Trading More and Sharing Nicely

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst. She recently edited and contributed to “For Love and Money: Care Provision in the United States.“

The online economy may be helping us in ways that are hard to measure. The declining cost of individual transactions increases both trading and sharing among individuals, increasing the “poductivity” of consumption in ways that are underestimated by conventional indicators of economic output such as gross domestic product.

You can increase the value of things that you own but don’t use regularly in three ways:

- Sell them online through Craigslist, eBay or similar peer-to-peer sales, with more flexibility - and less time commitment - than the traditional yard sale. These exchanges increase the utilization rate of stuff that has already been produced, but they aren’t necessarily recorded as market transactions. Purchases of used goods probably displace some purchases of new goods that might otherwise take place, though they can also have the paradoxical effect of increasing the demand for new goods by increasing their long-term value. You might be more likely to buy a new commodity, for instance, if becomes easier to sell it, in turn, to someone else.

- Rent your goods to ! other people through the use of online interfaces that speed transactions, help address liability and insurance problems, and provide quick publicly available feedback on the behavior of both parties. You can rent space in your home to others through services like Airbnb, rent your car through services like Wheelz or drive people around for pay as in the Lyft model. You get money; your renters get a room or transportation at a substantially lower cost than they would pay a traditional company. A recent article in Forbes on peer-to-peer rentals asserts that they will grow 25 percent this year, “moving from an income boost in a stagnant wage market into a disruptive economic force.”

- Share your goods with other people, either by giving away things you no longer use through a ite like Freecycle or by participating in a reciprocity-based exchange like Couchsurfing, which connects travelers looking for places to stay with hosts interested in meeting new people. Snapgoods offers opportunities for both sharing and rental of consumer durables; NeighborGoods and Acts of Sharing match borrowers and lenders of shareable goods; and Yerdle provides a platform for giving and getting stuff from friends.

The reciprocity-based model of “collaborative consumption” may take longer to catch on than new technologies for buying and renting, but it could have bigger effects in the long run, because it represents an especially low-cost form of exchange and it helps develop social networks that offer ! some intr! insic benefits.

Anders Fremstad, a graduate student at the University of Massachusetts, Amherst who is planning dissertation research on this topic, has shared some of his ideas about this model with me. He observes that Couchsurfing has achieved an impressive scale, with more than 5.5 million registered Couchsurfers living in 97,000 cities across 207 countries. Compare that with the 4.9 million rooms offered by the lodging industry in the United States.

The service is successful partly because it provides an interesting social experience as well as a place to sleep. Previous empirical research shows a high level of reciprocity. Over 40 percent of people with two Couchsurfing experiences have been both surfers and hosts. Further, 12 to 18 percent of Couchsurfing stays are directly reciprocated, suggesting that they lead to new friendships.

It sems harder to promote sharing of consumer durables, as with the NeighborGoods model (which Mr. Fremstad plans to analyze). The value of services provided by lawnmowers, vacuum cleaners and food processors is smaller relative to the costs of organizing and taking part in a sharing transaction. On the other hand, such items often sit idle most of the time.

Many consumer durables are already shared among household members. Indeed, one reason it is cheaper to live with others than to live alone is the capacity to use household equipment, as well as space, more efficiently. But for a variety of reasons, average household size has shrunk by about half in the United States over the last 150 years, to about three people from six. This shift has increased privacy, but it has also raised living expenses.

Further, as more women have entered employment ! and ferti! lity has declined, the percentage of homes that remain largely empty during the day - along with the percentage of cars on the road with only one passenger - has almost certainly increased over time. Much of our consumption infrastructure now goes underused.

We know that the Internet has increased social networking, so it seems likely that it could encourage economic networking as well. If new sharing technologies could be combined with social scripts that make it easier for people to interact positively with others, the economy as a whole could become more productive and more environmentally sustainable.

Prof. Yorchai Benkler of Harvard Law School describes sharing as a new mode of production that is likely to grow in importance over time. Perhaps we should call it a new mode of consumption.

Whatever we call it, we should recognize its potential contributions to conomic efficiency.