Economics, Exploitation

The Sharing Economy and the Ownership of the Means of Production

In a post at Cafe Hayek this morning, Don Boudreaux cites his Mercatus colleague Ashley Schiller’s observation that Uber and the “sharing economy” more generally allow individuals to turn their consumption goods into capital goods as they wish to. Your car becomes a capital asset when you use it for Uber driving. This, Don points out, spreads the ownership of capital more widely and thereby undermines the process of capital concentration that people like Piketty claim is happening. That’s a terrific point. And it raises a huge irony…

How amusing is it that so many Marxists and progressives are objecting to a change in the relations of production that enables more individuals to become owners of the means of production rather than having to work for someone else who owns all of the physical capital they require to do their job?

Yes, Uber still owns the software platform that makes the connection between seller and buyer possible, but it remains the case that Uber drivers own their own capital, as did the pre-capitalist artisans and farmers. Uber drivers control the days and times they choose to work. They can hunt in the morning, be a medical technician in the afternoon, drive for Uber in the evening, and work on their new business idea after dinner. Or they can do it by days if they wish.

The sharing economy can’t make us all Aristotle or Goethe. It can’t give us all of Marx’s utopia. But it sure does seem to get us closer to a number of the goals that Marxists and other progressives have claimed to want.  When people own their means of production and escape from the imposed structure of the owners of capital, they thereby gain the flexibility to explore multiple avenues of flourishing much more on their own terms.

Isn’t that one of the central goals of Marx-inspired socialism? If so, we should be celebrating the sharing economy as a huge step toward realizing one of socialism’s central goals through the market. Bleeding heart libertarianism, indeed.

 

Published on:
Author: Steve Horwitz
  • j_m_h

    I think the only issue I have with the bit about the car now being capital is that it already is even if you’re working for someone. There’s been a number of studies that seem to conclude people with cars have much greater chances of getting and keeping jobs and getting out of poverty.

    The fact that they don’t get to treat their car like a capital asset like a corporation does , merely because they have a W2 employment agreement with the employer and not a contract agreement, is the bigger problem.

    • DST

      Would your solution result in someone walking to work paying more in income taxes than someone driving to work, since the first lacks a capital asset like a car?

      • Theresa Klein

        The current system already results in workers paying more in income taxes than employers … just by virtue of the fact that workers can’t deduct expenses but employers can.

        • DST

          I wasn’t comparing workers to employers, but pedestrian workers to driving workers. My point was just that it seems strange to penalize pedestrians with higher taxes, just because they live close to work and can avoid driving, since that seems like a more efficient outcome that the tax code should at worst be neutral to.

          But to respond to your point, it’s difficult to talk about employers “paying” taxes, since tax is an expense that largely, but not exclusively, gets passed on to workers as reduced wages or to customers as higher prices. And even to the extent that you can talk about employers paying taxes, it’s very difficult, if not impossible, to compare that to workers paying taxes, at least with respect to deduction of expenses, since most business expenses are made solely for the business, while many worker expenses have utility outside of employment: car, clothes, etc.

          I do know that the IRS allows workers to deduct some uniforms if they can’t reasonably be worn outside of work. But most people today either wear casual (blue-collar) or business casual (white-collar) clothes to work, and so can’t deduct them. Of course, most people don’t itemize anyway, since the standard deduction is so large, which of course also cuts against the idea that workers pay too much in tax.

          Either way, complications like these are part of the reason why I think an income tax is one of the worst kind of taxes, particularly as implemented in most countries today.

          • Theresa Klein

            I was just pointing out that there there are a lot of examples of differential tax treatment already in the code. Allowing people to deduct car payments would be small compared to some of the other discrepancies.
            You’re right that it’s not clear how to equitably tax people using deductions for expenses, due to the fact that cars, houses, clothing have uses outside of work.
            This is why I was suggesting using the standard deduction as some sort of cost-of-living measure.
            But maybe the correct answer it to tax everyone on gross.

      • j_m_h

        Just to clarify, I didn’t suggest a solution only pointed out an observation.

