Ridesharing and Regulation
Earlier this week, I appeared on a Cato Institute panel organized by Cato’s Matthew Feeney, author of a new report on for-hire vehicle safety issues. Video of the event, which also included Center for Economic and Policy Research’s Dean Baker, can be found here.
The panel was titled, “How Should Ridesharing Be Regulated?” Naturally, being a general skeptic of regulation, I titled my presentation, “Why Should Ridesharing Be Regulated?” I noted that modern municipal taxicab regulations were crafted by the then-powerful streetcar lobby in response to new competition from jitneys and buses that occurred around 1915. By 1922, the streetcar industry’s main trade association, the American Electric Railway Association, was already crowing about its rent-seeking successes:
In many instances, municipal action has solved the question, but the situation demands general power in regulatory bodies to prevent competition of jitneys and busses with essential street car service. In the meantime, regulatory bodies and the public realize that transportation by electric railways will always be necessary…
Yes, those “always necessary” streetcars soon disappeared from the streets of U.S. cities, but the streetcar lobby’s efforts resulted in an entrenched taxicab cartel that supported the same types of anti-competitive regulations. Most major U.S. cities adopted regulations that established operating caps and minimum fare requirements through the Great Depression. Until the late 1960s, these rules went unchallenged. The 1970s saw a wave of several dozen cities deregulate their taxicab markets. Unfortunately, a number of the experiments were flawed and resulted in a number of cities reversing course and reregulating their taxicab markets. (For more on the regulatory history of the taxicab industry and the related economic research, see Reason Foundation Vice President Dr. Adrian Moore’s excellent literature review here.)
Then Uber came. Cities are now facing great pressure to deregulate or at least accommodate Uber, Lyft, Sidecar, and similar services that directly compete with taxicabs. However, I worry that some of these efforts, particularly the accommodationist strategy favored by Uber, risks locking in business models and restricting future innovation—particularly with the looming rise of autonomous vehicles.
One thing that really gets my libertarian blood boiling is that “ridesharing” only becomes regulated when the driver turns a profit. Hitchhiking is legal and essentially unregulated in most U.S. states. Anonymous commuter carpools like D.C.’s slug-lines are entirely unregulated, although there are social etiquette “rules” that “slugs” are expected to respect. In fact, not only is charging your carpooling passengers for gas and even mileage depreciation legal and unregulated up until profitability, many government agencies actively encourage it. The bias against commerce runs deep in the U.S., despite our reputation as a highly individualist, pro-market nation—this just shows how horrible the anti-commerce biases are in other countries!
I discuss this and more on the panel. Watch the whole thing here.