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More and more, consumers are turning to Uber to hail rides with their smartphones, or renting spare rooms from strangers online through Airbnb. These companies typify the sharing economy where everyone can be a micro-entrepreneur and provide valued services without a professional middleman. But as these peer-to-peer businesses explode in popularity, cities are dealing with major questions over how to regulate them. Following a wave of recent protests by taxi drivers across the U.S. and Europe, the debate over these services is heating up. Diane and her guests have a conversation about regulating the sharing economy, and what it means for businesses and consumers.
- Dean Baker co-director, Center for Economic and Policy Research and blogger, Beat the Press; author of "The End of Loser Liberalism: Making Markets Progressive."
- Arun Sundararajan Professor of information, operations and management sciences, NYU Stern School of Business
- Emily Badger staff writer at The Washington Post covering urban policy.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. In recent weeks, taxi drivers from Boston to Madrid have demonstrated, by the thousands, claiming their livelihoods were at risk. The alleged culprit, ridesharing services, Uber and Lyft. The app-based businesses are under the microscope for lack of government regulation, and they're not alone. Cities are struggling more than ever to balance the popularity of peer-to-peer services, like Airbnb, with existing regulations.
MS. DIANE REHMJoining me to talk about the future of the sharing economy: Dean Baker of the Center for Economic and Policy Research, Emily Badger of The Washington Post, and on the line with us from Paris is Arun Sundararajan of the NYU's Stern School of Business. And throughout the hour, we'll hear your ideas, your opinions. Give us a call at 800-433-8850. Send us your email to email@example.com. Follow us on Facebook or send us a tweet. And welcome to all of you.
MR. DEAN BAKERThanks for having me in.
MS. EMILY BADGERGreat to be here.
REHMAnd, Arun, are you with us?
PROF. ARUN SUNDARARAJANYes, I am.
REHMGood. Good to have you with us. I gather the traffic in Paris was pretty bad?
SUNDARARAJANYep. We've got a lot of people here for the holiday weekend, I think.
REHMOf course. Well, good to have you with us. Emily Badger, if I could start with you, describe for us what we mean by the sharing economy.
BADGERSo the sharing economy is this term that has come to encompass a whole lot of companies and a whole lot of services in the last couple of years, many of which technically don't have a whole lot to do with sharing, as we would traditionally define it. When we think of sharing, meaning, you know, I would share something with Dean and not expect him to pay me for it, this is sharing in the traditional definition. This is sharing as we teach children what sharing is.
BADGERThis is not necessarily what we were talking about in the sharing economy. Here we're talking about a lot of companies and a lot of services where an awful lot of money is being made and exchanged. But as it's come to describe lots of different types of services, some of them are more controversial than others. Some of the sort of not controversial ones that I'm thinking of are things like car sharing, bike sharing. These are the sort of original activities of the sharing economy.
BADGERI'm thinking of the city bike system in New York City or a company like Zipcar. These are companies and services that enable people to have access to sort of a communal asset so that they don't have to own it. You know, Zipcar says to people, why own your own car if it's going to be parked 90 percent of the time, when 10 people could use that car, and no one has to own it, no one has to pay for insurance on it, no one has to make monthly payments for it? You only use it when you want to use it.
BADGERAnd what Zipcar and bike share has sort of similarly done, this -- they've sort of created assets that lots of different people can use without having to own them. And at the same time, they've turned these assets into things that are used so much more efficiently than when each of us insists on owning our own bike or our own car.
REHMBut I gather it's gone even farther then now with people renting out rooms. As opposed to you're going to a hotel, you might rent a room in someone's home.
BADGERExactly. The car sharing and bike sharing are totally legal. There're not a whole lot of complications there. Where we get into much more sort of hazy territory is when we start talking about companies like Uber, like Airbnb, where what they're saying -- what Airbnb says, for instance, is, you have this empty room in your house. Why not make a little money off of renting it to someone who would otherwise be paying more money to have a hotel?
BADGERYou know, maybe this will help you make your rent payment because you're earning a little bit of income. Maybe this will help tourists save a little bit of money on a trip because this would be a cheaper alternative to getting a hotel room. And so Airbnb sort of suggests that both you, as the homeowner, benefit here. The tourists potentially benefits here. What's going on between these two parties is not necessarily sharing because I'm asking you to pay me money for this. But when -- what Airbnb is talking about -- and Uber sort of presents sort of a similar idea -- is, you know, why not make money off of the excess capacity of the things that you already own?
