Technology is fueling something impressive in the streets of cities here and abroad, and while it’s making a lot of people very happy, it’s giving some entrenched interests serious (though possibly well-deserved) fits.
A pair of ingenious smartphone apps, Uber (www.uber.com) and a newer competitor, Lyft (www.lyft.com), are connecting people who need a ride with drivers who are willing to provide one at a competitive price, always paid with a credit card.
The pioneer, Uber, started in 2009 and now operates in 149 cities all over the world, charging its drivers 20 percent of their fares.
The Press Herald reported July 3 that the service has begun running recruiting ads on Facebook for drivers in Portland, part of an effort to expand to smaller markets.
Who could object to such a convenient solution to a common urban need? Don’t be silly: It is opposed by taxi companies, who generally operate within a highly regulated cartel that uses government power to control who can enter the system.
Also objecting in some locations are governments themselves, because cities like New York sell the licenses (or “medallions”) that give the taxis permission to operate, and some states, like Virginia, have liberal leaders who apparently have ideological objections to freely contracted rides.
Here’s how Howard Baetjer Jr., writing for the free market-oriented Foundation for Economic Education, described it July 10:
“The entrepreneurs who created Uber saw what they believed to be a great way to create value for city travelers: Uber’s app could connect riders with the closest available car, show waiting riders their cars approaching, measure the distances traveled, calculate the fares, bill the riders, pay the drivers, and let both drivers and riders leave reviews for others to see. What an idea! They spotted an undiscovered market, which promised profits. So they went for it. Sure enough, they are earning big profits.”
Which, naturally, made governments and their client firms mad.
As Baetjer notes, “If we had free markets for city ride services, that would be the whole story so far. … (But) legislators and government bureaucrats have political authority to intervene in these markets. And the taxicab companies, whose profits – and even existence – are being threatened, are trying to use this authority to block or impede the creative destruction that is doing so much to improve the lives of city dwellers.”
He says government claims it protects people from “inferior ride services,” but sometimes uses its power “to impede public access to superior ride services. It illustrates the way government intervention is generally used: to benefit some special interest group – in this case the taxicab companies – at the expense of its customers and competitors.”
Certainly it’s possible to encounter an untrustworthy driver with Uber and Lyft, although their drivers receive extensive background checks. It’s even possible to be involved in an accident. But those things are true with taxis, too, and both services require the use of late-model vehicles and cover customers with liability polices.
As University of Michigan economist Mark J. Perry wrote July 12 on the center-right American Enterprise Institute website (www.aei-ideas.org):
“It’s important to remember that Uber and Lyft are already very heavily regulated ride-sharing services, and in some ways they are regulated even more intensely than traditional taxis, by a very ruthless group of regulators – the consumers who use their services.
It’s not a question of “regulated versus unregulated ride services,” it’s instead who provides the best oversight, bureaucrats or customers – and Perry says consumers win, hands down.
Some critics complain that the services use “surge pricing,” which can drive up ride costs in periods of high demand, like rush hour or stormy weather.
But as economics columnist Megan McArdle noted on the Bloomberg.com website July 9, such pricing “allows you to be sure that you will be able to get a taxi on New Year’s Eve or during a rainstorm as long as you’re willing to pay extra. Sadly, no one else loves surge pricing as much as economists do.”
So, New York has banned the practice, which, as McArdle notes, “is going to make many people worse off: the drivers who would have liked to make extra on rides, and the riders who don’t get rides because some drivers couldn’t be lured out of their warm beds on a cold and needy night.”
But hey, we’ve got “fairness” in New York.
In other places, people just have rides when they want them, for a price that makes riders and drivers happy. And some observers say the demands of a swelling customer base (who also vote) will keep the regulators under control in most locations.
That remains to be seen, but for now, at least in one economic sector, liberty expressed through competition is growing daily around the world.
M.D. Harmon, a former journalist and military officer, is a freelance writer and speaker. He can be contacted at: