Adam Thierer: Let the Market Self-Regulate

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Posted by Kendyll Ferrall on Friday, June 12th, 2015, 10:00 AM PERMALINK

The Federal Trade Commission (FTC) held a panel this week to discuss whether or not regulation should play a role in monitoring the rapidly-growing sharing economy.  The sharing economy is a marketplace that promotes competition, innovation and opportunity.

Through the sharing and exchange of transportation, hospitality services and other goods, the sharing economy provides consumers with more choices, drives competitive prices and allows individuals to reap financial benefits by fully utilizing belongings they already own. So naturally, the government is looking to intervene.

Adam Thierer, a senior research fellow at the Mercatus Center, closed out the FTC’s panel by speaking to the damage that regulation can do to young, emerging markets. Arguing that regulations often value private interests over the public, Thierer laid out five reasons why allowing the sharing economy to self-regulate benefits consumers and producers.

1. Regulations Usually Don’t Work

"Just because we label something to be a consumer protection policy or regulation, doesn’t mean that it actually protects consumers in practice. In fact much consumer protection regulation, historically, has had a fairly miserable record of serving consumers and unfortunately a fairly marvelous record of serving incumbent industries… Many regulations in this sector have come to burden innovations and become a formidable barrier to new forms of entry and entrepreneurialism.”

2. The Sharing Economy Solves Problems without Regulations

"New entrance can come in and provide better options to solve complex problems that were previously thought to only be solved by regulation… Reputational feedback mechanisms and product and service review systems create powerful reputational incentives for all the parties involved in transactions to perform better and develop trust. The combination of these factors helps create self-regulating markets where bad actors are weeded out fairly quickly. This alleviates the need for top-down regulation we’ve seen in the past."

3. Sharing Economy Creates More Choices and Competition 

“These platforms wouldn’t be thriving unless there was a clear consumer demand for them and a fairly high level of satisfaction and comfort with them overall. This bears repeating because of the fact that it means that we don’t always need a preemptive regulatory policy in place to solve problems.”

4. Liberalizing Markets Leads to Equality

The best way to level the proverbial playing field is not by regulating up to put everybody on the same level playing field but rather by deregulating down to give everyone an equal level playing field… Our goal should be to have an innovation policy of permission-less innovation, which means that new innovators are free to experiment with new business models and methods and then to the extent that harm develops and accidents happen - we deal with them after the fact.”

5. Regulation Should Encourage Innovation

“The best role that public policy can play at this time is to clear the way for even more sharing economy entry and innovation by removing barriers to entry and trade."

Thierer and the Mercatus Center have written extensively on tech freedom and the economic effects of regulations. By allowing the market to self-regulate, the sharing economy will continue to foster competition, increase opportunities, and improve the economic experience for consumers and producers.


Photo Credit: Internet Education Foundation

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