BADGERAnd the problem is cities regulate hotels. Cities regulate taxis. And this idea that these companies have come up with is very popular among consumers, but cities haven't quite figured out how to regulate them yet. And, obviously, hotels and taxi companies are not very happy about this.
REHMEmily Badger, she's staff writer at The Washington Post. She covers urban policy. Dean Baker, I've seen that you wrote the sharing economy is hype. You say they're actually facilitating rip-offs.
BAKERWell, yeah, to some extent. Again, I would agree completely with what Emily just said. There's certainly large aspects -- you know, the Zipcar -- that makes a lot of sense. I'm not saying these are bad things. But there's a real problem here that a lot of it -- and here I'm thinking of Uber and Airbnb in particular -- a lot of this is about scamming in the sense of evading regulation. So insofar as we could devise systems where I have a spare room in my house and someone's going to rent that out, that's great.
BAKERI mean, that's, you know, why waste a valuable resource? But the point is, if -- where the profit lies in evading the regulation. So here I am that, you know, this is profitable for me because I'm doing this without paying a room tax. I, you know, may not be a safe room. You know, maybe it's a room that's a fire trap. You know, so there's all sorts of issues that we have regulations that, in many cases, they're bad regulations. We should re-examine those regulations.
BAKERBut the point is we have regulations for hotels because we think that's appropriate. We tax them 'cause that's a way to raise revenue. So if Airbnb is about evading these regulations, evading the taxes, well, this is just a scam, and that's not helping. So if we structure Airbnb -- so we say, OK, the same regulations that apply to hotels, that apply to anyone who, say, rents out a bed and breakfast, can apply to rooms rented through Airbnb, and that's profitable, that's great. But that has to be the key. You need standardized regulations.
REHMDean Baker, he's co-director of The Center for Economic and Policy Research and a blogger at Beat the Press. And to you, Arun Sundararajan, talk about this sharing since it's not really new, is it?
SUNDARARAJANAbsolutely, Diane. I think what's striking about this particular wave of changes that we're seeing -- the little technologies in use -- is that they're affecting sort of familiar services that we're used to and familiar sort of real world asset-based services, point-to-point accommodation, short-term transportation, dining, probably in the future, healthcare and energy. And, you know, I'm struck by the characterization of these platforms as sort of being equivalent to a scam because I sort of see them as -- I actually see them as sort of important future engines of economic growth.
SUNDARARAJANAnd, you know, they're sort of inventing completely -- no, not completely new ways, but new and efficient ways of providing important familiar services. And so I'm very enthusiastic about the potential of these new business models and definitely feel like, you know, there's certainly a regulatory conversation to be had.
SUNDARARAJANBut, you know, there's sort of -- there's a long way between -- we need to adjust the regulations to accommodate the business models and maybe sharing economy companies that are scam. And, you know, I would say that I fall much more close -- much closer to the point of view that these are services that, you know, sort of have called into question the current regulatory infrastructure.
REHMAt the same time, wouldn't you agree, that cities who have these kinds of services and where they're unregulated, certainly the cities and indeed maybe even the states could be losing out on revenues that might come from taxes paid on rooms and regulations for safety?
SUNDARARAJANI think that there is the potential for short-term revenue loss for the cities and states. However, I think the right solution to that problem is to bring the new models under the regulatory umbrella by expanding it rather than by trying to say fit an Airbnb host into the same regulatory bracket as the Hilton. It's important here to realize that, you know, regulations evolve over time, and they evolve based on the needs that society has at a particular point for safety, for making sure that we have equal access, you know, labor protection.
SUNDARARAJANBut those needs change over time, and the extent to which technology can provide some of the things that we used to have to rely on sort of real world institutions, like city and state regulatory agencies, also changes, so, you know, I agree with you.
SUNDARARAJANI mean, there is a risk that revenue will be lost, but it can be reclaimed by accommodating the new models rather than by trying to sort of, you know, fit a square peg into a round hole.
REHMWhat about that, Dean Baker? Would you agree with Arun, that rather than trying to fit these new models into the old ones, we need to expand?
BAKEROh, absolutely. I think I agree very much. I mean, in fact, the piece where I referred to it as a scam economy, I also said that they're a valuable service insofar as they get us to re-examine regulations. I was particularly talking about taxi regulation, that, you know, this is totally antiquated. Now, we have to be fair to the people caught in the middle. I -- my immediate basis for -- was a guy in a 3:00 a.m. cab ride from his hotel, I mean, a San Francisco Airport to hotel in San Francisco.