        However, I see the point you’re making but wonder if that matters. What we’re want to know is what the net profit each enjoys from their productive activities. The person without the car probably will be living much closer to work and other things (shopping, heath care…) or have access to good public transportation.

        The point I get at is that the car is a capital good in nearly all it’s uses by most people by almost any standard economic definition (and certainly those use by Horwitz or Boudreaux) and it seems to be well established that in the USA having a reliable car is nearly a requirement for getting out of poverty. Treating the car as a capital asset of the person allowing expensing and depreciation would clearly help poor people own better cars.

    • Theresa Klein

      Agreed. It’s also been noted that there’s a discrepancy in that businesses get to claim their rent as an expense, but private individuals do not. That’s partly because a home is more than just a workplace, and we don’t want people claiming a massive house as an expense. But there ought to be some way to make income taxes on “profit” for individuals rather than gross.

      That’s what the standard deduction ought to be, but the standard deduction is currently too low to function that way. Personally, I think it should be computed according to some measure of the cost of living, including median rent, car payment, food and so forth.

      • j_m_h

        But isn’t the separation between living and working something of an artificial construction of the modern world? Additionally, if one thinks about the person being productive in the sense of generating some income the house is really little different from the building containing that actual equipment that people work with to make stuff that the business sells. The person, just like the machines, will not be maintained or in as good of working conditions without the housing’s protection from the elements.

        Sure, I understand how we get to where we are and that there are plenty of logical rationales for the current distinctions. As you mention, most are related not really to the underlying productive thing (person or not) but about tax deductions and the need to be to pay for government — or putting it differently, the need for government to have a revenue stream to spend. In that effort to ensure someone is paying taxes we end up with some rather arbitrary and differential treatment under law.

  • stevenjohnson2

    j_m_h, no a car is not a capital asset…it is an expense.

    The OP is welcome to capitalize his lawn mower by mowing other people’s lawns for money. I can’t claim to be successful at Marxism, but for what it’s worth, destroying Piketty by spreading capital around would be an excellent use of his time.

    • JoshInca

      J_m_h, no a car is not a capital asset…it is an expense.

      Capital good are always expenses until they are put to productive use.

    • j_m_h

      You seems to be confusing accounting and economics. My statement is about the economic sense of capital assets.

  • Jim Dow

    Is this what liberals/progressives/Marxists are objecting to? My take was that they were bemoaning the decline in steady jobs that would provide a decent standard of living and that are replaced by a bundle of temporary part-time jobs (I’m only half in agreement with this but I think there’s some truth). For some people, having more part-time opportunities is good since they don’t want the restrictions of a 40-hour job. For others, they would prefer a full-time job to part-time work.

    How you think about AirBnB probably depends on why you ended up renting your room. Got lots of space and don’t care if strangers come by? Good thing. Dad lost his job and is now working at the McDonalds and so you have to rent out a room? Too bad. Of course, renting a room is better than not renting a room, but it’s like getting shoved off a boat and then that person throwing you a lifeline. How appreciative should you be?

    I don’t think liberals/progressives/Marxists are either being illogical or uneconomic (although they might be wrong). I think they are arguing that wages at the bottom get pushed down towards some minimum which is determined in part by technology, legal restrictions, regulation and culture. They are arguing that the sharing economy will turn out to be a technological change that pushes down that minimum. Again, they might be wrong, but their argument has little to do with capitalization of cars and houses.

    • Steven Horwitz

      I didn’t mean to suggest that is WHY they are objecting. What I am arguing is that the EFFECT of their (other) objections is to stifle a change in the economy that seems to accomplish goals they’ve long stood for.

      • Jim Dow

        OK, it’s a sort of “on net” problem. They would like people to have more income producing capital and they would also like people at the bottom to have better jobs but, from their point of view, one interferes with the other and so they went with the policy they believed would have the larger effect (correctly or incorrectly)

      • UserGoogol

        Aside from the fact that most “liberals/progressives” aren’t really “Marx-inspired socialists,” there’s more to control of the means of production than just whoever officially owns whatever physical assets are used to produce more goods. Marxists have all sorts of complicated theories about how production is mediated throughout society and how capitalists control that broader system. If you have to work on Uber’s terms in order to do the job, then you don’t “really” control the means of production, and so you can have all the exploitation and alienation as usual. And the argument being made is that the exploitation is, in fact, worse.

