Invisible Hand and AirBnB

De Clarke/ Cortes Currents - It’s pretty common knowledge that we have a housing crisis on Cortes. In fact, there’s a “housing crisis” in many — perhaps most — popular or attractive places in North America and Europe right now. One of the factors often mentioned is AirBnB. This phenomenon (AirBnB now has global impact and qualifies as a Phenomenon!) vividly illustrates the predicament of “good for one is not necessarily good for all” — also sometimes known as “smart for one, dumb for all”.

A classic case of negative returns: the urban car
A more familiar example of this predicament might be the private automobile. The automobile is a highly desirable technology: it offers a combination of freedom, comfort and convenience that any human would find hard to resist. It can travel faster than a horse-drawn carriage and is (these days) simpler to operate. It keeps us dry and warm while in transit, and we can come and go as we please without having to check train or bus schedules. It’s hardly surprising that once the price point fell sufficiently (hat tip to Mr Ford), everyone wanted one.

But… as with most magic-carpet stories, there’s a catch. If enough people within a limited area (like a city!) all want and obtain private automobiles, the utility of those automobiles (and the amenity of the city as a whole) starts to degrade. There are diminishing returns, and finally negative returns, as their popularity (and our investment in them) increases. In the 70’s it was estimated that the time to transit any major US city by car had fallen back to something just below horse and buggy speed; this was due to “traffic congestion,” or more plainly put, too many cars. The car had been so successful that it was undermining its own utility.