Autonomous cars have been discussed rather thoroughly recently and at this point it seems a question of when and how rather than if they will become standard. But as this issue starts to settle, new questions about the application of autonomous technology to other types of transportation are becoming ripe for policy debates. While a great deal of attention seems to be focused on the potential revolutionize the trucking and shipping industries, not as much attention has been paid to how automation may help improve both intercity and intracity bus travel or other public and private transit like trains. The recent requests for comment from the Federal Transit Authority show that policymakers are starting to consider these other modes of transit in preparing for their next recommendations for autonomous vehicles. Here are 5 issues that will need to be considered for an autonomous transit system.

1. Establish what agency or sub-agency if any has the authority to regulate or guide development of autonomous buses.

Currently, the National Highway Traffic Safety Administration (NHTSA) has provided the most thorough guidance on autonomous vehicles, but it has focused almost exclusively on privately owned, individual transport rather than buses or trucking. Currently buses are regulated by the Federal Transit Administration (FTA), NHTSA, the Federal Motor Carrier Safety Administration, Transportation Security Administration (TSA), and various agencies depending on what particular regulation is being addressed. With the growth of soft law particularly for autonomous vehicles, this overlapping jurisdiction becomes even more complicated for those hoping to start a new driverless bus system.

For example, an innovator hoping to start a driverless bus system from Washington, DC to New York City could have approval from NHTSA for the vehicles safety standards from an informal sandboxing, but find him or herself fighting the TSA after the system was ready due to the intercity travel or state regs in either location. This overlapping jurisdiction at the federal level results in further delay for innovators who may think they have properly consulted necessary agencies or are not required to seek approval.

While evasive entrepreneurs have been able to work within and around such regulations, other times they have had to engage in innovation arbitrage in order to continue such projects or stop development before its fully realized. Yes, Elon Musk might be willing to flip switch on Hyperloop with a verbal yes, but other innovators and investors are less likely to pursue costly projects that regularly face regulatory rejection.

2. Vertical Take Off and Landing (VTOL) may be more transformational than autonomous buses

It’s possible that at some point multi-passenger Vertical Take Off and Landing (VTOL) may actually be more disruptive and take the place of standard buses. These devices are basically drones that can carry human passengers.

Uber, for example, has already announced its plans to test such technology in the relatively near future. Just like we may skip some levels of automation on particular technologies, we may find that we are better off skipping autonomous buses in favor of other technology altogether.

3. State and local governments also have significant impact on buses and that’s not necessarily bad.

Right now a great deal of regulation of both autonomous vehicles and intracity transit is done at a state or local level through restrictions on operations, noise control, and local sanctioned-monopolies. Some of this is because of the increasing difficulty in creating formalized rules or legislation to address disruptive technology at a pace sufficient to keep up with innovation. As Adam Thierer, Ryan Hagemann, and I discuss in our forthcoming paper, this has led to an increased use of soft law at a federal level. It has also opened a window for state and local governments to try new policy solutions to determine what (if any) form of regulation might be best to encourage a disruptive technology like autonomous vehicles. While some economists might argue that every new government is a barrier to efficiency, allowing such local regulations is not in and of itself bad.

If the federal government were to become the new bus czar, it would not likely end well. Not only would cities and states protest the usurpation of their traditional role, but they would lack the local knowledge to determine which tradeoffs to make. Transit would best serve its citizens when they are making the decisions that most directly impact them. While the future may have less strict routes, schedules, and stops through services like Lyft Shuttle even these will require some knowledge of local needs to determine the hours and areas for the most profitable operation.

At the same time, there are real risks that a few powerful cities or states like California or New York City could prevent life-saving innovations like autonomous transit in smaller markets. This could be in a variety of ways from permitting to lane restrictions to funding. Still when examined as a national or even international market, it is likely that innovators would choose to take their technology elsewhere to a market that did exist. For example, following increased regulations related to autonomous vehicle testing in California, Uber moved its autonomous vehicle testing to a more welcome regulatory environment in Arizona. While engaging in such innovation arbitrage is not as easy for an entire transit system, states and cities that are more welcoming or at least willing to work with technological disruptors are more likely to see innovators flock to those areas as well as tangential benefits of allowing such new technology.

4. Smart cities v. dumb choices

In general, it should be applauded that many states and cities are trying to take proactive actions to prepare for potentially transformative changes of driverless cars. However, many of these actions are dumb choices that neither prepare for the change nor promote innovation. As Emily Hamilton has written, “Self-interested incentives may lead policymakers to implement new technologies without making real changes in the quality of service delivery.”