BAKERThe reason my driver was driving at 3:00 a.m. was that was how he made ends meet. And, you know, we have totally antiquated taxi regulations to San Francisco, but that's true in most cities where, you know, this guy has to pay fees for this and that and that. You know, I could go through a long, long list. He did that for me.
REHMStarting with the cab itself.
BAKERStarting with the cab itself.
BAKERThe medallion, he pays...
BAKER...he paid $250,000 for medallion. We limited the number of cabs. Now, again, bad regulation, but he's stuck in the middle of this. So the point is to expand the regulation. I'm fine with that. But, you know, we have to have uniform regulation, however that's structured.
REHMDean Baker, Emily Badger, Arun Sundararajan, and we'll be back in just a few moments to talk further, take your questions. I look forward to speaking with you.
REHMAnd welcome back. We're talking about the new so-called sharing economy where people hale rides with their smartphones or rent spare rooms to strangers. Already, we've gotten two messages from Twitter. One says, "The whole point of these peer-to-peer services is that they are unregulated. Is there a generation gap going on here?" That's one, and then a second: "No comparison between Uber and a typical New York cab. Cabs need to improve service, availability, and convenience." And that takes us to the issue of why this so-called sharing economy has come in now. And what's your thinking?
BADGERWell, as a lot of people would point out, there's fundamentally something going on here that is not new at all. People have been sharing since even before people have been exchanging money. You know, the idea that I would share a nanny with another family on my block that has a child or that I would share a ride to work with a co-worker, these are...
REHMI was in a babysitting co-op. I mean, we shared back and forth.
BADGERExactly. So in that sense, this is not new. What is new is that technology has enabled the network of people who you share with to now include hundreds of strangers. In the past, probably the people who were in your nanny co-op were families who you knew who you trusted. But now potentially you could share a ride with other people who don't work at your office who you've never met before.
BADGERTechnology enables people to do this because primarily what all of these companies have created is these online marketplaces or these apps, in the case of Uber, that connect strangers to each other and that in some sense create kind of a trust mechanism, whether they're doing background checks and verifying them, whether people get the chance to rate each other -- Airbnb users always rate their Airbnb hosts. So there's sort of some sense of feedback that creates a little bit of trust among strangers.
REHMBut there are serious downsides, Dean.
BAKERWell, there's a lot of aspects that I think are downsides. You know, again, the regulations ostensibly serve a purpose. And, again, not to say the regulations are perfect -- in the case of cabs, very, very far from it. But, you know, we are trying to, in principle, serve purposes of regulations. We want the cabs, for example, to be safe. You know, my driver was telling me, I had to take a four-day course, you know, to be a driver where he was chauffeuring people around. Maybe that's unnecessary, but, on the other hand, he had to do that.
BAKERSo, again, standardize the regulations. We want to make sure people are safe drivers. What does that mean? In the case of hotel rooms, we will make sure they're safe. Again, it's a source of revenue. It'd be easy to tax Airbnb rooms just like other rooms. There's also an issue -- you know, there's externalities here. If I live in an apartment building or a condo building, well, my neighbors didn't pay rent or didn't buy the condo expecting to be in a hotel. So good for me that I'm having visitors come in helping to pay my mortgage or pay my rent, not good for them.
BAKERSo, again, there's issues here with the regulations. The regulations, in many cases, do need to be changed, but we need uniform regulations. It doesn't matter that you get it over the Internet.
REHMArun, how do you respond to the fact that Dean said earlier that traditional taxi drivers, for example, are caught in the middle? They have to buy their taxis. They may have to pay hundreds of thousands of dollars. They have to be trained. They have to have insurance where these Uber cars may just be an ordinary driver. What do you think?
SUNDARARAJANWell, it's certainly unfair to the taxi drivers who have paid a lot of money for these medallions. And I certainly think that city governments should focus their attention on figuring out a transition plan for the taxicab drivers who, if they are bearing this kind of capital cost, are upgrading at a disadvantage. I mean, the solution isn't to charge the same thing to the Uber drivers or to sort of disadvantage the Uber drivers in some comparable way. I mean, of course, rather the solution is to perhaps, you know, subsidize part or all of the cost of the medallion and make that up through sort of some uniform, like in a fee that is imposed, like, you know, equalize the playing field.
SUNDARARAJANAnd I think this is particularly important because, you know, as -- and Emily and I have discussed this in the past, that with sort of seeing this blurring of lines between personal and professional in the providing of commercial services, so we're used to a world where our taxi driver is a full-time taxi driver. The person who runs a bed and breakfast or who gives us a hotel room does that for a living.
