by Tina Kong
A new economic concept is now being talked about amongst the younger generation - The Sharing Economy.
While the traditional business model follows the cycle of goods and services, first being produced by firms and then passed on to consumers, this constantly evolving model of the sharing economy has its base in the sharing of assets and the reduction of purchases.
In other words, the sharing economy is a way of increasing accessibility of goods and services that are usually of relatively high prices and that are not used regularly through online platforms.
The Sharing Economy seems to have its roots in the concept of bartering, without some of the problems and inefficiencies of the past.
The slim possibility of two parties having the double coincidence of wants reveals the problem of bartering. Double Coincidence refers to a situation in which the buyer wants to buy exactly what the seller is selling and in turn, has exactly what the seller wants in return.
For example, shoes in return for wheat. Money acts as a medium of exchange, thereby overcoming the problem of double coincidence.
Modern technology mitigates these inefficiencies, and it is now easier than ever to share assets on peer-to-peer applications. However, the concepts of bartering and the sharing economy are, to an extent, different.
Bartering involves the trading of any goods, including perishable goods like milk. Therefore, theoretically, after consuming that product, it is impossible to return the product.
On the other hand, an example of what we would consider economic activity in a sharing economy is renting out your house to a foreign family during the holidays. But you would expect them to return your house in good condition after their stay.
The principle of the Sharing Economy is constantly evolving, and people perceive it in different ways. The question is why is there a sharing economy when people are happy following the traditional business model. Why are people striving for such collaboration?
Here, we need to examine the benefits of collaboration. Perhaps the biggest advantage of a sharing economy is the cheaper price of goods and services. Sharing a good that is not used on a regular basis can save resources and money.
After all, is it worth buying a car if you are only going to use it once a month? I think that most people would go with an alternative method, whether that be renting a car for the weekend or taking an uber taxi.
This procedure is more simple and does not require so much paper-work like insurance and maintenance for the car. For the youth, it’s not only the cheaper price that is attractive but also an alternative allowing for more sustainable use of resources.
Goods and services can now be used to a greater value leading to efficient utilization of resources. Today, the Sharing Economy is expanding at full power.
A notable exemplar in the transportation industry is Uber. Users of uber follow simple steps such as entering their current location and destination. This service is aimed at improving the traditional services of a taxi cab with better-quality cars and more personal service.
The emergence of Uber and other ride-sharing services have no doubt caused the drop in the value of owning a taxi cab in New York from 1 million to 200,000 USD in the past decade.
Other examples include the well-known eBay, a platform for the sale of second-hand goods and services.
Although we can never be sure of how long this principle will last, the technology and consumer satisfaction will continue to push it further.
As asserted by the Director of the Earth Institute at Columbia University, the movement of consumption towards sustainability without harming economic growth is what this type of economy embodies.
Although we must take into account that researchers are still in search of data to support this claim, such as a concrete number on how much sharing resources benefit the environment, I think that this economy will bring forth increased efficiency and sustainability in some way or another.