Some of the investment in technological infrastructure has its benefits such as providing data to make infrastructure decision and increased safety and connectedness by enabling more direct communication with citizens. At the same time, many of these projects have been little more than novelties and suffer from the same cronyism issues as other government funded projects. With autonomous vehicles, cities and states may risk betting on the wrong horse and investing in technology that will later be incompatible with the most common product on the market. As Michael and Emily Hamilton have written with the gap between the proposal of legislation and its actual implementation it is easy for the “smart” technologies to be outdated by the time they actually reach citizens.

Still, there are general policy changes that can prepare cities for a smart future. Adam Thierer has written about three policy proposals (an Innovator’s Presumption, a Sunsetting Imperative, and a Parity Provision) that would enable policymakers to create cities that embraced innovation. These proposals rather than targeting specific technologies would create a regulatory environment that encourages experimentation and innovation in a variety of industries.

5. Concerns about the impact of autonomous buses are well intentioned, but typically more about incumbents maintaining their market share.

As Michael Farren and I wrote about the collective freakout in Oregon about having to pump your own gases, often technopanics overlap with an imbedded cronyism or incumbents trying to keep out new entrants through bootleggers and Baptists phenomena.

Sadly, this phenomena is starting emerge when discussions about autonomous buses appear. Unions in some cities like Columbus, Ohio have public voiced their opposition if the jobs of current operators would be impacted. While job loss is a sad event, new technologies do not merely appear overnight and bring with them new job opportunities. Attempts by unions and other advocates to prevent any potential job losses from autonomous vehicles, could cost hundreds of thousands of lives including those of bus and truck drivers. Delaying a life-saving technology because it may negatively impact a few when it could benefit a large number in most cases is not a desirable tradeoff. Policymakers and advocates must realize that there will always be tradeoffs and recognize that often a small loss is necessary for a larger gain.

Technology does not just destroy jobs, it also creates them. A 2015 Deloitte study found that in the 140 years since the industrial revolution new technology had created more jobs than it had destroyed and not just in areas directly related to the technology. As individuals had more free time because technology made things like agriculture and manufacturing easier, significant growth was experienced not only in jobs related directly to technology, but also service and creative industries. While cars may have unemployed blacksmiths, they provided new opportunities for many others by creating and expanding new industries. It is likely that the current disruptive technologies will do the same.

As both the technology and policy surrounding autonomous vehicles evolves these and many other issues will have to be discussed and decided. It is a welcome event that such conversations are beginning to embrace the broader applications of the technology rather than solely focusing on “driverless cars” and hopefully this expanded focus will allow for even greater innovation and benefits.

Hurricanes Harvey and Irma mark the first time two Category 4 hurricanes have made U.S. landfall in the same year. Currently the estimates are the two hurricanes have caused between $150 and $200 million in damages.

If there is any positive story within these horrific disasters, it is that these events have seen a renewed sense of community and an outpouring of support from across the nation. From the recent star studded Hand-in-Hand relief concert and JJ Watts Twitter fundraiser to smaller efforts by local marching bands and police departments in faraway states.

What has made these disaster relief efforts different from past hurricanes? These recent efforts have been enabled by technology that was unavailable during past disasters, such as Hurricane Katrina.

1. Airbnb

Many people chose to evacuate once the paths and intensity of Hurricanes Irma and Harvey became clear. In fact, Hurricane Irma created the largest evacuation in US history. As a result, many hotels quickly filled.

Airbnb has been able to step in to allow local citizens to help in this situation by waiving its fees and encouraging owners to offer space free of charge to those displaced by the disasters. The website also makes it easy for evacuees to search and find available lodging. The service not only helps evacuees, but also volunteers and contractors coming to the area to help with recovery.

Additionally, the website was able to help authorities locate and communicate U.S. citizens who may have been in rented residences on Caribbean islands after the storm hit.

Licensing or other regulatory requirements could also limit what or which owners are able to offer in times of emergency preventing good Samaritans from being able to help. Regulations applying other lodging regulations, interpreting zoning laws, or outright bans on services like Airbnb could prevent this free service in the future. While Airbnb can waive its own fees, it would be unable to waive regulations from state or local governments allowing owners to offer their home. Often such regulations or enforcement attempts target hosts rather than companies like the zoning interpretation the city of Miami considered. If there are concerns about legality, individuals might be less likely to fill this void and help their neighbors or strangers through such services in times of crisis.