SUNDARARAJANAnd on the other end, you're used to getting rides from people occasionally from the airport, say, or borrowing your friend's apartment, but no money exchanges hands. So as Emily pointed out earlier, you know, as this kind of informal activity starts to scale, we end up with a continuum of providers, people who drive their car for five hours a week, for 10 hours a week, for 20 hours a week.
SUNDARARAJANAnd we need to make sure that the new regulations accommodate these people while not keeping out the taxi drivers. So we don't want Lyft and Uber to -- and some new set of regulations that say, OK, this is for casual drivers, not for professional drivers 'cause eventually in a vast majority of cities -- I mean, New York and Vegas may be exceptions -- I expect that in a few years almost all of point-to-point chauffeur transportation will be through platforms like Lyft and Uber (unintelligible)...
REHMInteresting. What are the differences, Emily, in charges by Uber and ordinary taxicabs right now?
BADGERThe charges that they make to consumers?
BADGERSo Uber offers a couple of different services. Their traditional service that they launched with about four years ago was this black town car which was kind of like an upscale version of a cab.
BADGERAnd then they rolled out in some cities a service that lets you call an actual cab. And the thing that's been really disruptive is this service called Uber X. This is this notion of people with their own car who have no chauffeur's license, who are not professional drivers in any sense, who don't have commercial insurance per se. This is me and my Prius making money giving someone a ride while I'm on my way to work.
REHMAnd how do you know that that person wants or needs a ride?
BADGERSo Uber operates entirely through an app. So if I would like to call a car, I pull up the app, I drop a ping, and say I'm at this corner in northwest Washington. I would like a car. And the sort of beauty of how their service is so streamlined is why consumers have really taken to it. What happens is that I'll see on that app a number of cars in my immediate vicinity. One of them will say, yes, I want to take this ride.
BADGERAnd then I will watch on my screen, on my smartphone, as that car drives through a map of the city and comes to pick me up. And this is so much more reliable for a lot of consumers than the experience that they have of calling a cab dispatch and saying, I would like a pickup and then never having that cab come or...
REHMAll right. But how do you know what kind of driver, what kind of car is going to pick you up?
BADGERSo the moment that someone says, I will pick you up, if we're talking about Uber X, I will immediately see the name of that person, the kind of car they're driving. I will see a picture of that driver. This also sort of helps facilitate my knowing exactly who the driver is when they pull up because otherwise I'm not going to be able to recognize that this is a professional taxicab.
REHMAnd how do you pay for that ride?
BADGERSo, when you sign up for Uber or Lyft or any number of other similar services like this, you tie your credit card to the app. And when I get in the car, I will tell the driver where I want to go. He will take me there. I'll get out of the car. We will never exchange money. I will never hand that person a credit card. That person will never even tell me, your ride was $12. I will just get out of the car. Uber will automatically calculate what that fare was, and it will automatically charge it to my phone.
REHMAnd how does Uber calculate the cost of that ride?
BADGERWell, this is one of the things that taxicabs are upset about. They're calculating it in a very similar way to how cabs are calculated. They're calculating it based on time and distance. It's very similar to a cab meter, except there isn't literally a meter in the car. Uber is just doing this using the GPS in your smartphone.
BADGERBut one of the things that's become really controversial with these companies is that they have something called surge pricing which means that if it's 11:00 on a Friday night and lots of people are out, all of a sudden, the price that I'm going to pay is going to be much higher than it would be if I were trying to get a ride at 4:00 in the afternoon. And this is because Uber says, you know, sort of the brilliance of what they've created is that they're trying to create a marketplace where supply and demand are better balanced than they are in the traditional taxicab industry.
BADGERAnd, according to Uber, if they're charging a lot more for rides at 11:00 at night on Friday, that's going to encourage a lot more people to come out and get those rides.
REHMNow, Dean Baker, how would you, as a regulator, look at what Uber is doing? And how would you expand the model of regulation to include that kind of surface?
BAKERWell, again, there's a lot about this that's very positive. But, again, I think the idea is to try and make the regulation apply in some sense equally. So one of the things we talked about earlier was that cabs have to have insurance. They can -- my cab driver had to have a million dollar policy. I think he said it cost him $800 a month. Now, if someone's driving Uber, you know, maybe they drive one afternoon, two afternoons a week. We could prorate that. That really isn't hard, you know.
BAKERSo, you know, maybe he's not got, you know, a million dollar policy or might be a million dollars of liability, but since he's only driving, you know, 10 hours a week then maybe that comes to $200 a month. But we can do things like that. And I think it is very important you try to do that quickly because, again, there are so many people caught in the middle. And I'll just use an analogy that I think's out there. If you look at Internet retailers, you know, they're still, in most cases, not paying -- not collecting sales tax.
