In this post, Thomas Ferretti discusses his recent article in the Journal of Social Philosophy on A Liberal Egalitarian Perspective on the Platform Economy.
The rapid growth of the ‘sharing’ or ‘platform’ economy, with the rise of well-known brands such as Zipcar, Uber, Airbnb, or CouchSurfing, has raised enthusiasm but has also generated concerns about precarious work. In my new article in the Journal of Social Philosophy, I investigate, from a broadly liberal egalitarian perspective, how public administrations should regulate these new kinds of economic organizations in a way that respects principles of justice and that maximizes the prospects of the least advantaged. In particular, I argue that preventing unfair inequalities could require changing the kind of organizations running these platforms.
A driving motivation is to contribute to the renewed and much-needed attention that political philosophy is giving to the different forms and ownership structures of economic organizations and their respective impact on the distribution of resources in society. Recent examples include the work of Elizabeth Anderson, Abraham Singer, or Martin O’Neill.
One contribution of the article is to make organizational transformations central to our understanding of the platform economy. I use theories of organizations to distinguish and to shed light on two processes facilitated by information technologies. First, I investigate the replacement of private goods with club goods: a car-renting organization like Zipcar, for example, proposes to replace your ownership of a ‘car’, an excludable and rival private good, with a ‘membership’ to the Zipcar club giving you access to the use of a car. While clubs have always existed, information technologies improve the capacity of organizations running clubs to manage the shared use of goods by facilitating user coordination in real-time, thus reducing coordination costs and congestion. This means that for a given pool of goods, clubs can now include more members, thus reducing the per capita cost of the pool and the membership cost. I note that this also allows sharing a wider variety of goods in new ways such as kick scooters.
Second, I investigate the creation of new markets through online platforms. Such platforms allow market agents to gather, pool, and analyze market information about suppliers and consumers in much more effective ways which reduce the costs of contracting directly on the market. This allows firms to externalize more transactions previously performed within their organization to market contractors. The distributive effects of such ‘creative destruction’ are more complex but I explain how it can negatively affect the worst off in at least three ways: a. because good jobs are replaced by more precarious ones and the risk of fluctuating demand is shifted from firms to contractors, b. because workers having to change occupation face transition costs, and c. because existing regulations and social protections are disrupted.
A second contribution of the article consists in clearly distinguishing two distributive strategies to mitigate inequalities resulting from these organizational transformations. Following a mitigating strategy, public administrations could simply implement policies such as redistributive taxation and adapted social protections to compensate people on the losing side of these market disruptions. But they could also go further and follow an organizational strategy: in addition to the previous mitigating policies, public administrations could aim at changing the kind of organizations running clubs and platforms.
In the article, I briefly give reasons to believe that clubs have mostly positive distributive effects because they cut the cost of accessing various goods such as books, tools or cars. Therefore, in my view, public administrations may not need to change the kind of organizations running these clubs and may simply need to intervene to help the least well-off access club goods through targeted subsidies to further cut membership costs, to help launch service points in poorer neighborhoods, and to improve digital literacy.
By contrast, I argue that the mitigating strategy may be insufficient to limit unfair inequalities created by online platforms and we may need to change the organizations running them. This strategy includes subsidies supporting more egalitarian cooperative platforms (of contractors and users) to help them outcompete current investor-owned platforms as well as more intrusive policies aiming at breaking the monopolistic tendencies of many platforms by forcing them to share their data and by making contractors’ and users’ reputational data portable to alternative platforms to improve competition.
The article ends by discussing the merits of the organizational strategy as well as an important challenge. Indeed, I underline that a presumption of formal freedom could lead us to believe that the more intrusive policies of the organizational strategy are justified only if they are necessary to realize justice and maximize the prospects of the least well-off; so, if changing the organizations running platforms is not absolutely necessary to maximize the situation of the least-well-off (if mitigating policies are sufficient and/or if promoting coops is inefficient) then, more interventionist policies may not be justified. In the paper, I outline the kind of arguments needed to respond to this challenge but more research is needed to reach a definitive conclusion regarding the necessity of the organizational strategy.