2. Drones

The Red Cross called for volunteer drone pilots who had the necessary paperwork and authorization to operate in the impacted areas and for the first time in a one week test used drones to deliver and survey disaster relief needs in some of the hardest hit areas.

But delivering supplies is not the only way drones are able to assist with recovery efforts. Verizon and AT & T were able to use drones to determine if equipment was damaged and causing outages, and then respond accordingly. Similarly some insurers have been deploying drones to allow adjusters to view and assess heavily damaged areas sooner.

In the immediate aftermath prohibited private drones from flying in areas around Houston, still the agency issued some permits allowing drones to assist in locating those who are trapped and survey the damage.  There were many legal concerns to be considered in the initial aftermath and in the future use of drones including both property issues and concerns of interference. A less restrictive environment might have allowed drones to provide greater assistance sooner with a minimal risk of privacy invasion or interference.

3. Tesla

Tesla issued an over the air update for additional battery life (an upgrade that is normally available for a fee) to provide owners the ability to evacuate following the preferred route. While some may have concerns that this power could be used negatively by the corporation, the success shows that over-the-air updates could be used to improve safety or other features in the future.

Additionally, one of the issues in any evacuation is traffic. The more cars on the road (particularly as weather worsens), the greater the risk of accidents. Assuming there is not too much precautionary interference, in the future self-driving cars could aid in making evacuation traffic safer and less stressful.

4. Social media and messaging apps help connect neighbors and get help

Want help? There’s an app for that.

The Cajun Navy gained renown for rescuing neighbors in the Southern Louisiana floods, but the app Zello made becoming a member of it even easier during Hurricane Harvey. Similarly, the app allowed victims of the storms to share information as power went out using less bandwith then phone calls.

Traditional social media also played a role in search and rescue efforts. When 9-1-1 failed, those in need of help turned to Twitter and Facebook in some cases. Neighbors, friends, or even strangers could use the information to provide help when traditional responders were unavailable. So many people were relying on social media, the Coast Guard had to issue a comment requesting people call not tweet at them for rescue.

Social media certainly had problems with misinformation, but in recent disasters it has shown to be an important part of disaster response and preparedness.

The one that might have been….

Could Flytenow have provided a possible solution to some of the concerns of airline price-gouging in the wake of Hurricane Irma? Flytenow hoped to make flight sharing a reality for the masses, but was shutdown due to interpretations by the FAA regarding common carriers. There are limitations on flight sharing, however, in a crisis, it’s possible allowing this type of arrangement could have resulted in a greater number of flights available. If demand was high, available pilots planning their own evacuation might consider posting additional available seats for others in exchange for some share of the expense of the flight. The result likely would be more seats available and lower prices overall. Using a platform rather than a traditional bulletin board arrangement would allow a service to limit the availability to only those who are certified or otherwise shown to be competent to fly in difficult conditions. Perhaps Flytenow would even have provided some sort of good Samaritan program like Airbnb to help get flights to those most in need of evacuation. Still, because of regulatory precaution, at least for now, we will not know the potential impact flight sharing could have on assisting in such natural disasters.

Conclusion

Technology is changing the way we respond to disasters and assisting with relief efforts. As Allison Griswold writes at Quartz, this technology enabled response has redefined how people provide assistance in the wake of disaster. We cannot plan how such technology will react to difficult situations or the actions of such platforms users, but the recent events in Florida and Texas show it can enable us to help one another even more. The more technology is allowed to participate in a response, the better it enables people to connect to those in need in the wake of disaster.

Yesterday, the White House Council of Economic Advisers released an important new report entitled, “Occupational Licensing: A Framework for Policymakers.” (PDF, 76 pgs.) The report highlighted the costs that outdated or unneeded licensing regulations can have on diverse portions of the citizenry. Specifically, the report concluded that:

the current licensing regime in the United States also creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities,  and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.

The report supported these conclusions with a wealth of evidence. In that regard, I was pleased to see that research from Mercatus Center-affiliated scholars was cited in the White House report (specifically on pg. 34). Mercatus Center scholars have repeatedly documented the costs of occupational licensing and offered suggestions for how to reform or eliminate unnecessary licensing practices. Most recently, my colleagues and I have explored the costs of licensing restrictions for new sharing economy platforms and innovators. The White House report cited, for example, the recently-released Mercatus paper on “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem,’” which I co-authored with Christopher Koopman, Anne Hobson, and Chris Kuiper. And it also cited a new essay by Tyler Cowen and Alex Tabarrok on “The End of Asymmetric Information.”

