Will the $185k fine against the Airbnb host in NY make people afraid of using Airbnb?

I doubt so.

This is an example of what in political science goes under the name of “the authoritarian illusion of the powerful” whereby those in power pretend to prohibit something by simply out-lawing it and issuing a fine or penalty against a behaviour which is believed by a critical mass of the people in the community to be a legitimate and/or un-harmful service or exploit of resources.

Whenever the authorities tried the “draconian penalty” route in the attempt to prohibit something (lessons can be learned from (a) the war on drugs, (b) the prohibition of alcohol, (c) outlawing sex workers, (d) outlawing of abortion rights) — instead of working out a way to regulate the matter and finding a way to balance the different interests at stake — they have consistently failed and failed again (as we know very well by now, outlawing drugs did not had any effect on drug usage, ditto for prohibition of alcohol or prostitution).

This does not mean that the authority will not go to extraordinary great lengths to (even severely) punish the behaviour of those contravening it: we know, for example, that in US, approximately 20% of the people in jail are there because of crimes related to the sale and consumption of marijuana (which is by now considered perfectly legitimate and un-harmful by the vast majority of the people).

Coming back to the Airbnb case in New York City: obviously the fine against Airbnb hosts is issued exclusively as a deterrent to protect the healthy profits of the “Hotel owners” interest groups. With different luck, the same route has been tried — for example — in Berlin (de facto killing the temporary rent market in the German capital) or Hong Kong (with no effect on the Airbnb market which remains prosperous).

The Municipality of New York, instead of trying to find a way to regulate the opposing interests of 1) the Hotel owners (who do not want further competition in the hospitality market) and 2) the Airbnb hosts (who want to offer a legitimate service, exploiting resources which would remain otherwise unused), preferred to bend to the Hotel owners desires and simply outlawed Airbnb hosts altogether.

This may de facto kill the Airbnb market in NYC or temporarily reduce its usage, but once the genie is out of bottle (i.e.: this behaviour has been tried-and-tested worldwide and it has been considered legitimate and un-harmful by millions of people worldwide), it is only a matter of time until these same people will find a new way to provide this kind of service and to exploit these resources, against the (illusory) authoritarian order of the political class.

Thanks Jonathan Brill for the A2A.

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