        Workers having more control over the assets they use in their work is, all other things being equal, an improvement from a Marxist perspective, and from a broader liberal-progressive perspective most of the time too. But all other things are not equal.

        • adrianratnapala

          I expect you are right that modern Marxists do in fact have lots of complicated theories about this stuff; but I was struck by how little Marx and Engels actually thought about the topic.

          They have a detailed analisys of why they think workers are short-changed by the wage system. And of how capitalists used property rights to become commanders of “industrial armies”.

          They then see the proletariat seizing that commanding role through government diktat. But what I’ve not seen from Marx and Engles is any curiosity about how the proletariat would function. They just assume that this collective entity will act in the interest of its members.

          The one thing that seems clear is that the proletariat really is an organsiation, an industrial army. Whatever “ownership of the means of production” actually means, it does not involve individual workers owning particular machines. It is about the proletariat owning them collectively.

        • ThaomasH

          “Aside from the fact that most “liberals/progressives” aren’t really “Marx-inspired socialists,”

          If you could disabuse writers and commentators on this blog of that, we might get somewhere. 🙂

      • adrianratnapala

        If what Marx wanted was industrial armies ruled by the ploratarian organisations, then General Motors is a pretty good, if partial implementation of his wish. It is certainly an industrial army, and it partly ruled by unions and their friends in government.

        It is hardly suprising that his followers resist any movement away from the GM model. Leftists who are not marxists will likely think in terms of different terminology, but the basic logic of their concerns is the same.

    • rjriediger

      Before Uber, I rode taxis maybe 5 times a year. I now ride uber about 5-10 times a month. It’s a cheaper, cleaner, faster, friendlier, information-rich experience. Uber’s competition is not taxis, but customers’ feet & other less desirable ways of getting places.

      • Jim Dow

        Uber is great! Both my liberal and conservative friends love it and so it’s the natural go-to example for libertarians arguing for less regulation. My issue is not with the effect on the consumer side, I think everyone agrees that it’s good, but its effects on the producer side. I think the benefits will be much much smaller than some are arguing (leaving aside the effects on existing cab companies, which will be negative and deservedly so).

        • rjriediger

          Southwest Airlines created new customers from car drivers & people who otherwise stayed home. Their air crews are among the highest paid in the industry. They have created wealth that didn’t exist. The pie is bigger for everyone.

    • Theresa Klein

      What if it turns out that a wider distribution of capital is inevitably linked to greater competition and a pushing down of incomes at the lower skilled end of the scale?
      Is the Marxist not then forced to argue that capital must be concentrated in the hands of the state so that the state can restrict competition for low-skilled services?
      Secondary to that, if the state’s role is to restrict competition to drive up incomes for low-skilled workers, who is being prevented from competing? It seems to me that restricting competition for low-skilled jobs inevitably involves excluding OTHER low-skilled people from having those jobs. Which brings us right back around to the injustice of occupational licensing and other such regimes. The state ends up arbitrarily favoring some connected and relatively well-off groups of people over less connected and less well off groups of people. Conventional taxi-drivers who have a steady job and a decent standard of living, are better off then unemployed would-be taxi drivers living in poverty.

      The liberals/progressives/Marxists in this case are favoring the interests of the working poor over the even poorer here, somehow on the theory that the even poorer will somehow end up getting steady jobs at a decent standard of living if only we can restrict competition enough by keeping them from having those jobs and driving wages down. It’s ultimately a massive contradiction. There’s no reason to think that demand for taxi services (and so forth), is ever going to rise sufficiently to supply everyone who wants to be a taxi driver a job at the high paying rate. Especially not if you’re deliberately trying to drive up the wages those people receive. And particularly not if your doing it by intentionally excluding people from working in those occupations.

      • Jim Dow

        I think we’re arguing about different things. My small point was that people of the left were not being hypocritical with their concerns about the sharing economy. Ownership of capital isn’t the only thing that’s changing with this.

