The Morality of the Sharing Economy

Editor’s note: This article was initially published in The Daily Gazette, Swarthmore’s online, daily newspaper founded in Fall 1996. As of Fall 2018, the DG has merged with The Phoenix. See the about page to read more about the DG.

Being stuck in Fisherman’s Wharf under the sweltering July heat in business casual dress was not ideal. To make matters worse,  we were running late for our bullet Caltrain. Crunched on time, I requested an Uber to take us back to the San Francisco station. Only after arriving (belatedly) to the station did I feel somewhat guilty.

Since its inception, Uber has accrued lawsuits and criticism surrounding its dubious surcharges, problematic screening process for drivers, and misogynistic corporate culture. My friends back home, all Bay Area denizens, inundate my social media feeds with articles decrying Uber as a corrupt corporation. For me, taking an Uber equated to abetting this corruption, and succumbing so easily to the app just because it was, at the moment, “practical” seemed somewhat pathetic.

But as an economist (and a regular human), I like practicality. The allure of sharing economy apps like Airbnb, Instacart, Tilt, and Indiegogo is that they reduce inefficiencies: seller A with resource X can offer buyer B who needs resource X a mutually beneficial trade at a certain exchange rate. Sharing economy apps help to connect seller A to buyer B. What this oversimplified analysis lacks is externalities associated with transactions.

Problems can be reduced into numbers, charts, and graphs, but this often comes at the expense of consideration for human lives. To belabor the classic Swarthmore example, our dumping of waste into incinerators in Chester is a solution that is cost-efficient but certainly detrimental for the health of Chester’s community.

Similarly, one of the major oversimplifications of Uber comes from its business model of allowing drivers to “be your own boss.” According to their corporate homepage, 87% of the drivers adhere to this mantra and 85% enjoy the flexible hours. From Uber’s perspective, their main focus is being a platform, which is why the screening process for drivers is essentially nonexistent. Drivers act as independent contractors in order to circumvent the traditionally defined employee-status that would reduce profits for both Uber and the driver. However, if a rider is assaulted or a driver’s car is damaged on the job, the company turns laissez-faire.

Throughout history, services that created problems similar to those of Uber have been boycotted or regulated. Regardless of a boycott’s success, the outcry against segregated restaurants or the 1980 Moscow Olympics raised stirring discussions. However, consuming food from a particular restaurant and entertainment sports are not essential goods, unlike transportation and housing. Sharing economy apps are so successful because they touch our most basic needs, and connects newfound sellers to potential buyers. Currently, regulation through legislation against services like Uber is already an option many discontent groups are pursuing, though Uber’s burgeoning client base presents a strong case for this rideshare service to stick around.

All this said, I’m not entirely opposed to the growing presence of Uber or any sharing economy app. In fact, I regularly use Uber. I think Uber can do a lot of good. Uber provides an  temporary and immediate source of income for unemployed workers, although there are reports that contests the company’s alleged payout. People in need of transport look to Uber as a safer and more personalized mode of transportation; the rating system incentivizes good driving and stellar service. While Uber is making strides to create safe spaces, especially for women, there have still been reports of assault that cast doubt on Uber’s clout to prevent harassment within a moving vehicle.

My intention here is not to censure Uber. I believe that technology is allowing us to reallocate resources smartly, but this industry is still nascent. There is much theory, trial and error that goes into developing and perfecting sharing economy apps. If Uber is in the business of positively benefitting our society—and perhaps my naïveté is showing—then profits should be secondary to impact.

The strategy going forward that I propose for all sharing economy apps is to understand their customer base (both buyers and sellers) and preempt problems that may arise for them. For Uber, drivers need to have a clearly defined role in the company and a more stringent screening and accountability process would be great. Transparency in surcharges and company policies would strengthen the bond that the company has with their user base. The primary concern is not the short-term loss of profits, but rather the growing voice of dissent against supposedly evil corporations. And it also would help if the CEO wouldn’t refer to his newfound sex life as “boob-er.”

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