A new Mercatus Center paper entitled “Rethinking Taxi Regulations” suggests that antiquated taxi regulations do not apply to today’s economy.
“While stringent taxi regulation may have made some sense in an earlier era, its justification does not apply to today’s ridesharing market.”
This conclusion stands in stark contrast to statements by Democratic Senator Elizabeth Warren. Referring to the decision of Uber and Lyft to leave Austin, Texas after the city upheld burdensome ridesharing regulations, Warren claimed that the companies are fighting “against local rules designed to create a level playing field between themselves and their taxi competitors.” In other words, Warren wants to make Uber more like taxis .
This single-minded way of thinking is all too common among proponents of increased regulation. What they fail to realize is that there are two ways to “level the playing field.” The first is by placing outdated, stifling regulations on innovative business models. The second approach is removing existing barriers to competition and allowing existing businesses (such as taxis) to better compete with new services (ridesharing).
The Washington, DC, Department of For-Hire Vehicles is considering changing the way it regulates the local taxi and ridesharing market. The DFHV should ignore Warren’s recommendations and instead permit taxis to become more like Uber.
Common models for taxi regulation can be traced back to the 1930s. During that time, regulations were promoted to combat what economists refer to as “asymmetric information” problems. These arose from passengers’ relative inability to know about the quality of various for-hire vehicle drivers. Additionally, passengers could not easily compare the costs of for-hire transportation options since taxis were usually found by waiting on the side of a road. These limitations led to regulations such as driver licensing requirements (an attempt to ensure universal quality) and common prices (so that consumers knew what they would end up paying).
While stringent taxi regulation may have made some sense in an earlier era, its justification does not apply to today’s ridesharing market.
Ridesharing services, similar to other sharing-economy companies...
Read the entire piece here on Forbes
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Jared Meyer is a fellow at the Manhattan Institute's Economics21. Follow him on Twitter here.
This piece originally appeared in Forbes