# Understanding the Sharing Economy: Definition, Criticisms, and Evolution

## What Is the Sharing Economy?

 The sharing economy describes a [peer-to-peer](https://www.investopedia.com/terms/p/peertopeer-p2p-economy.asp) economic model enabling individuals to utilize and monetize idle assets through community-based online platforms. This system, facilitated by modern technology, promotes short-term transactions and collaboration, allowing participants to maximize resources by renting out underused items like cars and spare rooms. As it evolves, the sharing economy faces both immense growth and notable challenges, including regulatory hurdles and market transformation as platforms become business-centric.

### Key Takeaways

*   The sharing economy allows individuals to earn money from underused assets or free time through platforms that connect them with those seeking goods and services.  
    
*   Despite its rapid growth and innovation, the sharing economy faces significant regulatory challenges and concerns about privacy and data transparency.  
    
*   Sharing economy platforms can lead to unintended consequences, such as rising housing costs and the shift of workers from stable employment to gig-based roles.  
    
*   Some platforms have evolved beyond traditional sharing to resemble more commercial services, diminishing the original community-oriented intentions.  
    
*   Alternatives like the gift economy have emerged as responses to perceived failures of the sharing economy, promoting sustainable and community-focused exchanges.  
    

## Exploring the Mechanics of the Sharing Economy

Communities of people have shared assets for thousands of years. In modern times, the advent of the Internet—and its use of [big data](https://www.investopedia.com/terms/b/big-data.asp)—has made it easier for asset owners and those seeking to use those assets to find each other within their communities.

> **Fast Fact**
>
> The modern sharing economy is also referred to as the share economy, collaborative consumption, collaborative economy, or peer economy.

Sharing economies allow individuals and groups to make money from their underused assets, their free time, or both. In a sharing economy, idle assets such as parked cars and spare bedrooms can be rented out short term. In this way, [physical assets](https://www.investopedia.com/terms/p/physicalasset.asp) are shared as services.

A car-sharing service like Zipcar is an example of a sharing economy service. Zipcar participants can make use of daily or hourly car rentals, with the vehicles parked close to their homes rather than at a traditional car rental agency, rather than owning a private vehicle. According to data from the Brookings Institute, private vehicles went unused for 95% of their lifetime in 2017.

The same report detailed Airbnb’s cost advantage over hotel space as homeowners made use of spare bedrooms. Airbnb rates were reported to be between 30-60% cheaper than hotel rates around the world.

## The Ongoing Evolution of the Sharing Economy

The sharing economy has evolved over the past few years to encompass a wide range of online economic transactions that may even include [business to business](https://www.investopedia.com/terms/b/btob.asp) (B2B) interactions.

Other platforms that have joined the sharing economy include:

*   **Co-Working Platforms**: Companies that provide shared open workspaces for freelancers, entrepreneurs, and work-from-home employees in major cities.
*   **Peer-to-Peer Lending Platforms**: Individuals lend money to other individuals at rates cheaper than those available from traditional lenders.
*   **Fashion Platforms**: Individuals sell or rent their clothes.
*   **Freelancing Platforms**: Freelance workers from writers to handymen find jobs posted by individuals or businesses.

In 2017, the Brookings Institute predicted that the sharing economy would grow from $14 billion in 2014 to a forecasted $335 billion by 2025. Those numbers increased dramatically within a few years. In 2022, Allied Market Research valued the market value of the sharing economy at $387.1 billion and projected that it would reach $827.1 billion by 2032.

## Addressing Criticisms in the Sharing Economy

The sharing economy offers participants flexibility to earn extra money and reduces the need for individual resource ownership. However, there are criticisms of how the sharing model has evolved.  

### Regulation and Government Oversight

Critics point to [regulatory](https://www.investopedia.com/terms/r/regulatory_risk.asp) uncertainty, as many services on these platforms aim to replace highly regulated industries like taxicabs and hotels. Individuals offering short-term rental services may not be following government regulations or paying the fees. This can lead to lower prices but also opens the door for incompetent or unscrupulous competitors.

The lack of government oversight can lead to a risk of serious abuses of buyers and sellers in the sharing economy, such as a lack of privacy or the unfair treatment of contractors. Even when laws are in place to regulate sharing platforms, those laws are not always followed.

For example, in Virginia, multiple cities and counties claim that Airbnb has avoided sharing the data necessary to determine whether it is paying the correct local and state taxes. Regulators are concerned that this lack of transparency is intended to hide information like units illegally operating as Airbnb rentals.