BAKERAmazon, yes. I was going to be differential to the owner of Emily's newspaper here, but, you know, let's name names. So they've gotten enormously wealthy at the expense of a lot of brick and mortar retailers and something that makes no sense at all. It makes no sense that I can go click, click, click, and get two or three or $400 of merchandise in Amazon, not pay sales tax to the District of Columbia, whereas if I go to my neighborhood store, well, they're going to charge me 8 percent tax.
REHMWell, isn't it that -- Arun, let me address this to you. Isn't it actually that the people and these services have gotten out ahead of the regulators so that now you've got all these people participating in these various services? And all of a sudden, the regulators are saying, woops, we missed out, and now we've got to play catch up?
SUNDARARAJANAbsolutely. And I think that's just the nature of technological progress. You know, when we have new technologies, it's natural that, you know, the regulations of the day are not going to have kept up in advance. I mean, we can't plan regulations for the technologies of 10 years from now. And so I think what's different about this wave of technological disruption on the regulatory front is that we're used to, you know, Internet search or social networking or privacy issues or sort of Internet radio, Internet television, things that were largely federal issues.
SUNDARARAJANThis is the first time apart from the sales tax issue that we're seeing a disruption of services that are under the umbrella of city governments and state governments of local regulatory authority. And what I think the path that we would -- we should ideally go down is one where we sort of redistribute the responsibility. You know, we all agree that we need to keep these services safe. We need to make sure that, you know, society's collective needs like equal access and, you know, disaster preparedness are preserved.
SUNDARARAJANIt's just that perhaps we don't need the same mechanisms, the same entities like, you know, sort of a city agency doing all of the work here. Maybe the platforms can do part of the safety creating, part of the metering, part of the pricing. To Dean's earlier point about externalities on your neighbors when you host on Airbnb, maybe the right entity or the right body to make decisions about whether or not an apartment building should allow Airbnb isn't the city government or the state government, but the building, sort of, like, you know, co-op board.
REHMAh, good point. And you're listening to "The Diane Rehm Show." I was about to raise the question of, you know, these -- taxi rides are one thing. The car rides are one thing, but if indeed you, on your own, decide to rent a room in your house and you do it for cash, how is anybody going to keep track of what you're doing, Dean?
BAKERWell, it's a really good point. This is, again, a little bit to why I was saying this could be a scam. So we have all sorts of informal transactions. You know, I hire my neighbor's kid to mow my lawn.
BAKERYou know, he's not paying taxes. Maybe I didn't pay him the minimum wage. Maybe the kid's not 18, you know, or 16, you know. So there's all sorts of things about that that aren't entirely kosher. No one cares. That happens. Now if, you know, someone comes along and goes, wow, I have a great Internet app and we could have all these kids all around the country, well, that's a different deal. And I think that's kind of what we're seeing here. You know, again, not the fully -- not the Airbnb, you know, the useful services. But the point is to distinguish between providing useful service and facilitating a scam. And that's what we have to do here.
REHMSo how much is that Airbnb growing?
BADGERI mean, Airbnb was most recently valued in April at $10 billion.
REHMWhoa. Where is the capitalization coming from?
BADGERSo this is venture capital in the same way that venture capital is supporting all kinds of other startups in Silicon Valley. Google is investing in Uber. I mean, this is the same money that we see throughout Silicon Valley. And increasingly it's sort of being -- it's being sort of directed towards these types of companies, these sharing economy companies, these companies that are Internet companies in a sense. But what they're doing is providing these services.
REHMBut is Google making money?
BADGERI think that, in the long run, these companies will make money.
REHMAnd the question is, are they going to pay taxes?
BADGERThey -- so Airbnb actually, for the first time yesterday, the first of July, started paying taxes in Portland. And I think that that's the first city that they're doing that in. And I think that we're going to see that in more cities because there is just absolutely no way that all of these activities continue on in the future unregulated. There's no way that they continue on being untaxed in the future. They've just become too big for anyone to ignore. And cities are absolutely going to have to figure out how to do those things.
BADGERAnd I don't think it's really that difficult for them to pay taxes to do sort of the logistics of that because really what these companies are producing at the end of the day is vast amounts of data. Airbnb and Uber have tons of data on everyone who has used these services, how long you've been in a car, exactly how many miles you drove, how many nights you stayed at a hotel. The issue is giving that data to municipalities or to whatever the taxing entity is in order to make that transaction possible.
