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Friction-free capitalism

By: name Newspaper
October 10, 2013 Updated: October 11, 2013 at 1:43 pm
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In these times of governmental gridlock and incompetence, it's great to see what the private sector can do if given the chance. Provided it's not being strangled in regulations by the Democrats, or corrupted by the crony capitalism of the Republicans.

I flew to Chicago last weekend to spend some time with my son. I wasn't originally sure I could go. A hotel room in downtown Chicago costs more than $200; two nights would have cost me more than the airfare. But fortunately, I know about the Internet's leading person-to-person rental lodging service.

This service allows users to both rent their own rooms and to find places to stay. You can search based on city, type of accommodation, neighborhood, number of beds, price level, and just about anything else. I stayed in someone's condo for $75 a night, a third of what hotels in that neighborhood charge. I've used the site to rent a room in my house too. I've met some very nice people, and gotten some extra cash that came in quite handy.

But who protects me from unclean linen, unsanitary rest rooms, and psychotic hosts who want to slice me up and eat my liver with a nice Chianti? Who protects me from sleazy renters who'll trash my place and steal my stuff? The answer is: The marketplace.

Because this service wants people's business and wants to build a reputation in the market, it vets both hosts and guests. It also has a detailed rating system where both parties evaluate each other. Since my host wants other people to rent his place, and since I want other hosts to accept me as a guest, we're both incentivized to be on our best behavior.

Reviews are made available to everyone on the site. A bad rating of a place, or a mediocre report of a guest, and they'll be in trouble, perhaps to the point of never getting a renter or a room on the site again. It is friction-free capitalism at its best.

The day after I returned, I found an article in my news feed about how a host in New York City was fined $30,000 for renting out his apartment, using the same service I did. His crime? Breaking a 2011 law that makes apartments "illegal hotels" if rented out for less than a month. And who helped bring this law into existence? The Hotel Association of New York City, of course. Acting for the noblest of public-spirited reasons, I'm sure. Fortunately, thanks to the help of a libertarian public interest law firm, the fines were reversed.

Still, I'm confident any future attempts to strangle the short-term rental market and kill this budding entrepreneurial venture will have bipartisan support. Democrats will regulate and tax it into oblivion, all in the name of "protecting the public". They'll do this to help hotel workers (labor is a traditional Democratic constituency) and because, well, taxing and regulating is just what Democrats do.

But Republicans will get on board too. Why? Because deep down they only like market competition when it doesn't threaten their donor base. The hotel industry is big business, a historically Republican-friendly constituency. Need I say more?

So what can ordinary consumers do? This stuff matters. I would not have seen my son this weekend if it weren't for this new idea that made seeing him affordable. Things like this are worth fighting for.

So fight the good fight. Elect candidates in either party who "get it" when it comes to basic economic principles. Recognize that in the absence of an injured party, the presumption should be to let consenting adults do what they want with their money, their lives, and their property, even if it upsets the status quo. Accept that nothing is permanent except change, including the economic arrangements of a free people in a free society. Perhaps because of them.

Then go visit someplace you've never been before, and stay in a stranger's home. You'll make a new friend, and bring the world a little bit closer.

-

Barry Fagin is a Senior Fellow at the Independence Institute in Denver, his views are his alone. Readers can contact Dr. Fagin at barry@faginfamily.net.

In these times of governmental gridlock and incompetence, it's great to see what the private sector can do if given the chance. Provided it's not being strangled in regulations by the Democrats, or corrupted by the crony capitalism of the Republicans.

I flew to Chicago last weekend to spend some time with my son. I wasn't originally sure I could go. A hotel room in downtown Chicago costs more than $200; two nights would have cost me more than the airfare. But fortunately, I know about the Internet's leading person-to-person rental lodging service.

This service allows users to rent their own rooms and to find places to stay. You can search based on city, type of accommodation, neighborhood, number of beds, price level and just about anything else. I stayed in someone's condo for $75 a night, a third of what hotels in that neighborhood charge. I've used the site to rent a room in my house, too. I've met some very nice people, and gotten some extra cash that came in quite handy.

But who protects me from unclean linen, unsanitary restrooms, and psychotic hosts who want to slice me up and eat my liver with a nice Chianti? Who protects me from sleazy renters who'll trash my place and steal my stuff? The answer is: The marketplace.

Because this service wants people's business and wants to build a reputation in the market, it vets both hosts and guests. It also has a detailed rating system where both parties evaluate each other. Since my host wants other people to rent his place, and since I want other hosts to accept me as a guest, we're both incentivized to be on our best behavior.

Reviews are made available to everyone on the site. A bad rating of a place, or a mediocre report of a guest, and they'll be in trouble, perhaps to the point of never getting a renter or a room on the site again. It is friction-free capitalism at its best.

The day after I returned, I found an article in my news feed about how a host in New York City was fined $30,000 for renting out his apartment, using the same service I did. His crime? Breaking a 2011 law that makes apartments "illegal hotels" if rented out for less than a month. And who helped bring this law into existence? The Hotel Association of New York City, of course. Acting for the noblest of public-spirited reasons, I'm sure. Fortunately, thanks to the help of a libertarian public interest law firm, the fines were reversed.

Still, I'm confident any future attempts to strangle the short-term rental market and kill this budding entrepreneurial venture will have bipartisan support. Democrats will regulate and tax it into oblivion, all in the name of "protecting the public." They'll do this to help hotel workers (labor is a traditional Democratic constituency) and because, well, taxing and regulating is just what Democrats do.

But Republicans will get on board too. Why? Because deep down they only like market competition when it doesn't threaten their donor base. The hotel industry is big business, a historically Republican-friendly constituency. Need I say more?

So what can ordinary consumers do? This stuff matters. I would not have seen my son this weekend if it weren't for this new idea that made seeing him affordable. Things like this are worth fighting for.

So fight the good fight. Elect candidates in either party who "get it" when it comes to basic economic principles. Recognize that in the absence of an injured party, the presumption should be to let consenting adults do what they want with their money, their lives, and their property, even if it upsets the status quo. Accept that nothing is permanent except change, including the economic arrangements of a free people in a free society. Perhaps because of them.

Then go visit someplace you've never been before, and stay in a stranger's home. You'll make a new friend, and bring the world a little bit closer.

-

Barry Fagin is a Senior Fellow at the Independence Institute in Denver, his views are his alone. Readers can contact Dr. Fagin at barry@faginfamily.net.

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