Libertarians, we may have an Uber problem.
Don’t get me wrong, friends of freedom. I love Uber. I use Uber at least once a week. I sympathize with the company being forced to take on entrenched, decades-old taxicab cartels and their captured regulators in order to offer an innovative new service to consumers. Their competition in this stagnant, politically managed market is very much appreciated.
But I have noticed two troubling trends: one, Uber’s present lobbying strategy is decidedly not one advocating for free markets; and two, many libertarians seem unaware of the first trend and are supporting Uber’s political strategy, rather than simply welcoming the improved service offered by the company and its competitors.
The California Sellout
The first has to do with the “California compromise.” In September 2013, after a two-year battle with various regional, municipal, and airport authorities in California, the state’s Public Utilities Commission issued regulations governing the licensing and operation of ridesharing companies.
These rules explicitly legalized ridesharing, not by deregulating the transportation service industry (e.g., abolishing the local taxicab commission, limiting or eliminating the state’s regulatory authority), but by created a new regulatory carve-out called the “transportation network company.” (I cringe whenever I hear this phrase, because it is the short-form for ridesharing providers coined by regulators at the California Public Utilities Commission, who in typical bureaucratic verbiage originally referred to Uber et al. as “New Online Enabled Transportation Services.” I prefer the less precise but also less statist “ridesharing provider.”)
The California Public Utilities Commission provides a short side-by-side comparison of Transportation Network Companies and Transportation Charter-Party Carriers, a regulatory class that covers all for-hire ground passenger transportation services other than taxicabs (and now ridesharing services). Ridesharing providers in California now face far more stringent inspection, liability insurance, criminal background check, and drug and alcohol policy requirements than limousines, shuttles, and charter buses.
As should now be obvious, the creation of the new “transportation network company” regulatory class is not in any way deregulation. This is merely regulatory recognition and accommodation. Regulatory accommodation may be a wise short-run strategy to get ridesharing providers legalized or explicitly recognized as legal. However, we must understand that this also creates new political barriers to entry and enhanced regulatory authority, both of which libertarians should oppose in the long-run as we seek liberalization in the transportation sector.
Not Even Effective
Rather than lobby for deregulation, as they at least pretended to do in the early days of ridesharing, Uber is now shopping around legislation across the country based in part on California’s regulations. It is hard to fault them for this, as ensuring their company can operate legally is their chief concern at the moment, but it doesn’t appear as though this strategy is working any better than advocating for broad deregulation.
The post-California accommodation strategy has so far only succeeded in Colorado while it has failed in Arizona and Georgia. This record for compromise is hardly a triumph, and it suggests that regulatory accommodation may not be significantly more pragmatic than pushing for actual deregulation, even if the short-term goal is only allowing Uber and Lyft to operate.
While I understand the instinctive appeal of appearing pragmatic on this issue, I believe libertarians supporting accommodation rather than deregulation fail to see a major disruption right around the corner—and one that will make the current ridesharing industry look insignificant in comparison.
Handicapping the “Next Uber,” You and Me?
I am talking of course about fully automated vehicles, often called autonomous vehicles, self-driving cars, and driverless cars. 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.
Automated vehicles promise greatly improved safety (approximately 93 percent of crashes are due to human error—see here and here), which will dramatically reduce the fatalities, injuries, property damage, and congestion associated with traffic accidents.
Computer-directed driving will also reduce non-crash congestion, as a large share of this congestion is due to human behaviors, such as inefficient lane merging. Reduced congestion will also reduce emissions and save fuel (the relationship between speed and emissions being parabolic means we often find ourselves stuck in traffic on the high left tail of the speed-emissions curve).
- (Shameless Plug: For much more on automated vehicle regulatory policy, see my Competitive Enterprise Institute whitepaper, “Self-Driving Regulation: Pro-Market Policies Key to Automated Vehicle Innovation.”)
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.
I would rather not find out, which is why libertarians should continue supporting deregulation of the taxicab industry and the broader transportation services market. This does not mean we should not be able to stomach temporary regulatory accommodation, but we should not lose sight of the goal, and we certainly should not naïvely assume a “transportation network company” regulatory carve-out is in any way a free market solution.