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Uber and Regulation: Pro-Business Is Not Pro-Market

“Republicans love Uber. Young urban voters love Uber. And Republicans hope that means young voters can learn to love the GOP.”

That was the opening line of Byron Tau and Kevin Robillard’s piece for Politico after the Republican Party rolled out a pro-Uber petition/prospecting campaign. Notice I say “pro-Uber” rather than “pro-market” or “free market.” Here’s the GOP appeal in full:

Our country was built on the entrepreneurial spirit. Our cities deserve innovative and effective solutions without government getting in the way. 

That’s what innovative businesses like Uber provide. And that’s why our cities need Uber. 

But across the country, taxi unions and liberal government bureaucrats are setting up roadblocks, issuing strangling regulations and implementing unnecessary red tape to block Uber from doing business in their cities. 

We must stand up for our free market principles, entrepreneurial spirit and economic freedom. 

Show your support for Uber by signing the petition today.

Despite the appeal to “free market principles,” the petition fails to mention actual free market policies beyond letting Uber operate lawfully. Furthermore, the notion that “liberal government bureaucrats” are only now “setting up roadblocks, issuing strangling regulations and implementing unnecessary red tape” in the transportation services market ignores many decades of stifling, anti-consumer regulation from these bureaucrats.

I am a huge fan of the services offered by Uber, Lyft, and others. I understand their political strategy; I’d probably do the same thing in their shoes. But it is important to remember that being pro-business is not the same as being pro-market. As I’ve noted several times in the past, it appears the current legislative and regulatory advocacy coming from incumbent ridesharing providers is one of accommodation, not deregulation. Most unfortunately, many in the free market policy world also appear to be adopting this outlook as their own.

This is most likely unintentional, as the current ridesharing policy debate in the free market movement is dominated by technology policy analysts or generalists, rather than transportation policy wonks. What this means is that many appear to be ignorant of the years of work by transport economists supporting the broad deregulation of the transportation services sector. As a result, legislative and regulatory proposals that merely grant Uber et al. a carve-out from existing regulations while piling on new rules—all while doing little to reduce barriers to entry for future firms with potentially very different shared-use mobility business models—are gaining support from some quarters of the free market movement. In advocating broad liberalization of transportation services, political realities dictate that compromises will sometimes be needed—particularly in the short run. But to accept accommodations and new regulations of Uber et al. as a victory for the free market is to miss the forest for the trees.

Here are my concerns, illustrated with an example of a disruptive transportation technology the pro-Uber set has ignored so far:

…Vehicle automation has made incredible advances in recent years, with traditional automakers struggling to keep up with Google’s pledge to offer highly or fully automated vehicles by 2017. German parts supplying behemoth Continental and luxury automaker Daimler are predicting product availability by 2025, while Nissan is promising a consumer model by 2020.

[…]

Once fully automated technology is sufficiently reliable, it would be possible for anyone to schedule and dispatch their own empty car to someone else—whether for family, friends, or for hire. What if you could park, hike down a trail, and have your car pick you up on the other side? This will also enable entrepreneurs to easily form their own start-up networks for those who do not own or want to use their own car.

Uber’s business model is disrupting traditional fleet ownership transportation services, but automated technology may result in a shift away from distributed ownership and back to centralized fleet ownership. In this scenario, professional ridesharing providers could maintain their market share amongst those who cannot afford or choose not to own personal vehicles, but most taxi trips are made by passengers who own cars. If your car could be your taxi, you would more likely use your own vehicle.

Will ridesharing providers simply become software companies or will they purchase their own fleets? Or will they wield their regulatory status against private owners like you and me, as well as innovative start-ups, to become the new taxicab cartels?

This is why I am nervous about libertarians championing regulatory accommodation for ridesharing providers. A new technology will possibly be available on the market in several years that could threaten current ridesharing business models. How will the lobbyists of Uber and Lyft respond when you and I are able to dispatch our cars to family, friends, and fares, while not being subject to costly insurance requirements, criminal background checks, and zero-tolerance drug and alcohol policies? Maybe they won’t mind. Or maybe they’ll react the way taxi cartels did.

Supporting more substantive regulatory reforms is not as crazy as pro-market pragmatists might first believe. While left-leaning D.C. Council Democrat Mary Cheh’s approach is fundamentally flawed and does little to liberalize the transportation services market, she has introduced legislation that would abolish the District of Columbia Taxicab Commission, transferring some of its functions to a new transit agency while eliminating others.

As was noted, Cheh isn’t backing broad deregulation, but eliminating taxicab commissions would at the very least likely do a great deal to improve regulators’ incentives and reduce the risk of regulatory capture. Abolishing taxicab commissions and shining a light on the supposedly “pro-consumer” anticompetitive regulations that currently exist is where free market advocates should start.

Regulatory accommodation for Uber et al. is broadly supported by those on the center-left. So, if the GOP thinks it can pick up the urban young professional vote by incorrectly claiming they are diametrically opposed to their Democratic counterparts on these issues, they are fooling themselves. Can we as free marketeers not take a more principled, ambitious, imaginative, and economically literate approach to digital hail technology and ridesharing than, say, bureaucrats at Washington, D.C.’s metropolitan planning organization? I sincerely hope the answer is yes, we can.