REHMEmily Badger, she's staff writer at The Washington Post covering urban policy. Short break here. Your calls when we come back. Stay with us.
REHMAnd welcome back. If you've just joined us, we're talking about the growth in the sharing economy, the Uber and Lyft automobile sharing, the kind of personal renting of rooms as opposed to hotels. Here in the studio, Dean Baker. He's at the Center for Economic Policy Research. (sic) Emily Badger is staff writer at The Washington Post.
REHMAnd joining us from Paris, France, Arun Sundararajan. He's professor of information, operations and management sciences at the NYU Stern School of Business. We're going to open the phones here. I think we have some very interesting callers to share their own experience. Let's go first to Shannon in Los Angeles, Calif. Hi there.
SHANNONHi, Diane. Thank you.
SHANNONI just was thinking about this topic, which I'm a big fan of the sharing economy, thought I'd call in, especially because I've been an Airbnb user since early 2010 when they were a very small company. And I started here in Los Angeles. I didn't start hosting right away. I actually started as a guest. And then, about two years in -- so it's been about 2 1/2 years -- I started hosting.
SHANNONAnd I thought, you know, I didn't hear a lot of -- I've heard a lot of the discussion so far really based on regulation and what's happening as more people are getting on to these new platforms. And I've just thought, you know, as an experienced -- as an experience as a host, I've just had an opportunity and to really travel through my own bedroom, my second bedroom, because we get people from all over the world.
SHANNONAnd it's been such an amazing opportunity. For example, right now we have a wonderful guest. She's French Canadian, and she does -- I mean, we're getting to know her really well. And every one of our guests, we really, really work to get an -- at least a little bit of time to understand what they're looking for in the city...
SHANNON...and how they're trying to experience Los Angeles.
SHANNONSo there's, like, that peer-to-peer that I see, that the sharing economy provides. And I haven't (unintelligible).
REHMCertainly. And opportunity for you as a host to get to know these folks. How do you screen the people who are coming into your home?
SHANNONThat's a -- that's just pretty much done by Airbnb. And then you'll see on an Airbnb request a person's photo and then a little bit of the identification information that they've provided to say that I am really this person, whether it's your passport, your driver's license. And they have things like phone number, email, which they send you confirmation of who you -- of this information you've provided.
SHANNONAnd then I always -- you can fill out your profile. And I always ask people before I host them that they do post a photo of themselves and that they just say a little bit about themselves, even for new users that sometimes reach out to me and they haven't filled out very much. They've just filled out the minimum. I just -- that's how I screen.
REHMAll right. And, Emily Badger, is that typical?
BADGERIn Airbnb, you have the chance to sort of pick and choose who you would like to stay there. I mean, Airbnb is not going to tell you, we've taken over your room as the hotel, and we're going to put someone in there and you're not going to know who that is. Because part of Airbnb's sort of marketing and ethos is we want this person to be a potential friend for you.
BADGERSo there's sort of this sense of personal interaction, and people have a chance to kind of screen each other in the sense that she just described. This is a little bit different from how things work in the Uber X and the sort of the Lyft and ridesharing space in the sense that, as I described earlier, you know, I might request a ride. And the car closest to me is the car that's going to get pinged and say, here is a ride.
BADGERDo you want to go get it? And so it...
REHMHere is an email from Cal who says, "Can you discuss the issue of possible customer discrimination? Hosts of rooms and drivers of cars can select their customers as they see fit, with no regard for equal rights." Dean Baker.
BAKERWell, that certainly could be an issue, and I remember seeing a study. I'll have to say I didn't read through it carefully, so I don't -- can't vouch for how carefully it was done -- but looked at applicants for rooms in Airbnb, and they found that people who were black, who identified themselves being African-American, were less likely to get a room. Their picture, in other words, you know, so otherwise identical, but, you know, it'd send a picture of an African-American person against a white person. They're much less likely to be accepted as a customer.
BAKERSo that's an issue. Now, we can't pretend that discrimination doesn't exist in the existing services. There's a lot of African-Americans will tell you they have a very hard time hailing a cab. So it's not as though, oh, we just have this new service, and they discriminate. But that is something we have to be very wary of. And, at least in principle, if we find out Hilton's telling, you know, African-Americans that they can't get a room, you know, we have ways to crack down on that. So the question is, is that going to be an issue with Airbnb?
REHMAnd, Arun, what about the use of credit cards for car sharing?
