Throughout the episode you'll hear from award-winning Stanford economist Jonathan Levin , who specia

A battle is being waged between the Internet and the State, and this episode of Freakonomics Radio gives you front-row seats. It’s called “Regulate This!” (You can subscribe to the podcast at iTunes , get the RSS feed , or listen via the media player above. You can also read the transcript ; it includes credits for the music you’ll hear in the episode.)
At issue is the so-called sharing economy, a range of services that facilitate peer-to-peer transactions country inn and suites charlotte north carolina through the Internet. Companies like Airbnb, Uber, and Lyft have seen rapid growth and eye-popping valuations, but as they expand around the world, they are increasingly butting heads with government regulators.
In this episode, you’ll hear from Nathan Blecharczyk , the co-founder and CTO of Airbnb (now valued at roughly $10 billion ), and one of the youngest billionaires in the world . Blecharczyk tells Stephen Dubner the story of Airbnb’s founding, how it initially struggled to find investors, and what kind of obstacles it still faces daily. In New York City, for instance, it’s estimated that about two-thirds of its business activity is illegal. That’s country inn and suites charlotte north carolina a big concern for New York State Senator Liz Krueger , known as “ Airbnb’s doubter-in-chief .”
In 2010,   Krueger country inn and suites charlotte north carolina was the chief sponsor of legislation that came to be known as the Illegal Hotel Law , which has made it harder for New Yorkers to legally rent out their rooms through Airbnb. Blecharczyk argues that it’s time for lawmakers country inn and suites charlotte north carolina like Krueger to recognize country inn and suites charlotte north carolina the reality of Airbnb, which he estimates will bring in  $768 million worth of annual economic activity in New York:
KRUEGER: I want to look at more enforcement, perhaps increase fines, and penalties. I do have a very serious frustration that the kind of law that we really country inn and suites charlotte north carolina need needs to be federal because the state is superseded by federal law when it comes to regulating online country inn and suites charlotte north carolina business. Some people seem to think that if you’re a business model that’s on the internet it’s like magic and hocus pocus. It’s just business. And there’s a reason for government to regulate business, whether it has a physical site somewhere or whether it’s in the cloud.
Inspired by Airbnb, the entrepreneur Guy Michlin co-founded EatWith , which enables cooks to convert their homes into restaurants. EatWith has yet to clash with regulators, but he s bracing for the inevitable:
MICHLIN: I think that sometimes, or actually many times, the regulator is a little bit behind to catch up with technology And if you think about Airbnb, it’s obvious country inn and suites charlotte north carolina that this is a phenomenon that’s not going to go away…. Obviously the regulator will need to come in and hopefully in a dialog country inn and suites charlotte north carolina with all the different constituencies, country inn and suites charlotte north carolina adapt and create a new regulation that fits the reality.
ZIMMER: They interpret laws one way and are trying to do their job. And we interpret laws another way and are trying to innovate. And those two things are at odds, and the timelines are at odds. And if we took the approach of, “Hey, let’s wait and see what the government does to create a path that is very, very clear then we wouldn’t be operating anywhere.
Lyft recently got into a head-on collision with New York State regulators , including the office country inn and suites charlotte north carolina of Attorney General Eric Schneiderman (which has also clashed with Airbnb). country inn and suites charlotte north carolina Schneiderman s chief of staff Micah Lasher tweeted that Lyft and Zimmer were “not just ‘disruptive’ but also personally dishonest.”
It might be easy to conclude that state regulators are clamping down on these companies in large part to protect the entrenched hotel and taxi industries. Lasher says this isn t the case, that the A.G. s office isn t against innovation or competition, but is instead just looking out for the public:
LASHER: One of the big issues is the question of externalities and external impacts. In other words, if my next-door neighbor is using their apartment as a hotel room, they’re not just running a risk of their apartment getting trashed, they’re having an impact on me. Similarly, country inn and suites charlotte north carolina in the case of Lyft, if one of those drivers gets into a car accident, doesn’t have appropriate insurance, that can have an impact country inn and suites charlotte north carolina on a whole bunch of folks who did not sign up for that.
Throughout the episode you’ll hear from award-winning Stanford economist Jonathan Levin , who specializes country inn and suites charlotte north carolina in Internet marketplaces. Levin tells us a story about a brilliant business idea he had as a kid and how mobile Internet beat him to the punch.
