Think of what has been dubbed the "sharing economy" of today. The fall in transaction costs ushered in by modern technology has created completely new possibilities for entrepreneurs. What was unimaginable a mere decade ago is now a reality.
The boundaries that divide sharing and renting are disappearing. And while this new modern phenomenon is a boon to consumers and society as a whole, it’s a massive headache for the incumbents. Once those who have been successful for a while detect a threat to their own well-being and future survival of their business, they ring the bell of the legislators. Such examples are easy to find—just look at the many attempts to regulate or even ban services such as Airbnb and Uber in many of the major cities around the globe in recent years.
While there might be some merit in these regulations—it is hard to draw the line between what a taxi company and a transportation network company is, especially in colloquial and legal vocabulary—the question that needs to be asked is not how one should regulate those emerging businesses but how to deregulate the ones stuck in the 20th century. For legislators, the long-run outlook is even bleaker than for the status quo. With change happening at an ever-increasing speed, keeping up with innovations could become impossible to manage.
Fearmongering about the Future
With the sharing economy, another modern Luddite movement has been born. The fear is that because of the reduction in transaction costs combined with automation, jobs will quickly fall away amid massive unemployment.
As long as there is scarcity, there are unmet human desires. And as long as there are unmet human desires, there are potential jobs to satisfy those desires.
If we believe Michael Munger, transaction costs will fall dramatically in the future. On the one hand, this will result in lower relative prices, but at the same time, many people will lose their jobs.
Nonetheless, the newest fear of mass unemployment is once more unfounded. The first thing we need to remember is that we live in a world of scarcity. As Don Boudreaux reminds us, no matter how much technology advances or transaction costs fall, as long as there is scarcity, there are unmet human desires. And as long as there are unmet human desires, there are potential jobs—jobs to satisfy those desires.
Take food, for example. We have all been accustomed to the idea of futuristic food, be it the meal-in-a-pill, Back to the Future’s pizza expanding in size, or Star Trek’s food replicator. And in some way, food has become a subject of the sharing economy already with services like Uber Eats and Deliveroo. Nonetheless, regardless of how good the service is becoming, it is unlikely that no waitresses or other restaurant staff will be needed in the future. After all, despite the efficiency gains, humans are social beings and will still cherish experiencing food in the company of people they like, at a place they like, more than getting their food from strangers and eating it in their beds.
The "Pretense of Knowledge" Problem
Not even the “best of the best” can predict what will happen in a few years’ time.
In addition, just as many jobs didn’t exist before the introduction of the internet, so are the jobs of the future non-existent today? Indeed, we can’t even imagine yet what job needs could arise in future decades. That not even the “best of the best” can predict what will happen in a few years’ time has been shown many times. For instance, economist-turned-NYT-polemicist Paul Krugman said in 1998 that "the growth of the Internet will slow drastically… By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machines."
Every generation has its own challenges on magnitudes never seen before. Of course, this will also be the case with the next challenges. But having the “pretense of knowledge” to interfere in these processes can not only stifle progress but also even send humanity back in time.