InternetLab is releasing this week the book “Economias do Compartilhamento e o Direito“ (Sharing Economy and Law), a result of the project “Sharing economy and its regulatory challenges” developed between 2015 and 2016, with the goal of advancing the debates about the regulatory tensions around new business models based on information technology and use of idle resources, with a special attention to the companies that act in the individual transportation sector.

Legislative proposals aiming to regulate these new platforms have been debated all over Brazil at a municipal level and also by the Brazilian National Congress. One of these projects is the PLC 28/2017 bill, which will be assessed today by the Brazilian Federal Senate. The proposal provisions, among other measures, the necessity of a previous authorization from the Cities and Federal District for drivers to provide individual passenger transportation services, significantly altering the way in which some technology companies currently operate in this market.

The research findings discussed in the book indicate that the regulation of economic activities such as the individual passenger transportation is based on the existence of market flaws and on the need for promoting the public interest and for the insertion of justice criteria in determined markets, like redistribution of wealth and universalization of services. In democratic environments, the regulation of tech companies that operate in this sector is experimental and built through open, participative and auditable processes.

Technological innovations bring with them changes in the reasons for regulating and in the ways of doing it in order to encompass new realities. Nonetheless, this does not imply the previous knowledge of the format and the content of the new parameters of the regulation. The sharing economies bring with them real conflicts that demand the establishment of regulatory frameworks that are debated and built democratically. The bill being analyzed in the Senate, however, seems to go against these lessons. There was little time for the discussion of the replacement bill presented on October 24th. The speeding-up of the Senate voting with urgency disrupts the democratic construction of the regulatory model and intensifies the tensions between traditional sectors, new ventures, and consumers.

It’s in the midst of this important debate and with the aim to contribute to the regulatory discussion that we released this book, born out of the reflections developed along the project. The work gathers articles written by specialists from diverse fields and discusses what kind of economy is behind these global platforms and what is the role of Law in the fostering of innovation and in the protection of the public interest, in sectors such as transportation and housing.

The book was published by Juruá [in Portuguese], under the CC BY 3.0 BR license and is available for sale at Juruá’s website, in paperback and digital copies. Read below the preface of the book, written by Diogo R. Coutinho, professor of Economic Law at the Faculty of Law of the University of São Paulo:

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Preface

In Business Cycles, Joseph Schumpeter noted that the economic system is in constant transition and, due to this, it is not something that can be described as “pure” in the terms of a logical, analytical, and consistent model.[1] Among the change factors that generate fluctuations in the business cycles, there are those who operate within the economic sphere and others that act outside of it.

Internal factors are changes in the tastes and preferences of consumption, changes in the quantity or quality of production factors, as well as changes that Schumpeter called innovations. These internal elements are the object of analyzes and typical economic considerations, he says, and further enphasizes, that innovation is a distinguished and peculiar internal factor of change.[2] In schumpeterian theory, the industrial innovation — “the extraordinary fact in the capitalist economic history” — acquires centrality and protagonism to the detriment of the role of banks, currency and credit, since it is the main cause of the cyclical instabilities that entail fluctuations in the investiment that, in its turn, explain the cycles of economic growth.

The external factors to the economic sphere, in their turn, should be considered as data from reality that affect, in an exogenous way, the economic life. An earthquake, for example, is an external factor capable of impacting the economy and the businesses that operate in it, in spite of not being itself an object of economic analysis.[3]

However, Schumpeter is explicit in saying that certain changes in the institutional framework are capable of altering in such a way the behavior of companies (causing fluctuations in the business cycles) that it cannot be said that they are fully external factors to the economic analysis. These institutional changes encompass from broad and profound processes of social reconstruction (like the one that happened in Russia 100 years ago), to more specific and circumstancial changes to the social behaviors and habits, he says. Schumpeter is explicit, yet, in affirming that these changes may or may not be incorporated to the legislation.[4]

Changes in the institutional framework, whether or not they are incorporated by formal law are, in other words, intermediate or hybrid factors which are, so to speak, at the same time inside and outside of the field of economic analysis. They effectively reconfigure the rules of the game and, along with that, the meaning of the systematic relations that make the “economic world”. Hence the ascertainment that the system is not entirely “pure”.

With that, not only did Schumpeter, in his way, recognize the fact that the institutional framework — that for him encompasses not only the juridical framework, but also the mental attitudes of the public policymakers — has intimate and intricate relations with the economy, its cycles, and fluctuations in businesses and entreprenurial activities, as well as the innovations in particular.[5] The legal institutions represent, on the one hand, the preservation of the status quo that innovative entrepreneurs challange all the time in high-risk ventures. Nonetheless, at the same time, both formal law and the institutions that ground it “evolve” due to the innovative entrepreneurial dynamic (among other causes), even if this happens in an uneven and almost inscrutable manner. Law is, at the same time, constitutive, created, and transformed by the economy.

In the way that I read this book I understand that, even if not explicitely, it dialogues with these premisses in a rich and fertile manner, unfolding them and thus revealing an important research agenda. When seeking to identify and incorporate juridical analyses to the study of sharing economies, the work pursues, in other words, the challange of exploring the manner in which certain simultaneously external and internal elements operate the economic system and modify and adjust due to it.

This happens whether because in the sharing economies new figures and juridical institutes emerge to meet demands that were until then unkown, or because the law in its existing forms is transmuted to perform new functions in markets in which technology propels steep changes, or even because sharing economies demand an intentional and consistent reflection about legislative, regulatory and institutional changes in the fields of culture, trust, good faith and reputation, of the ways of shared use and consumption, and in the scope of the social networks that extend the orthodox concept of “market economy”.

The book that the reader has in hand leads to the refletction, at last, about how the law — understood as the norms per se, but also as the institutions, processes, juridical interpretations –can catalyse or hinder innovations that are at the base of the sharing economies and that, at their limit, question the very archtype of the schumpeterian entrepenour. But it also goes beyond this intuitive perception when it makes the effort to show how this is occuring today.

The result is a merge of analyses, case studies and insights produced by a promising and talented genaration of researchers, complemented by reflections and notes by experimented academics. These are economists, sociologists, and jurists that present us with researches, narratives and statements about what is happening today. When doing it, they offer relevant findings that collaborate with the field of sociojuridical research along the way, in an auspicious flourishing in Brazil.

This is a reading of great actuality and relevance, beyond a shadow of doubt, for jurists and other social scientits interested in the “brave new world” of sharing economies, innovations, and technology

Diogo R. Coutinho

Professor at the Faculty of Law of the University of São Paulo

[1] Schumpeter, Joseph. Business Cycles – A Theoretical, Historical and Statistical Analysis of the Capitalist Process. Abridged, with an introduction, by Rendigs Fels. New York Toronto London : McGraw-Hill Book Company (1939), pp. 17.

[2] Idem, pp. 82.

[3] Ibidem, pp. 13.

[4] Ibidem, pp. 17.

[5] Schumpeter, Joseph. Capitalism, Socialism and Democracy. Taylor & Francis e-Library (2003), pp. 135.

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We hope that this book will encourage new research and aid all of those involved and interested in this debate. We will soon release information about the book launch.

By Pedro de Paula, Beatriz Kira e Rafael Zanatta (equipe do projeto “Economia do compartilhamento e seus desafios regulatórios”)

Translation: Ana Luiza Araujo