Virtues of the formal economy: There are reasons for having taxes and regulations

The ideas of the ”mesh” economy and ”collaborative consumption” are to create services built on shared access and shared maintenance of goods. Lots of businesses are based on this: Hotels, rental cars, car sharing, and airlines… What’s new is how digitization, urban density and a tight economy makes it possible to share many more things: Tools, sports equipment, car rides, little chores like shopping or assembling IKEA furniture.

In a sense it is a very efficient market: if someone has idle capacity, it can be offered to others and used easily and quickly and with a minimum of regulatory hassle and paperwork. Wonderful!

However, there are a few dilemmas that arise as the exchange becomes less formal, and you start doing a lot of peer-to-peer exchange and bartering.

In many ways it's the good old moonlighting economy, but digitally enhanced – and the trouble with moonlighting is that you can’t collect taxes from it, and there’s no way to enforce society’s normal regulation.

So, if you believe in having a well functioning and adequately funded public sector, good roads, public healthcare and education – or if you believe in regulation to keep track of pollution and unsafe working conditions – or if you believe in trade unions to protect decent wages and blatant exploitation of those who are too weak to negotiate – well, then you might feel that a growing informal sector is undermining the rights that others have fought hard to ensure over the past century.

It’s a paradox that the mesh economy is seen as a way of strengthening local communities and building stronger social interaction – but at another level, you can argue that it short-circuits the building blocks of society as a whole.

I have no doubt that the current commercial system, and our current way of regulating business and interactions is too rigid and often counter productive. Mesh-style initiatives are needed to challenge and explore.

But going local shouldn’t mean ignoring your obligations to contribute to society at the greater level.