What is ‘the Shared Economy’ and Does it Work?

Source: Thinkstock

Source: Thinkstock

In an era in which many Americans are increasingly frustrated with the economy, it’s refreshing to learn about a source of economic growth, especially one that exists almost entirely between consumers with hardly a middleman in sight.

That’s essentially the idea behind the “sharing economy,” a term which economists have coined to describe the way some internet-based businesses allow consumers to exchange goods and services without overseeing each and every transaction. Examples include several successful online platforms like Airbnb, Dogvacay, Lyft, Uber, Relayrides, Taskrabbit, Fon, and more.

Nancy Koehn, a Harvard Business School professor who spoke with the Harvard Gazette, defines the sharing economy as “a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade, and consumption of goods and services by different people and organizations.”

She adds that, “This is theoretical language for peer-to-peer exchange of everything from car rides to spare bedrooms to advice on buying a new television or finding a good plumber.” The sharing economy is wonderfully flexible and all-encompassing; websites ranging from Angie’s List to Etsy all fall under this category.

While experts may have only recently labeled this phenomenon, the Internet has quietly been engaging in this “socio-economic ecosystem” for quite awhile now. Case in point: Remember when eBay first jumped on the scene in 1995?

Koehn uses eBay as an early example of the sharing economy, noting that “eBay opened up a treasure trove of previously unavailable goods, almost all of which were initially being offered for sale by people seemingly just like them.” While eBay has changed a lot since then, and has even, arguably, grown antiquated in the past decade, the company did pioneer a new way of using the Internet, and it’s left long legacy.