Moreover, along with Christopher Koopman and Matt Mitchell, I recently submitted comments to the Federal Trade Commission for a sharing economy workshop. In those comments, as well as a recent paper on the same subject, we documented how occupational licensing rules were often “captured” by affected interests and are then used to discourage new forms of competition and innovation. This harms both consumers and workers by depriving them of new and better options. Many sharing economy operations are having great success in breaking down these barriers and proving that consumers and workers do better in an environment free of unnecessary and costly licensing restrictions. This suggests that consumer welfare would be improved even more by reforming other licensing regimes.

Mercatus has published dozens of other things related to this issue, many of which I have listed down below. Just recently, in fact, we published a new paper on “Breaking Down the Barriers: Three Ways State and Local Governments Can Improve the Lives of the Poor,” by economist Steven Horwitz. The report begins by documenting how “occupational licensure laws disproportionately burden the poor by requiring them to spend significant resources just to enter a market.” This is consistent with the findings from other Mercatus reports and other academic publications.

Anyway, check out the new White House report and, if you are serious about studying the issue of occupational licensing in more detail, you’ll want to take a closer look at some of these other Mercatus Center publications on the issue. The case for occupational licensing reform is strong and non-partisan, as the release of this White House report makes clear.

Mercatus Center publications and related material on occupational licensing & barriers to entry 

