Monday, July 7, 2014

Michael Munger on the Sharing Economy

This week's Econtalk is another entry in the Roberts/Munger hit parade. The topic: sharing. There's a bunch of new ways to reduce ancient search problems: I need a place to stay for the night, you have room for a lodger. Let's get together and make beautiful music.

Mike and Russ spend a bit of time talking about what Gordon Tullock called the "transitional gains trap", which is the thorny problem of what to do when special privileges are threatened by alternative institutional arrangements. In this case, hotels are threatened by airbnb, taxis by uber, municipal governments by monkeyapp, etc.

Tullock's recommendation: set no transitional gains traps.

It's great advice when you're considering new political privileges, but it provides little guidance after the fact.

Hence the puzzle: should taxpayers bail out people who spent a million bucks on a taxi medallion? Why or why not? What constitutional provisions (lower case c-constitution) can prevent governments from setting new traps? Is there an easy solution?

How do we clear the way for more and better euvoluntary exchange? Suggestions welcome.

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Do you have suggestions on where we could find more examples of this phenomenon?