Smart Cities Let Us Better Understand What Markets Are About
Digital technology and multilateral platforms are radically transforming our lives, while smart cities are changing the way services are provided to people and businesses.
The so-called sharing economy, made possible and augmented by digital technology, is improving the match between labor demand and supply. On the supply front, there is a rush to enter the job market by a multitude of people usually primarily engaged in other occupations. These new non-professional operators are interested in profiting, even if only fleetingly, from the market space that opens up thanks to these new technologies. The inherited boundaries between self-employment and employment, and between the status of tenant, owner and user, are now so porous, as to make these categories often indistinguishable, if not meaningless, and this confusion is a source of concern for regulatory bodies. Therefore, the issues raised by the sharing economy are many, especially with respect to the regulatory requirements that need to be met to compete in certain markets. And digital technologies enabling such competition also open new frontiers for geolocation and transportation services.
The project I coordinate, "Sharing behavior and risk attitudes in the urban world", which is funded by the AXA Joint Research Initiative, aims to study the spatial and behavioral aspects of the sharing economy, with particular reference to the changes that are a likely to be induced by digitization and artificial intelligence in the functioning of cities. Several phenomena are fueling this structural change.
Firstly, the entry of digital oligopolies is expanding the size of many traditional markets, from mobility to housing to food consumption, and much more. These local markets pose significant issues in terms of the regulation of employment and of the regulation of competition.
Secondly, the sharing economy entails a lower propensity of consumers with respect to the ownership of the goods being used. If one thinks of urban mobility, this could lead to a positive reduction in the number of vehicles in circulation, but not necessarily a reduction in total mileage traveled and, consequently, in congestion and pollution.
Third, from a technological point of view, self-driving (electric) vehicles are about to become a reality especially in U.S. cities and, given the fact that a private car stays in the parking lot 90% of the time, it's conceivable autonomous cars will be shared rather than owned, with a consequent reduction in costs. This scenario could result in the reduction of external costs related to mobility, through a reduction in the number of vehicles in circulation and the optimization of occupancy rates. In fact, having at one's disposal a car that needs no driver, could encourage families to live in places further and further away from the city centers, fueling suburban sprawl. This situation would lead to an increase in average distance traveled with a consequent increase in external costs.
Fourth, cities are changing their shape and their functioning thanks to digital technology and, in equal measure, on the data and algorithms that improve the match between supply and demand. A renewed approach to the classic mechanism of operation of markets raises questions about access to certain services, since these will no longer merely depend on income and the place of residence, but also on the capability to access to networks from fixed and mobile devices.
The new smart cities therefore offer not only new modes of consumption and production, but also renewed opportunities for analysis, in order to understand how traditional markets will evolve geographically, and how individuals will change their behavior in a given urban space.