Why Government Should Not Regulate the App Economy

In Damon Runyon’s Broadway stories (and in the musical Guys and Dolls), a gambler named Nathan Detroit hosts New York’s oldest established floating crap game, presaging three functions of today’s app revolution. Thinking of the app market in such nontechnological terms shows us what is really happening today and lays bare the absurdity of government attempts to regulate it.

Making the Market

First, Nathan Detroit made the market by bringing gamblers together. The game, like today’s apps, was open to anyone with the right password:

So Nathan Detroit moves his crap game from spot to spot, and citizens wishing to do business with him have to ask where he is every night; and of course almost everybody on Broadway knows this, as Nathan Detroit has guys walking up and down, and around and about, telling the public his address, and giving out the password for the evening. (from the short story Blood Pressure)

Moreover, in Nathan’s game, “the guys bet against each other rather than against the bank, or house.” In economic terms, his crap game functions as a two-sided market, where two sets of agents come together and do business through an intermediary. Today, that intermediary role is played by apps like Airbnb and Lyft, which match people who need a place to stay or a ride with people who can provide them with that service. (Incidentally, a two-sided market provider won the award for the best…