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Edward L. Glaeser

The urban innovation model

ISTOCKPHOTO/H. HOPP-BRUCE/GLOBE STAFF

Last week,Avis announced that it was buying Zipcar for $12.25 a share, a 49 percent premium over Zipcar’s price at the time. For Avis, it’s a bet that short-term car rentals — or car sharing, as Zipcar likes to call it — will continue to grow in cities worldwide. For cities, the deal points to an even broader trend: It’s a reminder that technological change, which favored suburbs throughout much of the 20th century, is now clearing away obstacles to a satisfying urban life and amplifying the benefits of urban density.

Zipcar allows the city dweller who needs a car only occasionally to get by easily without owning one. Like so many innovations, this approach to car rentals came out of urban interaction. In 1999, the company’s two founders, Robin Chase and Antje Danielson, were having coffee in Central Square’s Andala Cafe, when Danielson told Chase about a Berlin company that rented cars by the hour. Chase got excited about, as she later put it, “the idea of Zipcar as collaborative infrastructure that was collaboratively financed.” Scott Griffith, the company’s leader since 2003, is a passionate advocate not just of his company but also of urban life.

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Today, Zipcar has over 767,000 members and over 10,000 vehicles spread throughout 20 major metropolitan areas in the United States, Canada, and Europe. When Zipcar went public in April 2011, its stock soon soared from $18 to $30 per share. That trend reversed as revenue growth failed to live up to exuberant expectations, and as car-rental giants like Hertz moved into the hourly rental market. Avis’s confidence that it can make car sharing pay has implications for cities throughout the globe.

Sharing most things is hard over long distances, and one of the great advantages of city living is the ability to share infrastructure, which lowers fixed costs and expands one’s options. Early urbanites shared city walls, which protected them against outsiders. Today, city parks are shared greenspace; urban libraries offer shared books. While suburbanites may have showpiece kitchens and large dining rooms, city dwellers can share the tables, kitchens and culinary talent of nearby restaurants.

But as any 5-year-old can tell you, sharing has two big downsides. The other kid may not let you have the crayon when you want it. Worse yet, he may have broken it. The ability of urban residents to share cars or bikes has been historically limited for these reasons. But technology can fix that. Because we’re all online, we can check availability and book Zipcars easily. The Zipcard technology makes it possible to get into a car locked with keys inside. GPS systems and electronic monitoring make it easy to spot when users hold cars too long.

All of this information means that so-called Zipsters can share with each other, without having to place great trust in one another — or even know each other.

Technology can promote sharing in other areas of urban life, too. The San Francisco start-up Airbnb, for example, helps users share space instead of cars. Would-be hosts use the company’s website to post any extra square footage they have available, whether an apartment a spare room or a broom closet, and then renters sign up.

In the mid-20th century, revolutions in communication and transportation favored the suburbs. Radios, movies, and television brought entertainment with high production values — once an urban monopoly — into far-flung places. The car and the interstate highway system made it possible to live and work at far lower densities, away from urban public transportation.

But today’s information technology is more about mastering detail than bridging distance, and that favors cities. It’snot important that you be able to book a Boston Zipcar from Sri Lanka; what’s critical is that the company have detailed, constant information about the exact location and mechanical integrity of its stock. Similarly, it’s critical that Airbnb customers be able to see exactly what they will get.

All that detail makes coordination easier and bad behavior easier to catch, and that helps sharing. I don’t know if Avis will make money from its Zipcar purchase, but city dwellers throughout the world stand to benefit from the innovations that make it easier to share not just cars, but everything else.

Edward L. Glaeser, an economist at Harvard, is the director of the Rappaport Institute for Greater Boston.
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