The future has arrived, and it is a radically different economy. Havas Media’s Tom Goodwin pointed out in 2015, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” This phenomenon has significant implications in the world of public policy, so we owe it to ourselves to understand the economics of what is happening.
What economists once understood about business has in the past two decades has been upended. Following the pioneering work of French economists Rochet and Tirole in 2000, it turns out that markets do not always consist of a single provider and a single customer but often have many different interests representing different sides of the market. YouTube, for instance, provides services to video makers, video viewers, and advertisers—and has to balance the interests of all these parties to be successful. YouTube and other multisided businesses are called platforms.
What is exciting and transformative about this new economy is that it offers countless opportunities for innovators to provide new ways of doing business and creating wealth that we haven’t seen before. It is precisely because it is so innovative and transformative that there have been calls for regulation to slow or stop the pace of change. This would be a massive mistake.
As Duke University’s Michael Munger explains in his latest book, “Tomorrow 3.0: Transaction Costs and the Sharing Economy,” there appear to be two separate but closely related trends in business that account for the phenomenon Goodwin pointed to:
- More businesses are fulfilling the role of matchmaker, bringing people providing goods or services and people who want them together. Yelp is an example, bringing more restaurants to the attention of diners.
- More businesses are selling reductions in transaction costs, making those economic transactions easier. Amazon’s direct retail business is probably the most obvious example.
However, as mentioned above, these factors often interrelate. While taxicabs had ride-hailing apps for a while (I used to use Taxi Magic—now Curb—to get a ride out of D.C. late at night), Uber beat them by reducing transaction costs to people who wanted to provide rides, thereby adding many more providers (drivers) in its matchmaking function.
Virtually all of these innovative businesses are platforms in one way or another, and so while this phenomenon is often called the “sharing economy” (or the “gig economy” by those worried about its development), it is probably best called the platform economy.
In order to help policy-makers understand the platform economy better, why it is happening, what could stop it from happening, and what implications it has for the way we live, work, and do business, CEI has therefore compiled the Web Memo “Platform Economy Bibliography: A Study Guide for a Rapidly Developing Field.” This contains lists of books, journal articles, policy reports, and shorter articles that help explain various aspects of this emergent form of economic organization.
The list is by no means exhaustive, and we welcome suggestions for additions to the bibliography.
We hope you find it useful.
Former Research Associate Ryan Khurana contributed extensively to the compilation of this bibliography.