        My bigger point across a number of these discussions is that getting rid of occupational licensure will have very little effect on *unemployment*. We know that, as a first approximation, the level of productivity is unrelated to the level of unemployment. Productivity has grown massively since the 1950s, and so if productivity improvements could reduce unemployment, it should be at zero by now.

        People arguing the other way are typically falling into the lump of labor fallacy. They are assuming that there are a fixed number of jobs around and so getting rid of a regulation that limits the number of some kind of job will result in a decrease in the overall unemployment rate. Again, this is inconsistent with history.

        I’m not arguing for the current taxi cab regulations. I’m in favor of uber, but for reasons besides employment.

  • Jim Dow

    The other thing to be concerned about, if this ever becomes big, is how new income streams are capitalized in assets. Say that AirBnB makes houses more valuable by generating an extra income stream. If you bought a house before AirBnB, this is a great thing since it increases the price of your home. If you bought a house afterwards this is neutral since the present value of the option for the income stream would be capitalized in the price. Renters would probably faced mixed results. Having “guests” living with you would be a negative externality for most people to varying degrees. Those who didn’t care would find that their “effective” rents decreased (since they would need less compensation than the market-going rate to make up for the externality) while those who cared a lot, perhaps families with children, would find their effective rents increased.

    • DST

      The effect of services like AirBnB would seem to be to reduce the percentage of residential buildings that are dormant at any given time, bringing actual residential use closer to capacity. Wouldn’t that reduce the demand for housing, and therefore prices all around, since existing units are being used more efficiently?

      • Jim Dow

        At least where I am, AirBnB is mostly used by tourists and so is a substitute for hotels rather than long-run residential. This reduces the demand for hotels and should make travel cheaper which is great for consumers. It’s the production side where the effects are more complicated since you have to tease out where the inelastic supply is so you can see who earns the rents (literally in this case).

        In my city, much of AirBnB is driven by renters leasing rooms which landlords are very much against (and probably breaks contracts). If landlords could get their cut, they’d probably be OK with it, but the transactions costs of arranging that are pretty high.

    • JoshInca

      Renting out a room in your residence for either long term or short term usage is a very old idea. One that was suppressed by 20th century zoning policies but never disappeared entirely.

      • Jim Dow

        That’s a good point. Why those zoning policies appeared probably deserves some consideration.

  • Benjamin

    Kevin Carson has been saying this for years.

  • stevenjohnson2

    So far as I know, Marxist groups like the CPUSA, Worker’s World, PSL, ISO, Spartacist League, Social Equality Party aren’t propagandizing against Uber, etc.
    Just to be clear, what “Marxists and progressives” are?

  • jtkennedy

    I don’t get why this is called sharing when it seems like conventional buying and selling.

  • JoshInca

    Isn’t that one of the central goals of Marx-inspired socialism?

    No, why would anyone think that it was, because it is sometimes used as a marketing pitch for socialism?

    The revealed preference for socialism has always been centralization or capital under state control.

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  • reason60

    Uber and AirBnB are really just variations on the old economy models of taking in other people’s laundry and renting out rooms.

    None of which is objectionable to this “Marx inspired socialist”. My only objection is one, the flouting of existing laws (how about we stop enforcing Uber’s copyright? Y’know, just to be disruptive and break things?) and two, the classifying of drivers as “independent contractors” to evade the labor rules of how employees are to be treated.

    Basically, Uber and the rest are fine, we just need them to play by the rules and make sure the public is getting a clear benefit from them.

    • Mark Burk

      As near as I can tell, the “rules” you feel we “need” them to play by are those as dictated by government as opposed to those agreed to by individuals who are free to choose not only what economic arrangements they enter into, but the terms of the deals as well. It is precisely that freedom that is taken away when government intercedes in its attempt to make a “fair playing field”. Why do we “need” to make sure the public is getting a “clear” benefit from them, and who do you mean by “we”? Irregardless of how knowledgable anyone (or institution) might be, they have no right to decide what they feel is best for anyone else unless the (other) person gives permission to do so.

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