• Working Papers, Filings & Testimony
  • Mercatus research paper, “Breaking Down the Barriers: Three Ways State and Local Governments Can Get Out of the Way and Improve the Lives of the Poor” by Steve Horowitz (July 21 2015).
  • Testimony before the South Carolina Health Planning Committee department of Health and Environmental Control, “Certificate-of-Need laws: Implications for South Carolina” by Christopher Koopman, Thomas Stratmann, and Mohamad Elbarasse (June 12, 2015).
  • Mercatus on Policy, “Certificate-of-Need Laws: Implications for Arkansas” by Christopher Koopman, Thomas Stratmann, and Mohamad Elbarasse (June 9, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for West Virginia” by Christopher Koopman and Thomas Stratmann (June 2, 2015).
  • Mercatus working paper, “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the “ Lemons Problem” by Adam Thierer, Christopher Koopman, Anne Hobson, and Chris Kuiper (May 26, 2015).
  • Mercatus FTC filing, “The Sharing Economy: Issues Facing Platforms, Participants, and Regulators” by Christopher Koopman, Matthew Mitchell, and Adam Thierer (May 26, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Kentucky” by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse (May 26, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Michigan” by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse (May 19, 2015).
  • Mercatus publication, “How state CON Laws restrict Access to Health Care” by Christopher Koopman Thomas Stratmann, and Mohamad Elbarasse (May 13, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Missouri” by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse (May 11, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Georgia” by Christopher Mercatus on Policy, “Certificate-Of Need Laws: Implications for South Carolina” by Christopher Koopman and Thomas Stratmann (May 5, 2015).
  • Testimony before the Indiana Senate Commerce and Technology Committee, “Occupational Licensing Gone Wild? Why Licensing is Not Always the Answer” by Edward Timmons (April 16, 2015).
  • Koopman, Thomas Stratmann and Mohamad Elbarasse (March 31, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Tennessee” by Christopher Koopman and Thomas Stratmann (March 24, 2015).
  • Mercatus on Policy, “Certificate-of-Need Laws: Implications for Florida” by Christopher Koopman and Thomas Stratmann (March 3, 2015).
  • Mercatus policy recommendations, “Florida Fiscal Policy: Responsible Budgeting in a Growing State” by Randall Holcombe (February 26, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Virginia” by Christopher Koopman and Thomas Stratmann (February 24, 2015).
  • Mercatus working paper, “Bringing the Effects of Occupational Licensing into Focus: Optician Licensing in the United States” by Edward Timmons and Anna Mills (February 17 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for North Carolina” by Christopher Koopman and Thomas Stratmann (February 12, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for New Hampshire” by Christopher Koopman and Thomas Stratmann (February 4, 2015).
  • Testimony before the New Hampshire House Health, Human Services and Elderly Affairs Committee, “Certificate-of-Need laws: Implications for New Hampshire” by Christopher Koopman and Thomas Stratmann (January 28, 2015).
  • Mercatus publication, “The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change” by Christopher Koopman, Matthew Mitchell, and Adam Thierer (December 8, 2014).
  • Mercatus interactive publication, “40 Years of Certificate-of-Need Laws across America,” by Matthew Mitchell and Christopher Koopman (October 14, 2014).
  • Mercatus working paper, “Do Certificate-of Need Laws Increase Indigent Care?” by Thomas Stratmann and Jake Russ (July 15, 2014).
  • Mercatus working paper, “Regulatory Reform in Florida: An Opportunity for Greater Competitiveness and Economic Efficiency” by Patrick McLaughlin, Jerry Ellig, and Dima Yazji Shamoun (March 18, 2014).
  • Mercatus on policy, “A Tale of Two Labor Markets: Government Spending’s Impact on Virginia” by Keith Hall and Robert Greene, (September 20, 2013).
  • Mercatus publication, “The Pathology of Privilege: The Economic Consequences of Government Favoritism” by Matthew Mitchell, (July 8, 2012).
  • “Beyond Bailouts: What is Cronyism?” by Matthew Mitchell, (July 8, 2012).
• Journal Articles
  • Published in Econ Journal Watch, “Was Occupational Licensing Good for Minorities? A Critique of Marc Law and Mindy Marks” by Daniel B. Klein, Benjamin Powell, and Evgeny S. Vorotnikov (September 2012).
  • Published in Cato Journal, “Occupational Licensing and Asymmetric Information” by David Skarbek (Jan 2007).
• Charts and Videos
  • “The Wrath of CON | How Certificate-Of-Need Laws Affect Access to Health Care” by Matthew Mitchell (May 12, 2015).
  • “Occupational Licensing: Bad for Competition, Bad for Low-Income Workers” by Veronique de Rugy (March 25, 2014).
• Media
  • Christopher Koopman discusses certificate of need laws on The Bill LuMaye Show on WPTF in North Carolina (5/11/2015).
  • Edward Timmons and Anna Mills publish, “Short-Sighted Policy,” at S. News and World Report (2/17/15).
  • Veronique de Rugy publishes, “Free the Horse Masseuses!” in Reason Magazine (July 2014).
  • Veronique de Rugy discusses state occupational licensing on Richmond’s Morning News on WRVA in Virginia (6/6/14).
  • Veronique de Rugy publishes “Licensing laws protect special interests at the expense of opportunity,” at The Washington Examiner (3/28/14).
  • Patrick McLaughlin discusses occupational licensing on The Ed Dean Show in Florida (3/27/14).
  • Donald Boudreaux publishes “Occupational licensing: Reality differs from rhetoric,” in The Pittsburgh Tribune-Review (3/25/14).
  • Emily Washington blogs “Occupational Licensing Hurts Consumers and Limits Entrepreneurship,” at Neighborhood Effects (8/20/13).
  • Veronique de Rugy blogs “More State Occupational Licensing Law Abuse: Kentucky Edition,” at National Review’s The Corner (7/17/13).
  • Emily Washington blogs “Small steps in VA occupational licensing reform,” at Neighborhood Effects (6/25/12).

On June 9th, the Federal Trade Commission hosted an excellent workshop on “The ‘Sharing’ Economy: Issues Facing Platforms, Participants, and Regulators,” which included 4 major panels and dozens of experts speaking about these important issues. It was my great pleasure to be part of the 4th panel of the day on the policy implications of the sharing economy. Along with my Mercatus colleagues Christopher Koopman and Matt Mitchell, I submitted a 20-page filing  to the Commission summarizing our research findings in this area. (We also released a major new working paper that same day on, “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem.’” (All Mercatus Center research on sharing economy issues can be found on this page and we plan on releasing additional papers in coming months.)

The FTC has now posted the videos from their workshop and down below I have embedded my particular panel. My remarks begin around the 5-minute mark of the video.

Along with colleagues at the Mercatus Center at George Mason University, I am releasing two major new reports today dealing with the regulation of the sharing economy. The first report is a 20-page filing to the Federal Trade Commission that we are submitting to the agency for its upcoming June 9th workshop on “The “Sharing” Economy: Issues Facing Platforms, Participants, and Regulators.” We have been invited to participate in that event and I will be speaking on the fourth panel of the workshop. The filing I am submitting today for that workshop was co-authored with my Mercatus colleagues Christopher Koopman and Matt Mitchell.