SUNDARARAJANYou know, just a sort of follow-up on Dean's point, before I get to that, Diane...
SUNDARARAJANI think that this does raise an important issue. I mean, my reading of the study that Dean was referring to was that -- I think it was that people of particular ethnicities weren't able to charge as much as people of different ethnicities. So it was sort of hosts rather than guests. And, you know, it does raise an important issue of the fact that we have developed all of these protections for a world in which we have professional providers.
SUNDARARAJANAnd we need to come up with ways to extend them to the peer-to-peer world. But as Dean points out, we shouldn't think about this as being a situation that exists sort of exclusively in the Airbnb world. This happens elsewhere. And so -- like, and we've got to choose the right comparison point.
SUNDARARAJANI guess it's the same thing with credit cards. I mean, if you need a credit card, if you need a smartphone, if you need a certain sort of level of, you know, prosperity in order to access basic services that you could access with cash, this can also create a form of what one Silicon Valley writer called sort of data Darwinism or a digital Darwinism where...
SUNDARARAJAN...you know, people who use these services a lot and who have access to them will sort of build up reputations and therefore get preferential access. And we may be creating a new sort of divide between, a new way, a new form of, like, have and have nots.
REHMExactly. What about those who might be handicapped, Arun?
SUNDARARAJANWell, that's certainly a situation where we do need government regulation. I always think of regulation as, you know, the government's stepping in when a market can't sort of take care of something that society needs by itself. And equal access, like, you know, a sufficient number of wheelchair-accessible vehicles, isn't something that the market is likely to self-provide. And so that's certainly something where I support there being government guidelines for a minimum number.
REHMAll right. All right. Let's take another call, this time from Christopher in Dallas, Texas. Hi there. You're on the air.
CHRISTOPHERHi, Diane. Thank you for taking my call.
CHRISTOPHERWell, I am a -- I drive for both Lyft and Uber X. Uber X is kind of Uber's version of Lyft, more ridesharing, less on the professional black town car side. And it's just really been incredible. I think, you know, there is a lot of concentration on the regulation in this conversation. And that's valid. I'm an independent contractor, so I don't think I would mind getting my taxes taken out before I get paid. But I don't know. I think there's so much more positive than negative in this.
CHRISTOPHERI'm pursuing an acting career, and I'm a filmmaker. And it's just really allows me to be my own boss, to go out and meet people. I think to your caller earlier who hosts on Airbnb, I think it just creates a sense of community. It -- so many people have been dropping their jobs and pursuing this because it just -- I don't know. In my opinion, makes life better. Not only that, but I think, you know, yes, I agree with regulations. But I think, first things first, you know...
CHRISTOPHER...let's concentrate on the regulations on taxi drivers and make that, you know, solid before approaching anything else.
REHMAll right. Thanks for you call. Emily, do you want to comment?
BADGERWell, Christopher brings up a good point about how this is part-time work for him. And this is something that we haven't talked a whole lot about. But this -- we're at a particular moment in the economy right now where a lot of people are underemployed or they're unemployed. And these services are giving people who are providing them a chance to make money. They're giving them a chance to make money that supplements what might be a part-time job.
BADGERAnd a lot of people sort of criticize the sharing economy, suggesting that as soon as the economy gets better all of these people will go get full-time jobs, and they'll stop trying to make money off of their spare bedroom. I'm sort of skeptical of that argument. But it's absolutely true that one of the things that has contributed to the environment where all of this is thriving is the state of the economy, is the fact that there are people like Christopher who are looking for part-time income.
BAKERYeah. I would agree very much with that. Also, you know, just to make another point along the same lines, you know, one issue -- and I have no idea. Christopher maybe could tell us how much he ends up making on an hourly basis. But one concern, of course, is that people do still get a decent wage. You know, it doesn't make any sense to have minimum wage laws, which are being raised in many areas with the idea we want to make sure people get a decent living from working, and then say, oh, everyone's an independent contractor, that doesn't apply.
BAKERNow, again, we could do that. Uber has the technology.
BAKERThey can make sure everyone gets at least, you know, whatever, X, is the minimum wage.
BAKERThey get at least X. Uber knows how to do that. But the point is that has to apply to them.
REHMAll right. To Grants Pass, Ore. Marcus, thanks for waiting.
MARCUSWe love your show.
MARCUSAnd thanks -- my call. I'm going to take a little bit different perspective on this. We have a vacation chalet in Switzerland where we rent out a couple of studio apartments. We've been using a sharing company, Vacation Rental By Owner, for several years. But -- and our clients, they pay their taxes. And, you know, we run the whole thing. It's just us as the owners who take care of it.
