The rapid proliferation of “sharing economy” applications like Uber and Airbnb may have profound implications for the nation’s future growth. A galaxy of disruptive startups is giving individuals new opportunities to commercialize assets that have previously been reserved for personal use. And though the debate over the rise of the sharing economy is often focused on the potential of new technology to upend entrenched industries and change the nature of employment, these apps are also expanding the economy’s productive capacity and increasing the potential rate of GDP growth.
The amount of slack in the economy is traditionally measured by counting the number of idle workers; Okun’s Law, for example, draws a direct relationship between the economy’s capacity for growth and the amount of slack in the labor market. Since the supply of labor is relatively inflexible, the arrival of full employment has traditionally meant that the economy is operating at its maximum potential. When the labor market runs out of slack, growth will be limited to demographic expansion plus productivity gains—and any further expansion will likely be accompanied by strong inflationary pressure.
The sharing economy throws a wrinkle into these assumptions. Technology that brings personal assets into the commercial realm—for example, by transforming personal vehicles into taxis and rental fleets (in the case of services that rent out privately-owned vehicles)—allows for the more intensive use of these assets. Increasing the utilization of valuable assets like cars and guest rooms effectively boosts the productivity of their owners. As new technology makes personal assets more commercially productive, the economy’s total productive potential should increase in tandem.
Uber has spawned numerous clones that have ambitions to be “the Uber” of their industries. For example, Washio is to laundry and dry cleaning what Uber is to taxis. Postmates aims to be the Uber of goods—their delivery service sends couriers to deliver local goods to you "in under one hour." Airbnb matches property owners with travelers seeking a place to stay.
This “Uberization” of goods and services introduces a new degree of uncertainty about the amount of slack remaining in the economy and the true potential for above-trend growth. The difficulty in measuring slack in the labor market is well known—the official measure of unemployment is almost certainly massively undercounted, missing millions of involuntary part-time workers and discouraged workforce dropouts. Now, advances in mobile telecommunications are increasing productive capacity in ways that are difficult to predict or measure.
And the commercialization of personal vehicles and guest rooms is only the tip of the iceberg—new apps launch every day, promising to commercialize a wide variety of personal assets, from lawnmowers and snowplows to dog walkers and house cleaners. The ultimate impact of these services is almost impossible to predict—Uber may be available to almost everyone, but relatively few drivers participate; it increases the potential value of private vehicles, but reduces the necessity of car ownership. Traditional measures of economic slack may increasingly underestimate the capacity for future growth—but by how much is anyone’s guess.
View our economic commentary disclaimer.
Who earns the most from digital platforms like Uber and Airbnb?Read article about Who Earns the Most in the Online Platform Economy?
Should we be concerned that the US economy is on the verge of another recession?View video about Is a New Recession on the Horizon?
A growing amount of global commerce is conducted in US dollars. Does this expose developing nations to too much risk?Read article about The Dollar’s Spread Sparks Concern
Weekly insights on the economic issues that matter most to your business.