The second report we are releasing today is a new 47-page working paper entitled, “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem.'” This study was co-authored with my Mercatus colleagues Christopher Koopman, Anne Hobson, and Chris Kuiper.

I will summarize each report briefly here.

In our new filing to the FTC, we address the five questions the Commission set forth in its workshop annoucement. Those five questions are as follows:

• How can state and local regulators meet legitimate regulatory goals (such as protecting consumers, and promoting public health and safety) in connection with their oversight of sharing economy platforms and business models, without also restraining competition or hindering innovation?
• How have sharing economy platforms affected competition, innovation, consumer choice, and platform participants in the sectors in which they operate? How might they in the future?
• What consumer protection issues—including privacy and data security, online reviews and disclosures, and claims about earnings and costs—do these platforms raise, and who is responsible for addressing these issues?
• What particular concerns or issues do sharing economy transactions raise regarding the protection of platform participants? What responsibility does a sharing economy platform bear for consumer injury arising from transactions undertaken through the platform?
• How effective are reputation systems and other trust mechanisms, such as the vetting of sellers, insurance coverage, or complaint procedures, in encouraging consumers and suppliers to do business on sharing economy platforms?

We provide detailed answers to each of these questions as well as one additional major question that was not posed by the Commission in its workshop notice but which is, no doubt, on the minds of many at the agency and outside it: What should the FTC do about state and local barriers to entry and innovation that might be thwarting the growth of the sharing economy? (I blogged about that issue here a couple of weeks ago and our filing includes that discussion.)

Please take a look at our filing for detailed answers to each of these questions. (Incidentally, our filing is an extension of an earlier working paper that Koopman, Mitchell, and I released late last year on “The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change.”) But, to briefly highlight the thrust of our argument, here’s a passage from our new filing:

As the debate surrounding the sharing economy moves forward, policymakers must keep in mind that merely because regulations were once justified on the grounds of consumer protection does not mean they accomplished those goals or that they are still needed today. Even well-intentioned policies must be judged against real-world evidence. Unfortunately, the evidence shows that many traditional consumer protection regulations hurt consumers; in the words of New York Attorney General Eric Schneiderman, they are often “cumbersome, and some are just plain protectionist.” Markets, competition, reputational systems, and ongoing innovation often solve problems better than regulation when they are given a chance to do so. There are two reasons for this. First, market imperfections create powerful profit opportunities for entrepreneurs who are able to find ways to correct them. Second, regulatory solutions too often undermine competition and lock in inefficient business models.

We continue on to explain exactly why that is the case, while also offering some constructive solutions to other issues that are on the minds of regulators.

Meanwhile, the new working paper we are releasing today provides much greater detail on the fifth of the five questions the FTC posed in its workshop notice regarding reputation systems and other trust mechanisms. Here is the abstract from the paper:

This paper argues that the sharing economy—through the use of the Internet and real time reputational feedback mechanisms—is providing a solution to the lemons problem that many regulators have spent decades attempting to overcome. Section I provides an overview of the sharing economy and traces its rapid growth. Section II revisits the lemons theory as well as the various regulatory solutions proposed to deal with the problem of asymmetric information. Section III discusses the relationship between reputation and trust and analyzes how reputational incentives affect commercial interactions. Section IV discusses how information asymmetries were addressed in the pre-Internet era. It also discusses how the evolution of both the Internet and information systems (especially the reputational feedback mechanisms of the sharing economy) addresses the lemons problem. Section V explains how these new realities affect public policy and concludes that asymmetric information is not a legitimate rationale for policy intervention in light of technological changes. We also argue that continued use of this rationale to regulate in the name of consumer protection might, in fact, make consumers worse off. This has ramifications for the current debate over regulation of the sharing economy.

We believe that our research makes it clear “how the sharing economy relies upon—and has helped spur the growth of—sophisticated reputational feedback mechanisms that facilitate online trust and commerce, overcoming many of the information asymmetries that seemed intractable… just a generation ago. In combination with online review services and other information-sharing technologies enabled by the Internet,” we conclude, “these reputational tools can help create more effective, and largely self-regulating, markets that provide more information to more individuals than ever before.”

We look forward to continuing engagement with officials at the FTC and other policymakers at the federal, state, and even international level on these issues. We hope our research will help legislators and regulators find sensible ways to adjust policy for the sharing economy so as not to derail the sort of “permissionless innovation” that has thus far powered this exciting sector and produced the many pro-consumer benefits flowing from it. Check out our filing and new paper for more details.