WHY DOES BUSINESS NEED TO JUSTIFY ITSELF?

Poor Airbnb. First it seemed heaven-sent, a great new app that allowed people to rent out their homes, condos and apartments to visitors from anywhere. Then it became the devil itself: Guests from hell annoyed the neighbours. Hotels and their unions lobbied against supposedly unfair competition. Governments cracked down on “hosts” for not paying hotel and consumption taxes. And so on and so on.

Now Airbnb feels the need to fight back and justify its existence. How do you do that in the 21st century? The way businesses have been doing it since John Maynard Keynes re-wrote macroeconomics in 1936: By demonstrating how you “create jobs” and help “the economy.” In Keynesian terms, that means increasing Big C. Not cancer, but consumption. C + I + G + (X-M) = GDP is the Keynesian catechism (where I is investment, G is government spending, and X-M is the trade balance (exports minus imports). Add to any one of these and you’re a hero of the macroeconomy.

But no part of economics is junkier than these ritual attempts by firms and industries to show how economically vital they are. Have you ever seen a firm or industry presentation that doesn’t begin with a claim of responsibility for X number of jobs, Y amount of output and tax revenues equal to Z? Because we are so important to “the economy,” they imply, you should give us whatever we’re lobbying for.

I’ve got nothing against Airbnb. In fact, I quite approve of Airbnb and other innovations like it. They allow consenting adults to engage in transactions that make both parties better off (otherwise they wouldn’t make them). The more we have of that the better, subject to taxes and regulation (which should both be applied with a light hand). Renting out your living space is selling people a newly-produced service (rental accommodation), so you should pay GST or HST or whatever the consumption tax is called in your jurisdiction. And you have to pay income tax, too.

But apart from that, more power to you. Let a hundred flowers bloom. Let a thousand flowers bloom. Let as many flowers bloom as want to give blooming a try. Such flowers shouldn’t have to justify their existence on the basis of how much they do for people who aren’t parties to the transactions they host. But the way our society has evolved over the last hundred years, if you can’t show you contribute to “employment” or “the economy,” you have diminished moral standing.

So Airbnb hired a couple of economists to crank some numbers, using Montreal as a case study. In 2017, its 13,000 “hosts” received 283,000 visits for a total of 2.63 million guest-nights. (That’s 202 guest-nights per host, which suggests hosts aren’t so much “sharing” their living space as being squeezed out.) According to an Airbnb survey, each guest-night involves local spending of $180.53. Multiplying that by the total number of guest-nights produces what is commonly called an “injection” into the local economy of $475 million.

But get real! We’re supposed to believe that if Airbnb didn’t exist, these 283,000 guests wouldn’t have come to Montreal? That’s crazy. Most would have found other accommodation — with friends, at a motel or hotel, at the Y, at a hostel or suburban campground, in their Winnebago, you name it. As the study concedes, only 3.8 per cent of guests surveyed by Airbnb say they would not have come to Montreal if they didn’t have access to Airbnb. And 3.8 per cent of the $475 million “injection” is a much less impressive $18 million.

But the study argues that since 75 per cent of Airbnb customers said its availability made them more likely to travel to Montreal again, and Airbnb now accounts for 20 per cent of all pleasure travel accommodation and 10 per cent of business travel stays, we should attribute not 3.8 per cent of travellers’ spending to it, but 50 per cent. That seems a little generous, doesn’t it?

Then there’s the income earned by Airbnb hosts, $115 million in 2017. But you know what? Some hosts saved out of that while others paid off their mortgages. Not good! In Keynesian calculations, saving doesn’t contribute to current economic activity so it’s subtracted out. But if people save, that’s because in their view saving is the best use of that income. They’re Quebeckers. If they’re better off, Quebec’s economy is too. Of course, the great bulk of the $115 million is income that, if Airbnb didn’t exist, other providers of accommodation would have earned instead. So any net gain is much smaller.

If a business survives in the long run, it’s because it’s providing a service people value. Good. That’s what the economy is for and it should be sufficient. GDP, Shmeedp.

LET AS MANY FLOWERS BLOOM AS WANTTOGIVE BLOOMING A TRY.