It is rare that an election in San Francisco brings good news to the nation, but last Tuesday voters there defeated a referendum that would have interfered with Airbnb by limiting the number of nights people could rent out rooms in their homes. While this victory is good on policy grounds, it is even better for what it tells us about the capacity of the sharing economy to mobilize small businesses and consumers against onerous regulations.
Small businesses and consumers tend to lose out in politics, because they are diffuse groups where the gain for each individual from engaging in politics to shape regulations is small and the cost of organizing is high. In contrast, large businesses and labor unions are more concentrated interests and as a result have more leverage. In politics concentrated interests tend to win out over diffuse groups.
Such concentrated interests stood to gain substantially from restrictions on Airbnb. Hotels are competitors of Airbnb and so are the labor unions of hotel workers. Generally owners who want to rent out apartments for short stays and their customers would be no match for these interests. But Airbnb lowers the cost of organizing, because it is internet based. This organizational ability levels the playing field. The sharing economy is the porcupine of politics with ample quills in the form of participating consumers and small businesses for defense against government regulation.