A question to ask yourself: would you like stay in a person’s home who didn’t like you on the grounds of your race, sex, religion, or language? I would think not. For my part, I would like to know ahead of time of the person’s biases and thereby try to avoid the place.

Another question: if you are paying someone for a service, wouldn’t you rather reward someone who likes you and doesn't secretly loathe you because of your race, sex, religion, or language? I would think so. It’s nice to be nice to the nice.

One of the wonderful things about Airbnb is that owners can demonstrate their preferences. It’s not only their right; it’s actually beneficial to everyone.

What If People Are Mean?

Here’s an example. I had a friend coming to town from Shanghai, and I was arranging an Airbnb for him. The first contact pushed back: “Is he Chinese?” I said no, he is living in China but is originally from Ukraine. This prompted more pushback. “What was he doing in China, and why is he coming here?”

Reputation-building works far better than police-state regulations to bring about socially desirable results.I became annoyed at the questions. He had every right to ask them. It’s his home, after all. But I detected some kind of strange bigotry at work here, and it bugged me. So I made a pitch to another place one block away. The owner of the new place immediately said yes! As a result, she was $900 richer. I took great pleasure in cancelling the earlier bid, denying him the same amount of money. Maybe he will learn the lesson to open up a bit.

Now all of this is possible only because owners can discriminate, however irrationally. The money goes to the most liberally minded. And this strikes me as a good thing. Why would you want to pay money to someone who hates you if you have the option of paying someone who likes you?

Over time, people’s preferences line up with their economic interests.

I have no doubt that discrimination is rampant in these private markets. I get it too. You are inviting strangers into your home, many of whom don’t have public profiles, because they are using the service for the first time. Safety is a concern, and that is wholly legitimate.

Or maybe the discrimination is just invidious. The person does have a profile and high ratings from others who have hosted the person. Still, the owner pushes back on the grounds that he doesn’t like people from India or China, Ukraine or Syria, or doesn’t like immigrants or blacks, or long hair or red heads or whatever.

A study from the Harvard Business School claims to discover that would-be guests with distinctively African-American names were 16 percent less likely to be accepted relative to those with white-sounding names.

If true, that is their right, and also good for the cause of social cooperation. When exchanges take place, it’s good that both parties agreed to it. And think of the results: the profits go to the good guys and are denied to the bad guys. That seems socially optimal to me.

Or We Could Muscle People

The other way is proposed by Kristen Clarke, writing in the New York Times:

Only by allowing potential victims of discrimination their day in court and taking swift and comprehensive action to root out bias among its hosts can Airbnb fulfill its promise of being a truly inclusive online rental marketplace. If Airbnb fails to fix the problem on its own, litigation or congressional action may be required to provide greater clarity about the scope of anti-discrimination laws.

That’s just great. Take a wonderful, voluntary, disruptive, successful company and pillage it with lawsuits, cops, investigations, bureaucracies and so on, all to make sure that owners are forced to rent to people they don’t like.

This doesn’t seem like a good idea at all. In fact, these owners don’t have to rent out space. They can just as easily pull the space off the market. If they feel like hosting people is some kind of crapshoot, they might rethink the whole thing. And then we have a bigger problem – the same problem that Airbnb came along to fix.

Another suggestion made by Clarke is for the company to “stop having users display an actual name or profile picture before booking; that information should be withheld until a reservation has been confirmed.”

The general tendency of the market is toward ever more integration, ever less bias, ever more fairness. This is just weird. Why wouldn’t you want to look at a face before renting a space in your home to someone? Owners can discern vast amounts of information from a face and much of it may matter to the decision. For example, what if you are a black owner who has a grudge against white people and only want to rent to black people? That is a preference that should be realizable, but it can’t be so long as there is no profile picture.

Worrywarts like Clarke imagine a world filled with seething racists who only want to hurt people of color. But they don’t account for the opposite impulse. Many people like to go the extra mile to demonstrate to themselves their absence of racial bias, simply because it makes them feel good. Call in private affirmative action if you want to. You can’t do that if race is completely removed as a factor.

Build Your Reputation

So many of these peer-to-peer services rely on reputation building. As a user of Lyft, I guard my reputation as a passenger very carefully. I tip well; I’m nice; I try to be at the right place at the right time for pick up and so on. All of this matters. In city taxis, it doesn’t matter at all. I can be a total jerk without cost.

It is the same with the market for space rental. People are incentivized to behave as politely and neatly as possible to get a good rating from the owner. The less information is revealed before the match is made, the less the renter has the incentive to be a wonderful person.

It turns out that reputation-building works far better than police-state regulations to bring about socially desirable results.

Look, these markets are imperfect, of course, but they are part of a process of continual learning. One mistake is not a system-wide error, and the general tendency of the market is toward ever more integration, ever less bias, ever more fairness. But we can only realize those gains so long as the market remains free. And that includes the freedom to discriminate.