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CHAPTER IV - Disrupting Government

Like other institutions, government must deal with the challenge of disruption. In fact, in the long run government may be the institution that is most profoundly challenged by the increasing rate of social change.

What is the appropriate role for government in a world of continual disruption? Can it function in such a way as to keep pace with the changing environment in which it must operate? Sonny Garg, Chief Information and Innovation Officer at Exelon Corporation, pointed out that even as the pace of innovation increases, government structures are built on assumptions of stability and are slow to adopt to change. For example, many municipal governments depend heavily on revenue from taxes on hotel rooms. This reliance is being disrupted by services like Airbnb which siphon business from hotels. Even though Airbnb’s CEO professed a willingness to begin paying these taxes, he claimed that no mechanism currently exists to collect these taxes.i Similarly, governments that have closely regulated taxis by granting a fixed number of medallions are struggling to come to terms with ride sharing services such as Lyft and Uber: some have tried to include them in their regulatory frameworks while others have attempted to ban them outright. The real problem, Garg concluded, is the discrepancy between the pace of social and economic change and the rate at which government is capable of changing.

Entrepreneur Robin Chase responded that while some government regulations make sense and deserve to be kept, others are outdated and need to be changed to accommodate the growth of a sharing economy. Some regulations involve tax revenue (and are often built on old, outdated models); others determine what kinds of activities are permitted and what are prohibited. For example, the federal government, which is responsible for assigning different portions of the electromagnetic spectrum for various wireless applications, still treats bandwidth as if it had to be strictly segregated into different uses and different users (to avoid interference). In fact, in recent years, new techniques for sharing spectrum make it possible to increase spectrum utilization by using bandwidth much more efficiently. Yet government regulatory policy is not yet updated to allow for sharing, in part because of the resistance of incumbent users reluctant to share a resource that many have come to believe belongs to them.

Another problem area involves copyright and the protection of intellectual property, which seem to be increasingly out of step with an economy that is based on sharing. Companies whose success was built on the old model of creating and exploiting stocks of knowledge are not likely to be comfortable in a world based on maximizing participation in flows of knowledge, and are likely to seek the protection of existing copyright schemes. For example, Elliott Shore with the Association of Research Libraries noted that educational publishers are attempting to keep control of scholarly publications, and pointed out the irony that these publishing businesses are based on charging colleges and universities a high price (in the form of expensive scholarly books and journals) to buy access to the work of their own researchers and scholars. Even though publishers’ revenues might actually increase if information could be shared more openly, they remain firmly committed to the traditional model based on restricted access.

A troubling question that ran though the discussion of the rise of the sharing economy was who ultimately benefits? Will this new model of business do anything to help those who are disadvantaged, to reduce the growing inequality in our society? The optimistic view is that new technologies like the Internet have already provided benefits to everyone. But skeptics argue that the poor and uneducated who lack access to the tools necessary to participate in collaborative enterprises and the skills to use these tools may end up being relatively worse off than they already are. Several participants noted that the digital economy tends to be driven by a power law in which a few participants garner the lion’s share of the rewards, while everyone else must share what is left over.

Perhaps it is the role of government to ensure that the benefits of technology are equitably distributed (for many years, for example, the federal government provided subsidies to help rural and poor residents to help them get electricity and telephone service). But Bob Brook, Distinguished Chair for Healthcare Services at the RAND Corporation, posited that the federal government does not routinely do any analysis of its policies to determine their impact on reducing discrepancy.

i Joshua Brustein, “Why Airbnb Wants to Start Paying Hotel Taxes,” Forbes, October 03, 2013,

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