June 21, 2018
The growth of the sharing economy has challenged not only traditional regulatory approaches but also traditional notions about how regulations are made and enforced. While typically thought of as top-down phenomena — deliberately designed and planned — a regulation, in its broadest sense, is any rule of behavior that establishes order.
In this working paper, Matthew Mitchell and Christopher Koopman use the overlapping regulatory approaches in the vehicle-for-hire industry to create a taxonomy for better understanding regulation that accounts for both public and private enforcement as well as those regulations that are both planned and emergent.
Public versus Private Regulation
Many regulations are created and enforced by various levels of government that affect the vehicle-for-hire industry (e.g., federal labor law, federal tax law, state tax law, DMV rules, taxi commission rules). There are also activities undertaken by private parties operating within the vehicle-for-hire industry that have the effect of regulating behavior (e.g., background checks by platforms, GPS monitoring of routes, algorithms to reward performance, tipping). This distinction is vital to understanding how these industries are regulated.
Planned versus Emergent Regulation
In addition to regulatory measures being public or private, Mitchell and Koopman build upon F.A. Hayek’s work to distinguish between those regulations that amount to “taxis” orders, which are made or planned, and “cosmos” orders, which grow or emerge from human actions. This distinction is a critical feature in the vehicle-for-hire industry. It is the difference between Uber’s designed five-star rating system that regulates and influences how drivers and passengers interact and the #DeleteUber social media campaign that regulated and influenced how the platform interacted with its user.
Only by understanding each arrangement–public-taxis, public-cosmos, private-taxis, and private-cosmos–can we begin to evaluate the costs and benefits of each approach adequately. In doing so, policymakers can have a more productive conversation about where current regulatory efforts fall short and where they can be improved.