ED GLAESER: Tell us about Airbnb, how do you get involved with that company?
MICHAEL LUCA: So eBay and Amazon started in the mid
1990s, bunches of others started selling products around the same time.
In fact Match.com started thinking about how to facilitate dates in the mid 1990s.
So there are implications of platforms like eBay and
Amazon, one is that markets would be more efficient so
prices might come down, your availability to products might go up.
But in addition to the efficiency implications, people had explored
the equity implications of platforms like Ebay and Amazon.
What they had thought about is not only will markets become more efficient, but
people posited that markets would also become fairer.
There was a great paper that looked at transactions for
cars that initiated online.
And they had hypothesized that by buying this online where you're not kind
of face to face, and
looking at the person, that you might get rid of a lot of the discrimination.
And in fact, what they found is that in offline purchases,
they saw the same types of discrimination that they had seen before.
But in online purchases they had seen most of this discrimination had gone away.
And when you look at a platform like Airbnb,
they're making very different design choices.
They're showing you not only the listing where you might stay, but
the person you might stay with.
They're giving hosts a lot of flexibility about who was going to stay with them.
And we ran an experiment in which we tested for discrimination
on the platform, and we found that, GLAESER: How did you
do that? LUCA: So
we have followed an autostudy methodology that really within economics have been
pioneered by Marianne Bertrand and Sendhil Mullainathan.
Where we have looked at the names of the guests that were
going to be staying somewhere.
So we took names that were statistically most likely to be a white person, and
statistically most likely to be African-American person.
And what we could see is that if you have a name that is statistically more likely
to be African-American, that you're about 16% less likely to be accepted for
an Airbnb, relative to the same application with a white sounding name.
So eventually Airbnb put together a committee.
I'd spoken several times with people at Airbnb about
steps they could take to reduce discrimination.
In their committee they laid out a series of changes that
they were going to make to a platform to try to reduce the amount of
discrimination. GLAESER: What else is going on in
Airbnb? LUCA: So
Airbnb has a few issues that they struggle with.
The way that I think about them is, discrimination is one set of issues
they've been thinking about, taxes are an issue that they've been thinking about.
So thinking about someone who rents out a place as an Airbnb,
should they be paying taxes as income as a individual?
Should they be paying taxes at the hotel tax rate?
So these are open policy questions that policy makers are thinking about and
that airbnb has high powered incentives to try to shape as well.
Externalities is an enormous issue that Airbnb struggles with.
Thinking about an apartment building, if the person next to you takes their place
and sublets it as an Airbnb, and you have a different person staying
there every night, this imposes an externality on the neighbors.
So policymakers are trying to think through,
how do you deal with this externality? GLAESER: Well, there are many cases, for
example, if you have a cooperative, or even in a condominium,
the building can make the rules.
So I certainly feel with those who don't want their neighbors renting their room as
a hotel room.
But presumably the coop association could just ban it without the need of actual
public regulation, right? LUCA: Sure.
So, buildings are making regulations in a lot of these situations.
Cities are also getting involved in what the regulation should be.
And one feature of the digital age is lots of people who moved into a place weren't
necessarily thinking about even the potential of a platform like Airbnb when
they purchased a place, so right?
So if short term rentals were allowed in 1995,
that may have felt very different than short term
rentals being allowed in 2015. GLAESER: Do you
think cities are differentially effected by these new tech-networks relative to
other places? LUCA: So,
when we think about some of the first term generations of online platforms,
think about Skype, Amazon, eBay.
These disproportionately you might have thought help people living
outside of cities.
Somebody who can now order something from a city that otherwise would have been
unavailable.
Somebody who could telecommute from a place that previously would have been
inaccessible.
But in recent years what we've actually seen is a series of platforms that have
popped up that require network effect.
So they need a certain amount of market thickness for them to successfully launch
in an area, and those platforms-- GLAESER: Why Uber starts in San Francisco,
right? LUCA: Exactly,
why Uber starts in San Francisco, and why so
many platforms start in San Francisco and New York, and not in more rural areas.
In that world there's been a benefit that at least thus far has
disproportionately accrued to urban areas.