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InsiderOnline Blog: April 2014

You Have More Capital than You Realize

Regulators trying quash services like Airbnb and Uber are standing athwart one of the most important economic developments of the past decade. As Daniel Rothschild explains, the novelty of the peer production economy lies not so much in the technology, but in the fact that these new business models are transforming dead capital into live capital:

This “peer production economy”—the development of new platforms to connect buyers and sellers who otherwise would not have connected, either because of supply- or demand-driven constraints, regulatory barriers, or high transaction costs—is placing that which we didn’t formerly think of as productive capital into the stream of commerce. The result may be a blurring of the lines between personal consumption goods and productive capital, and we may become much wealthier as a consequence. […]

The value lies in creating new marketplaces and new markets that allow sellers (owners of capital and labor) and buyers to transact in a way they could not before. These firms are simply using technology—and fairly mundane technology at that—to reduce search costs and information asymmetries. In that regard, they’re no more innovative than any marketplace developed by men to engage in Smith’s “propensity to truck, barter, and exchange one thing for another.”

Notably, few if any of these peer production companies actually provide the services they purvey; Uber connects black car drivers with passengers, Airbnb links renters with travelers, and Etsy allows small artisans to create virtual storefronts. Uber owns no cars, Airbnb has no properties, and Etsy prints no Insane Clown Posse fan art. They are really marketplace innovations, not tech innovations […] . [The Umlaut, April 9]

Posted on 04/10/14 08:11 PM by Alex Adrianson

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