Adapting to change is hard, especially when your family’s
livelihood is on the line. That’s why, when companies face competition, their
tendency is to reach out to the government to ask for protection and demand
that competition be squashed using the regulatory and coercive power of the
state.
The best example is the fight
between taxicabs and companies such as Uber and Lyft, two innovative
up-and-coming alternatives to cabs. It’s been going on for months, but it
culminated a few weeks ago in Virginia when the Virginia Department of Motor
Vehicles sent cease-and-desist letters to Uber Technologies and Lyft ordering
them to stop operating.
Over at the Washington Post last week, Emily Bagger had a
piece explaining what is really at stake for cab companies: cab medallions. As
the piece explains “a medallion in Chicago fetched around $350,000. . . . In
New York, taxi medallions have topped $1 million. In Boston, $700,000. In
Philadelphia, $400,000. In Miami, $300,000.”
One way to think about medallions is that they are the reward
for companies subjecting themselves to the insane
and punishing licensing laws imposed by the government.
CHICAGO — A taxicab is a car remade by government, modified
dozens of ways by edicts within subsections of articles of the city’s taxi
code.
“Everywhere on this car has been regulated,” John Henry
Assabill says. “Look at it!”
He throws up his arms in the direction of his gold-colored
2012 Ford Transit Connect. The car’s medallion number — 813 — is painted in
black plain gothic figures (must be black plain gothic figures) on the
driver’s-side hood, on both passenger doors and, for good measure, on the rear.
Inside, there is a camera mounted over the rear-view mirror, a dispatch radio
bolted to the console, a credit-card reader snapped to the passenger headrest.
From the back of Assabill’s seat hangs a sign — lamination
required — spelling out the city’s fare structure: $3.25 for the base rate, $2
for the airport departure/arrival tax, $50 vomit cleanup fee. Everywhere, there
are mandatory stickers. “That one costs a dollar,” Assabill says of a window
decal reminding passengers to LOOK! before opening the door into the possible
path of cyclists and pedestrians. “The fine for not having it is $100.”
Then there are the holes. Several have been drilled into the
roof to mount the top light that distinguishes cabs from other cars at a
distance. Another has been punched right into the hood, bolting down the
palm-size metal plate — the “medallion” itself — that gives Assabill the right
to operate this cab, one of 6,904 in Chicago.
The losers of this ban are low-income Americans looking to
make a living. These ride-sharing companies allow anyone who has a car to
become a businessman: Drivers can provide travel services directly to customers
using apps.
And this is where Uber and similar companies come in: They
are alternatives to traditional anti-competitive, highly regulated taxis. Taxi
medallions, fare price-fixing, and other regulatory barriers to entry have all
but drained the last competitive juices from the legacy taxi system. Without
these limitations, Uber and Lyft are able to offer their customers better
services at more reasonable prices. In addition, being new companies in a
competitive market, they understand that they had better make sure their
customers are satisfied so they will come back often. And this is a key point
that seems lost in the current debate: Consumers are the ones at the core of
the existence of Uber and Lyft.
Unfortunately for consumers and low-income workers who were
making a living from these new ventures, lawmakers are only too happy to get
captured by incumbents in the cab industry. As I wrote in the Examiner on
Friday:
Of course, politicians and regulators are the ones to blame.
It is because lawmakers allow themselves to be captured by special interests
who want to fence off competition that innovators and new comers have to ask
for permission to give customers what they want. Without over-the-top economic
regulation over rates, entry, and new technologies, incumbent cab drivers would
have to compete for customers over the quality of the services they provide.
And in fact, it is the decades of protection from competition that has left
taxi companies complacent and largely unequipped to nimbly improve their
businesses.
There is a reason consumers like companies such as Uber and
Lyft. They provide them with the service they want at a price that suits them.
I understand that after having been forced to comply with onerous licensing
laws and fees, cabbies are invested in the current system. But I think that a
better course of action going forward is to minimize barriers to entry and
regulations; that is the way innovation occurs and consumers are better served.
There is no stopping this new era of consumer-driven transportation companies.
The State of Virginia may crush Uber this time around, but other companies will
appear now that consumers have gotten a taste for freedom.
As a matter of principle, conservatives should be against
licensing laws. They hinder employment, especially for lower-income workers,
and create artificial barriers to entry in order to protect incumbents against
often very needed competition. AEI’s Michael Strain made that case in a book
chapter called “Employment: Policies To Get Americans Working Again,” and then
in piece in the Washington Post last week. As he explains, conservatives should
strive to address long-term unemployment, which means making it easier to find
work. Getting rid of occupational-licensing laws would really help, he argues.
Here is my Reason piece on the issue.
