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Wednesday
Mar122014

An economic evolution is underway

In a recent interview, Richard Florida said something about disruption that left me nodding my head. According to Florida, the sharing economy is “taking the last frontier of real inefficiency and waste, our cities are just wasteful machines, and making them run more efficiently.” He is referring to government, and more specifically, to protectionist policies.

An economic evolution is underway. It’s a structural shift that we inevitably see with every changing of the generational guard. Here’s proof:

“The following articles of clothing, when worn as outer garments, are prohibited: T-shirts without a pocket or buttons, underwear, tank tops, swimwear, jogging suits, body shirts, shorts, cut-offs, trunks, or similar attire … By prior approval of the director, T-shirts and sports jerseys and shirts may be worn as outer garments in conjunction with special attractions.” – City of Minneapolis Taxicab Ordinance

Minneapolis’ taxicab regulations speak to Florida’s point. They cover everything from acceptable types of sandals to detailed insurance requirements. Skimming through the 35 pages of regulation, I got to thinking: I’ve never had a legal taxicab ride.

  • Listening to music without a rider’s prior approval? Violation.
  • Talking on a mobile device, including a wireless Bluetooth headset? Violation.
  • License posted more than 3 inches from the top of the front seat? Violation.
  • Blocking the normal flow of traffic to pick-up customers? Violation.
  • Wearing a t-shirt without pockets? Violation.

Most all taxicab regulations aren’t even enforced. The City doesn’t have the time, resources or willpower to enforce them. This begs the question; is there a point to having regulations you don’t enforce?

The parade of new tech breakthroughs is relentless. Policy makers need to be responsive, not obstinate. They need to find ways to realize the benefits. The status quo isn’t ideal; and even the regulations on the books intending to make things better, such as taxicab rides, aren’t actually regulated. They are just barriers to entry.

We can see the change all around us, from online retailers like Craigslist, Amazon and Ebay to new financing mechanisms, such as Kickstarter, Fundrise and Indiegogo. The list can go on; Lyft, Uber, Airbnb, Car2Go, Etsy. These services are all tools in a toolkit. While they won’t change our world overnight, they help us better interact with the world around us.

The change is a rational response to our climate of higher unemployment, less stable and lower paying jobs and increased personal debt. It’s a necessity for some people to get a job on the side. It’s been referred to the greatest economic transformation in human history. This is especially true for our cities, because, in part, these inventions allow us to live more comfortably in urban spaces.

I remember my epiphany.

It was 2004. I remember looking in awe at the price tag of college textbooks: $100 for an introductory of macroeconomics textbook? I begrudgingly bought the book – a used copy no less – from the college bookstore and proceeded to use it (maybe) a dozen times throughout the semester. At the semester’s end, I brought it to book buy-backs only to find they’d upgraded to a new edition and weren’t buying back copies.

I remember feeling cheated. Like, the system was rigged.

Upon the recommendation of a friend, I decided to check out Amazon. I listed the book and sold it for like $75. I didn’t make money on the deal, but it was better than the alternative. Eventually I started selling my old textbooks.  When that wasn’t enough, my friend and I noticed the college bookstore would discard literally hundreds of “outdated” textbooks each month on a table with a sign that read, “free books.”

We’d grab our backpacks and laundry baskets, fill them up and list everything on Amazon. The college provided free packing materials at the time, so our cost was virtually nothing. I made around $3,500 the first semester and a couple thousand the following semester before the University started donating to Books for Africa.

To this day, I still sell books on Amazon. While my margins aren’t as big as they once were, I still capture value from something that I would never have prior to Amazon. The downside to all of this is that I – and countless hundreds of thousands like me – am helping put stores out of business.

Technology disrupted the traditional marketplace by cutting out an inefficient middle man and allowing sellers to connect directly with buyers. Remember travel agents? Newspaper classified ads? Bookstores? Best Buy!?!

Direct versus indirect economic benefit. This is the freelance economy in a nutshell.

Every book I’ve sold on Amazon is a book that would otherwise have been sold elsewhere. Instead of someone buying it at a bricks-and-mortar establishment that provides jobs and pays taxes, they’ve chosen to save a little and put $20 in my pocket. It’s a system that has drastically affected a small number of people, but marginally benefited a great number of people.

Never going to watch that DVD again? Sell it on Amazon. Gone for the weekend? Airbnb your apartment. No plans Friday night? Drive around for Lyft. These are all rational decisions, especially for a Millennial graduating college with the equivalent of a mortgage payment.

The response isn’t to ignore or fight against, but to embrace. Update the city codes and add flexibility. Make all services viable, because if you try to stop them, you might not be able to. They won’t change your world overnight, but they should give your city a tool in a wider toolkit, and a Strong Town is one that embraces a greater toolkit of possibilities.

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Reader Comments (3)

The real epiphany is when you find that many professors don't use their books much at all, and you should forego the purchase altogether. I quit buying them as an upperclassman in the 90's.

After a recent grad school stint, I now recommend asking on day 1 the following, "Would an old edition be acceptable in this course? They are only a couple bucks on Amazon." Many professors I knew gladly say "Yes". They know books are a scam and accommodate students that are short on cash.

March 12, 2014 | Unregistered CommenterAndy

Evolutionary economics is part of mainstream economics[1] as well as a heterodox school of economic thought that is inspired by evolutionary biology. Much like mainstream economics, it stresses complex interdependencies.

March 13, 2014 | Unregistered CommenterSanna

Great article Nathaniel. Unfortunately, rather than changing codes to add flexibliity and allow for innovation in services, governments seem to be going backward by adding new regulations to hinder these new types of services.

Uber is getting hammered in many cities by new regulations that aim to protect the existing taxicab industry rather than helping make better services available to citizens. Airbnb is suffering the same fate as many cities add regulations making it difficult or impossible for people to do short term rentals on their homes and apartments.

The bottom line is that governements are creating more rules to try and maintain the status quo. But, while the status quo may be comforting to many people, it prevents innovation and progress. I suspect as governments create more rules that citizens feel are unnecessary, unjust, and just plain stupid, citizens will simply start ignoring the rules.

March 13, 2014 | Unregistered CommenterTerry Keyes
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