Thanksgiving is a time to reflect on trust and to be grateful for its presence in our lives. Originally, Thanksgiving was a celebration of trust between two different peoples, the indigenous Indians and the Pilgrim settlers. Despite their different cultures and religions, they were able to trust one another enough to contribute food to a feast and sit down to dine with one another.
Today Thanksgiving is quintessentially a family celebration. At its best, it is suffused with trust because the family is a locus of trust. Because of the bonds among kin, for most of human history much commerce took place among extended families. And most of the rest of it took place between people who were known to one another. Being a repeat player who must live in a community inspires trust in others, particularly past eras when being ostracized was very costly.
But as civilization developed, communities became larger and the opportunities for gains from trade extended beyond those that could be easily satisfied by family, new institutions had to arise to police trust.
Many people, particularly on the left, argue that the modern economy is increasing inequality. But, as I have discussed before, important trends in innovation increase equality. One example of these equalizers is the sharing economy. The ideas of a law and economics theorist of the developing world show how this new economy generates a greater return on the assets that people of modest means are most likely to own.
Economist Hernando De Soto recognized that much of the capital in developing nations was locked up. For instance, squatters lacked property rights in their houses even after decades of living there and improving the land. But legal reforms providing capital can greatly enliven previously dead capital in those nations. When a squatter becomes a property owner, he can mortgage his property and use the proceeds to start a small business.
The advantages of these legal reforms go almost entirely to people of modest means. Not only did the rich generally always have formal title to their real property, even more importantly real property is a much smaller proportion of their total assets, which are mostly financial securities.
Similarly, the sharing economy enlivens important capital assets in the developed world. As Daniel Rothschild suggests, this unlocking creates prosperity. But it also boosts equality because the assets it enlivens are those which make up most of the wealth of people of modest means.
In the sharing economy, companies like Uber, Lyft, and Airbnb, add value by using resources that would otherwise be idle. The Internet connects people who need transportation or accommodations with people who are willing to provide them. Another substantial advantage is that these same connections permit social norms rather than government regulation to enforce standards of good conduct.
Government has a model for regulating taxis. It generally requires substantial licensing and enforces rules by tracking complaints and disciplining drivers found in violation. But a company like Uber makes much of this regulation unnecessary. First, given its substantial capital investment, it has every interest in checking out drivers itself before it permits them to represent its good name.
But Uber also makes use of social media to assure continuing good behavior of its drivers.