### Bias Within Platforms

There are concerns that online platform information can lead to racial and gender bias. This can happen when users are allowed to choose who they will share their homes or vehicles with, or because of implicit statistical discrimination by algorithms.

### Moving Away From the Sharing Economy

Many sharing economy services have grown into models less focused on sharing. Instead, contractors use sharing platforms to create full-time businesses, becoming similar to the commercial services the sharing economy was initially meant to replace.

For example, Airbnb originally encouraged hosts to rent out unused rooms in their own houses, or to rent out their houses when they were away from home. As Airbnb grew in popularity, many units became full-time private rentals. This has led to concerns that, rather than promoting the sharing economy, Airbnb has contributed to rising housing and rental costs, as hosts buy properties to use solely as rental units. This decreases the supply of both long-term rental units and houses for sale.

## Understanding the Gift Economy Model

The gift economy, where participants don't charge for shared items or services, emerged as a response to perceived failures in the sharing economy. This model is organized around principles of community support and sustainable reuse.

Examples of the gift economy are:

*   The Buy Nothing Project: Locally managed neighborhood groups that give or loan each other goods and services for free
*   Repair cafés: Pop-up events in which volunteers help neighbors repair items or appliances rather than buying new ones
*   Tool libraries: Local hubs for borrowing tools rather than owning them
*   Little Free Library: A nonprofit that enables participants to create book-sharing boxes in their front yards where neighbors can leave or take books

> **Important**
>
> Many public libraries let patrons borrow toys, tools, appliances, and other items besides books and movies.

## How Is the Sharing Economy More Environmentally Sustainable?

The sharing economy is often cited as environmentally beneficial because it allows existing resources to be used more efficiently. An Uber driver sells rides to many people who otherwise would have to buy vehicles. A co-working space provides all of the equipment and space needed for a large number of home offices.

## What Is the Downside of the Sharing Economy?

Consider an alternate name for the sharing economy: the gig economy. Some of its participants appreciate the freedom and flexibility that has been made feasible as the sharing economy has grown. However, this also allows businesses to shift away from hiring full-time workers to hiring more contractors. This decreases the number of jobs available that offer stable benefits such as regular pay, health insurance, sick leave, and paid vacation time.

## How Does the Share Economy Differ From the Conventional Economy?

The share economy has several distinct characteristics:

*   It allows direct interaction between buyer and seller, without a retail go-between.
*   It's a short-term commitment for one job, not a contract for ongoing services.
*   It stretches one person's resources or skills to serve many others.

## Conclusion: Insights on the Sharing Economy

The sharing economy empowers individuals by allowing them to generate additional income and enjoy flexibility through the efficient utilization of idle resources. This model fosters direct interactions between users, facilitating personal and financial independence. However, it also raises significant concerns. The dominance of large platforms can lead to regulatory challenges, and these platforms often pocket substantial profits while sometimes neglecting regulatory compliance.

Additionally, as the sharing economy evolves, many services transition into full-time business models, potentially losing the essence of short-term collaborative consumption and impacting broader social and economic structures.

> **Article Sources**
>
> 1.  Governance Studies at Brookings. "[The Current and Future State of the Sharing Economy](https://www.brookings.edu/wp-content/uploads/2016/12/sharingeconomy_032017final.pdf)," Page 3.
>     
> 2.  Allied Market Research. "[Sharing Economy Market Research, 2032](https://www.alliedmarketresearch.com/sharing-economy-market-A230672)."
>     
> 3.  The Daily Progress. "[Cities and Counties Across Virginia Say Airbnb Is Breaking the Law](https://dailyprogress.com/news/local/government-politics/cities-and-counties-across-virginia-say-airbnb-is-breaking-the-law/article_641a27ee-b4e4-11ee-9880-57cb629011bd.html)."
>     
> 4.  Airbnb. "[Fighting Discrimination and Building Inclusion](https://www.airbnb.com/against-discrimination)."
>     
> 5.  Forbes. "[The Airbnb Effect on Housing and Rent](https://www.forbes.com/sites/garybarker/2020/02/21/the-airbnb-effect-on-housing-and-rent/)."
>     
> 6.  Buy Nothing Project. "[About](https://buynothingproject.org/about)."
>     
> 7.  Repair Cafe. "[About](https://www.repaircafe.org/en/about/)."
>     
> 8.  Little Free Library. "[About Us](https://littlefreelibrary.org/about/)."