.
Although hotels will continue to book, they are already seeing their markets decline as millions of young people migrate to Airbnb and Couchsurfing. How does a huge hotel chain, with its high fixed costs, compete with literally millions of privately owned spaces that can be shared at low and even near zero marginal costs?

Retailers of all kinds, already on the ropes with disappearing profit margins, are going to be equally disadvantaged by a sharable economy where clothes, appliances, toys, tools, and thousands of other items are continually in use through rental and redistribution networks. Extending the lifecycle of stuff by passing it on from user to user significantly cuts into new sales.

Recent surveys underscore the broad economic potential of the Collaborative Commons. A 2012 study by Campbell Mithun, a Minneapolis ad agency, in partnership with Carbonview Research, found that 62 percent of Gen Xers and millennials are attracted to the notion of sharing goods, services, and experiences in Collaborative Commons. These two generations differ significantly from the baby boomers and World War II generation in favoring access over ownership. When asked to rank the rational benefits of a sharing economy, respondents to the survey listed saving money at the top of the list, followed by impact on the environment, lifestyle flexibility, the practicality of sharing, and easy access to goods and services. As for the emotional benefits, respondents ranked generosity first, followed by a feeling of being a valued part of a community, being smart, being more responsible, and being a part of a movement.
That was the logic of the hippie crash pads, with the internet replacing the bulletin board at the local college, and without the acid and Acapulco Gold.  I ask readers to contemplate the implicit accounting identity here: might businesses that attempt to make do without workers simply be feeding a dynamic in which people who are no longer working attempt to make do without buying?

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