A great source of inspiration in my thinking this past year has been the podcast EconTalk with Russ Roberts. This week Russ spoke with the Political Economist Michael Munger about his new book “Tomorrow 3.0: Transaction Costs and the Sharing Economy” and, more generally, the sharing economy. Their discussion raised some questions for me around my own research in transportation and land use. Michael placed great emphasis on the importance of transaction costs, which include and bear a close resemblance to transportation costs and accessibility. Michael defines transactions costs into three, conveniently ‘t-suffixed’ words, namely: triangulation, transfer, and trust. He gives the case of the Sears catalogue as an early 20th century example of reducing transaction costs. The catalogue provided a medium for the aggregation of a wide variety of goods for sale. The Sears catalogue can be argued to be a predecessor of Amazon. Both represented major leaps forward in our ability to reduce transaction costs. The goods are provided in a centralized location (fulfilling triangulation), low cost in their distribution networks (transfer), and trusted by consumers. The ability to rate suppliers is a key ingredient in the success of Amazon and, focusing on the shared economy, the emergence of software that provides a means of trust in non-traditional market transactions. Consider Uber, which provides a service similar to hitchhiking in its lack of regulation. Users trust the service because Uber acts as an intermediary system of vetting for drivers.

Michael and Russ spend the first portion of the podcast talking about the sharing economy and the cost of durable goods. There are many goods we rarely use (e.g. power tools), which could be rented rather than owned. The main criteria for an effective shared durable good is that it have a high purchase price and low frequency of use. Michael provides an example of autonomous vehicles transporting rented equipment between homes, which is intriguing but also MIGHT presents challenges with respect to road congestion. I say might because it is not straightforward to compare individuals making purchases at the store with a centralized provider of goods, who can potentially optimize their route planning and carry many goods in a single vehicle. There are interesting questions around where the tradeoff lies between the cost of ownership and the cost of rental, including transportation costs.

One point that stood out for me in their discussion was the space requirement for durable goods. The primary examples are cars and large power tools. They discuss how space requirements for dwellings might be reduced by a diminished storage requirement within the home. Mind blown! It is so intuitive, but yet is not something I have considered at length. I am a great hoarder of books, which take up precious shelf space in our small apartment. The library is a (very) old example of the sharing economy in this particular space. I generally take advantage of this resource but the transaction costs are high for the cost of the good: I need to be sure the book is available at my local branch or reserve the book - requiring a wait for the satisfaction of reading a particular book. I’m often rough with my books, adding to my preference for ownership. None the less, it raises interesting questions about the reduction in building footprint associated with the shared ownership of cars, and perhaps other large durable goods.

Michael and Russ talk about Uber being a framework for sharing, well outside the transportation realm. I think this evolution is highly probable and it raises some fascinating questions for transportation and land use researchers. These are fundamentally questions of transportation, accessibility, proximity, and time - in the parlance of my field. It is an exciting time to begin in this field, indeed!

My usual notes on these topics: how will these new technologies affect equity? How can new technologies be framed in the context of networks? This is a topic I am ruminating on as a potential book idea. I have an enormous passion for history, which is largely untapped in my research. I have been thinking a lot about topics for a book that mix my interest in history with the perspective of a Transportation Engineer. We shall see where it leads…