Sharing is caring: a collaborative commons economy

Last week a judge in New York ruled online vacation rental site Airbnb is violating laws against running illegal hotels.

Airbnb has had an up-and-down couple of days. On Friday, investors put an additional $500 million into the company, valuing it at roughly $10 billion. This week, they're in a New York courtroom, defending their model against a subpoena for their list of New York hosts. Hotel regulators argue that the company violates New York law that an apartment cannot be rented for less than 30 days.

Jeremy Rifkin, author of "The Zero Marginal Cost Society," thinks the way Airbnb operates is a sign of a shift in how business will be done in the future. The conflict comes down to the elimination of marginal costs. That's the term for how much it costs for a business to add an additional good or service. According to Rifkin, Airbnb's marginal costs are almost nothing, and that's problematic for brick-and-mortar businesses.

"Businesses have always wanted to reduce marginal costs. They simply never anticipated a tech revolution so extreme in its productivity that it could reduce marginal costs to near zero, making goods and services nearly free, abundant, and sometimes not prone to market exchange forces."

Rifkin also points out that this struggle between Airbnb and hotel regulators is different than, say, what the music industry went through when users tried to share content for free. In that case, the market had to adjust and learn to coexist with new technologies. Sharing economies, however, may have larger implications with how bussinesses operate. According to Rifkin:

"The capitalist market will stay. It will have a role to play. I don't think it'll be the primary arbiter of economic life in 30 years from now. I think the collaborative commons is here to stay."

About the author

Ben Johnson is the host of Marketplace Tech.

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