Stephen J. DUBNER: Hey, podcast listeners. Our mission at Freakonomics has always been to talk about things you thought you knew but didn’t … and things you never thought you wanted to know, but do. Well, now it is your turn to tell us something that we don’t know. On Monday, October 6, in New York City, we’re launching a live game show called “Tell Me Something I Don’t Know” and the audience, that’s you, is the star. So if you have a great idea, or an interesting set of facts, even a great story, and you live in New York, or know somebody who does, please go to freakonomics.com/TellMe to sign up. You could tell us about anything food, medicine, dating and mating, brain science. country inn and suites charlotte north carolina All we ask is that it is interesting (at least to you), worthwhile (at least a little bit), and well, true. There will be prizes and celebrity judges, including Malcolm Gladwell. country inn and suites charlotte north carolina Again, that is Monday, Oct. 6, in New York City; sign up at freakonomics.com/TellMe. I cannot wait to hear what you have got to say.
Jonathan D. LEVIN: country inn and suites charlotte north carolina I just think about years ago, when I was…after country inn and suites charlotte north carolina I graduated from college I lived in Europe for two years, and I had this dream of having a service a business that I was going to set up where you would basically call them and then they would sort of like solve your problem.
DUBNER: A few years ago, Levin was awarded the John Bates Clark Medal, which is what young economists often win before they eventually get a Nobel prize. So what was this brilliant business idea he had while backpacking through Europe?
LEVIN: You’d be sort of just about to get on the train to go to Paris or to go to some other city and wherever you were going, and when you arrived, you would call them back and they would have sort of made all the arrangements for you. Because it was so cumbersome to do anything like that…
LEVIN: And the idea that, like, that problem would like never cross the mind of my kids. They’ll just get on the train and they’ll pull out their phone—or maybe they’ll do it on their glasses … You know, that level of convenience for regular people, as opposed to just for the billionaires of the world, is really remarkable. It’s an amazing democratization of personal service and convenience.
DUBNER: Now, if you were sitting back at the beginning of Internet time, and you were wondering what kind of people were in the best position to exploit this amazing new technology,  you might have thought it would be big institutions – multi-billion-dollar firms, the multi-trillion-dollar industries, governments. After all, they had the big budgets and – you might have thought – the big incentives to keep pace with change. But it didn’t work out that way.
LEVIN: One of the things that the Internet has done is just to dramatically lower barriers of entry in many industries It’s just much, much easier to flip a switch and make your product available to people all over the country, or all over the world in a way that would’ve been extremely difficult before the Internet.
DUBNER: But flipping the switch didn’t just let you build an online version of a brick-and-mortar business, like Amazon did to Barnes Noble. The Internet let anyone do business with anyone else; it became a lot easier to sell something that was just sitting around forgotten or unused. Like your grandmother’s porcelain figurines, country inn and suites charlotte north carolina which you could now unload on eBay. Like the extra room in your apartment, which you could rent out on Airbnb. Like the back seat of your car, which is empty approximately 99 percent of the time – but which, as it happens, someone might pay to sit in. This kind of activity has blown up in the last few years in particular – the peer-to-peer economy, it is sometimes country inn and suites charlotte north carolina called; or, even more hopefully, the “sharing economy.” It means you can find a place to stay, in some faraway city, that isn’t a hotel; a place to eat that’s not a restaurant; you can catch a ride with someone who is not a licensed taxi driver. Uber, for instance, builds apps that let pretty much anyone with a smartphone hire just about anyone with a car. It is currently valued at about $18 billion – roughly one-third the market cap of General Motors; Uber just hired David Plouffe, the former Obama campaign manager and adviser, as its senior v.p. of policy and strategy. Now to some people, this new economy – whatever you call it is heaven. It makes the world work better; it makes good use of dormant resources; it lets more people earn a living. country inn and suites charlotte north carolina But not everybody sees it this way – the taxi and hotel industries, for instance and especially the people in charge of regulating the taxi and hotel industries. So what we’ve got for you today, ladies and gentlemen, is a good old-fashioned smack-down.
Liz KRUEGER: Some people seem to think that if you’re a business model that’s on the Internet it’s like magic and hocus pocus. It’s just business. And there’s a reason for government to regulate business, whether it has a physical site somewhere country inn and suites charlotte north carolina or whether it’s in the cloud.
Micah LASHER: The problem is companies come in, they say “we’re not interested in whether or not our conduct is in violation of the law, we may very well in fact as a strategic matter decide to break the law,” with the hope or expectation that through means of pressure, we won’t enforce the law.
BLECHARCZYK: So Airbnb was started and inspired by an event that happened in October of 2007. Back then, the three of us, Joe, Brian and myself, were roommates. And the rent on out apartment was raised 25 percent. And I decided to move out. The other two guys did not have enough money to pay for the ren