A year ago I wrote about the crazy, over-regulated New York City taxicab industry. Well, things are getting even crazier.
There’s a new rush of start-up competition, led by Uber, whose high-tech mobile app lets riders request luxury rides on demand instead of frantically trying to wave down a passing cab. It costs more than a cab, but the convenient experience seems to be immensely popular, and Uber has been slowly expanding to more and more cities.
Of course, the existing taxicab industries, already used to protective regulations in many cases, don’t like the competition, and there have been varying volleys and setbacks in recent months as established players have tried to put up, er, roadblocks to keep the new kids out.
Regulators say roadblocks – excuse me, regulations – are necessary to protect consumers. That’s a frequent excuse to justify government intervention, but it’s a bit of a stretch in this case, as the New York Times explains:
Regulators say new laws are required to protect consumers from being harmed by such apps. But Uber, aside from the hurricane troubles, is generally adored by customers who say they are willing to pay extra to summon a ride without much wait, especially in cities where cabs are scarce.
In Apple’s App Store, the Uber app has hundreds of five-star ratings. And when Washington tried to pass rules that would make Uber illegal, customers bombarded City Council members with thousands of e-mails in protest.
Tthere does not appear to be any evidence that consumers need protecting from these fancy taxis (not to mention the fact that Uber is sometimes solving a regulation-enhanced scarcity problem). But regulators aren’t just trying to add helpful but perhaps unnecessary protections; they’re now coming up with some pretty blatant proposals that have nothing to do with protecting consumers at all:
Taxi regulators from 15 cities, including New York, Los Angeles, San Francisco, Washington and Chicago, were on the committee that drafted the guidelines on new rules. One rule would forbid luxury car services from using a GPS device as a meter for calculating fares based on time and distance, which is the method that Uber uses.
Another rule would forbid any driver from accepting an electronic hail through a smartphone while driving. And one says limousines may not accept a request for a ride that is made less than 30 minutes in advance, which would impede Uber’s primary business model of connecting luxury car drivers with passengers immediately.
I think it’s extremely difficult to argue that it is somehow helpful to allow consumers to immediately hail a willing taxicab but forbid them from hailing a willing limousine without at least a 30 minute wait. This blatant proposal is pretty clearly coming from a pressured taxicab industry, and it’s much more desperate than the typical established business support of boring regulations that at least have the appearance of protecting consumers from danger or fraud.
Regulations raise the “barrier to entry” for new businesses, and as Sonic Charmer explained with some fancy bar charts, old/big businesses tend to like regulations because they put an equal (i.e. non-progressive) burden on everyone, and since old businesses are bigger than the new guys they have more left over, reducing the risk of the even larger burden of a new guy innovating faster than them and taking all their customers.
Typically I think of barriers to entry as things like filling out lots of paperwork, or raising the minimum safety requirements for a building – it’s possible that big businesses support them because their big departments can handle them easier than a new start-up, but it’s at least possible that these requirements are protecting consumers from greedy and/or idiotic small business owners. But there’s no possible way that limiting limousine service or accurate GPS readings is better for consumers; these are cool, helpful innovations that the old business simply can’t or doesn’t want to provide.
Liberals often promote regulation to protect consumers from immoral, profiteering businesses. But regulation is just a tool, and the same profit motive that leads “bad businesses” to defraud their customers also leads them to prevent other businesses from competing with them. Sure, regulation can protect consumers from businesses, but it can also protect businesses from consumers choosing a better business.
Fortunately for Uber, even D.C. liberals love their service so much that they helped fight back against the regulatory roadblocks; for now, anyway, it seems like it’s all paying off. As the new saying goes, “How do you turn a D.C. liberal into a libertarian for a day? Threaten to regulate his limousine service.”
I think it’s important to consider that the D.C. taxicab industry is not particularly immoral or dastardly in their roadblocking of a more innovative competition. Sure, I think it’s unethical, but they’re also just responding to the available incentives. Almost everyone would be a rent-seeker if you gave them the opportunity, and too often regulation does just that.
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