MARCUSBut I don't think the sharing is all that it's cracked up to be because, when you start looking at some of the websites, like VRBO, there's just a lot of property management companies on there now. So it's like you're just going to a hotel anyway if you book through them. Or, in your case, of using a taxi analogy, you're just you're calling thinking you're getting a private car, but when you get there, it's just a taxi that picks you up. So maybe your guests there could comment on that.
REHMRashiv. (sic) Sorry, Arun.
SUNDARARAJANYeah. You know, I think that this is an important issue because, you know, I think about the way eBay grew, like, you know, 15 years ago. It started out as a peer-to-peer marketplace where people were sort of selling the stuff that was lying around in their garage. So it was sort of, you know, scaling the local garage sale. And then very rapidly -- what drove eBay's really rapid growth was the emergence of professional sellers who sort of, like, you know, gave the market what we call liquidity. So there was lots of supply, and so the demand came. And perhaps we're seeing the same thing on VRBO as well.
SUNDARARAJANBut in thinking about, should we allow these professional, like, you know, property managers to use these platforms, you know, I think we should. We should have them distinguish themselves clearly. But we don't want to block them from connecting to the platform, and especially in the case of, you know, sort of transportation. We don't want to create a situation where the taxi drivers can't eventually connect to the platforms and make a living off of them. So I think that, you know, my experience with Uber in New York has been mixed.
SUNDARARAJANI actually sort of have a great deal of respect for how much the taxi drivers in New York City know the city and know how to get you somewhere fast. And I want to see that labor force sort of, like, you know, connected to the new technologies of today. And so I do want to see the professionals on these platforms, but perhaps with sort of a clear sign that says that this is a listing from a professional property manager, this is a listing from a professional taxi driver versus an amateur.
REHMAll right. And you're listening to "The Diane Rehm Show." Want to bring in another perspective here from Raj here in Washington, D.C. You're on the air.
RAJHello, Diane. This is Raj. How are you today?
REHMI'm fine. Thank you, sir. Go right ahead.
RAJYes. The fact that the cab driver in Washington, D.C. are not based upon a market system. Since we are not based on a market system, it means we cannot charge as much as (unintelligible) market demands. So it causes difficulty for cab drivers to even compete with the companies like Uber.
REHMAnd what do you say to that, Emily?
BADGERWell, I think he's probably referring to what I mentioned earlier as surge pricing. This is this notion that Uber and Lyft are changing -- are charging varying amounts for fares, depending on the time of day, depending on the demand and the supply. And the ability to do that is absolutely not something that taxis have. Fares are very strongly regulated by cities everywhere.
BADGERJust about everywhere in the country, the fare that your cab is going to charge you in Washington is an amount of money that's been set by the city, that's been regulated by the city. So, absolutely, if you had an Uber X driver who is giving someone the exact same ride at eleven o'clock at night on a Friday night, as a cab driver, it's entirely possible that Uber X driver's making a lot more money doing it.
REHMSo right now, the system is unfair, wouldn't you say?
BAKEROh, absolutely. I think you want to have, again, more uniform regulation so that same rules apply to everyone.
REHMYeah. And I know, Arun, you wanted to say something.
SUNDARARAJANYeah. No. I'm -- a similar point that, you know, there are disadvantages that taxi drivers face. I think that we've gotten used to this kind of variable pricing in other spheres of life. I mean, you know, when you travel by a plane, you often have paid a different price from the person sitting next to you. You stay in a hotel. You know, the person in an identical room might have paid a different price.
SUNDARARAJANAnd so the idea that there are different prices either at different times of day or for different sort of categories of customers isn't new, and it's something that we have gotten used to in other situations. So I certainly think that, rather than saying the platforms can't do it, we should come up with ways to sort of allow the existing people, the taxi drivers, to sort of share in the benefits of the value of creation.
REHMOf course. Of course. All right. And, sorry, we are going to have to end what has been a most interesting conversation. Arun Sundararajan, thank you so much for joining us. He's professor of information, operation and management sciences at NYU. Here in the studio, Emily Badger of The Washington Post and Dean Baker of the Center for Economic and Policy Research. Thank you all.
BAKERThanks for having me on.
BADGERThanks for having me.
REHMAnd thanks for listening, all. I'm Diane Rehm.
ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Denise Couture, Susan Casey, Rebecca Kaufman, Lisa Dunn, Danielle Knight, and Alison Brody. The engineer is Timothy Olmstead. Natalie Yuravlivker answers the phones.
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