A former limousine driver and current editor of Limo Insider Report has written a persuasive letter of complaint about Uber to the U.S. Attorney General, accusing the ride-sharing company of circumventing all sorts of laws and regulations. Similarly, the Taxicab, Limousine, and Paratransit Association argues that Uber and Lyft are risky for consumers to use. These are both good points.
At the same time, at least some of those regulations are in place for the specific purpose of limiting competition within the taxi industry. As a result, as the Washington Post observes, taxi medallions “have been the best investment in America for years.”
When regulations are in place to protect the providers of a good or service, the consumers usually are the losers. Politicians, policy makers, and opinion leaders need to understand that the true value of a policy must be judged from the point of view of consumers, not providers.
“If we actually cared all that much about what the consumer experience was, is this the system we would have built?” asks an Uber representative. “Absolutely not!” Once we start caring more about the providers instead of consumers, we end up creating artificial shortages, barriers to low-income people, and all sorts of other problems.
Uber is just one example of a disruptive technology based on smart-phone apps shaking up the market and raising the ire of regulators who want to control everything, usually for the benefit of providers, not consumers. Some people in San Francisco have declared war on AirBNB, an app that allows people to find short-term rental housing. They claim the app is exacerbating the region’s housing shortage, but just like the taxi shortage, the housing shortage is the result of overregulation.
Similarly, the city of San Francisco is trying to kill an app called MonkeyParking that allows people to find a parking space by “buying it” from whoever happens to be occupying it at the moment. The app creatively allows people to use the market to solve the city’s parking shortage, but the city can’t stand to see that happen.
If these apps had been available a hundred years ago, we would be routinely using them today instead of relying on an oligopolistic taxi industry, regulated rental housing, and first-come, first-served parking. Those who fight the apps are effectively fighting for oligopolies and monopolies and against consumers.
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If a regulated industry is threatened by a smartphone app, the solution is not to regulate or ban the app. Instead, it is to deregulate the old industry. What about taxi drivers who paid up to a million dollars for a medallion? One solution would be to double the number of medallions, giving the new medallions to each owner of an existing medallion on the condition that they sell them off–repeating as necessary–thus reducing the value of the medallions without significantly impacting the wealth of the people who already own them.
Uber and Lyft are not likely to completely drive taxi and limo companies out of business. Instead, those companies will have to compete based on the premium services they can provide: consistent ride quality, fast response, and guaranteed safe drivers. In Hawaii, Charley’s Taxi succeeds by relying on these qualities while it actively opposes regulation such as the medallion system (which doesn’t exist in Honolulu). According to the company, it often charges less to take people from the airport to Honolulu destinations than Uber.
Shouldn’t the government at least provide minimal regulation to insure the safety of passengers and the road skills of the drivers? I’m going to go out on a limb and say no. If Uber gets enough bad publicity from stories like these, it will either figure out a way to regulate itself or people will stop using it.
On the other hand, there may be a case for requiring Uber-type drivers to use airport lanes set aside for taxis and other public conveyances, rather than the lanes now used for private parties. Mixing the two could cause unnecessary congestion.
Nor do I see Uber significantly reducing auto ownership rates. As George Packer observes$17 billion is almost certainly wrong. I suspect those who bet that it is are effectively generating another tech bubble. But that’s their problem.
Is Uber gouging customers with its surge pricing system? Maybe so, but that’s something the market will deal with as well.
The Antiplanner advocated taxi deregulation before Uber. It makes even more sense today.
While I agree with most of what the antiplanner says here, I disagree with his support for the “MoneyParking” app. This will encourage some drivers to stay longer and park longer than necessary in parking spots just in order to sell them. It may also encourage individuals to just circle looking for parking spaces, taking them when they find them then immediately putting them up for sale. It is doubtful that this is providing value to society and will cause unnecessary congestion. A better option is to have a variable price on parking so that the value changes with demand. That way there is no incentive for individuals to spend time finding parking them selling it, and the city may as well sell parking at the market rate. Combining this with an app that shows where parking is available at what rate for how long would be a more desirable option.
Paul: If such a class of middlemen spring up it is merely proof that parking is under priced.
AP: “airport lanes set aside for taxis and other public conveyances”. You seem to think this foul elitist idea is a good one. Why? Why does a passenger in a bus or taxi have a better or worse right than me to get to the airport in a timely and convenient manner?
AP wrote: “When regulations are in place to protect the providers of a good or service, the consumers usually are the losers. Politicians, policy makers, and opinion leaders need to understand that the true value of a policy must be judged from the point of view of consumers, not providers.”
Servant-leadership is what that is called. Good thing Jesus got up on that cross to do what was best for us instead of doing what was best for Him and wiping us all out.
The Antiplanner wrote:
When regulations are in place to protect the providers of a good or service, the consumers usually are the losers. Politicians, policy makers, and opinion leaders need to understand that the true value of a policy must be judged from the point of view of consumers, not providers.
I strongly agree.
I can see no reason that local governments and the taxicab regulators who work for same should erect economic barriers to entry (such as city- or county-issued medallions).
And even in a deregulated taxicab environment (like the one that Sweden has had since the 1990’s), there is still plenty of work for regulators to do.
– They need to make sure that hackers have the correct license credentials and are not convicted criminals that may be dangerous to customers;
– They need to make sure that taxicab vehicles are safe and not emitting excessive pollutants;
– They need to verify that the taxicabs (and their customers) are covered by insurance;
– They need to be sire that the drivers and cab companies are paying taxes (this is Sweden, after all);
– They need to make sure that the meter records and computes the correct fare; and
– They need to keep “gypsy” cabs from operating – and stop any that they identify.
Washington Post: Virginia tries to put brakes on taxi-like services
For a case study of where taxicab and other private transportation has been freed from economic regulation, look at the State of Arizona. A few years ago, Arizona completely deregulated taxis, private van services, airporters, intercity buses and other privately-provided services. Safety regulation was taken over by the state, so there are still insurance, vehicle safety and minimum driver standards being enforced. I’m not sure if anyone has closely studied the Arizona situation, yet. Here is a potentially productive project for CATO or Reason, Randal!
I can’t speak to what has happened statewide, but I can describe what happened in Yuma, AZ since I am just wrapping up a transit plan there (local transit service was NOT wiped out by statewide deregulation, mainly because taxis are still considerably more expensive to provide on a per trip basis). In Yuma, there are nearly 200 private taxis, which is a lot of vehicles for a low-density, spread out county of ~200,000. Many of these operate shared ride services from the border crossing at San Luis Rio Del Colorado, with a typical fare of $7.00 each way to/from Yuma.
I initially thought that taxi subsidies would have been a good option for providing paratransit services particularly to seniors, but there was little solid information on the many companies operating (the average operation is 1-2 vehicles out of 200), so the reliability and trustworthiness of any one operator was impossible to assess fairly (where I previously worked in Vallejo, there had been a problem with at least one local taxi operator hiring ex-cons who were violent offenders, for example). And I’m not sure Yuma County is someplace Uber et al would want to operate, given that the typical taxi passenger is a relatively low income (by US standards) farm worker or related, Spanish-speaking citizen of Mexico.