Economist Matthew Mitchell says ridesharing companies make a lot of sense in places such as Albuquerque, N.M., where he grew up.
“There’s limited public transportation there, and there are a bunch of drunk 20-year-olds on a typical Friday and Saturday night,” he says with a laugh.
But opponents, including regulators in various locales across the nation, aren’t laughing.
They insist companies such as Uber, Sidecar and Lyft abide by the same rules as taxi companies and, in some cases, they’re cracking down hard on the startups that use smartphone apps to attract passengers.
Case in point: The city council in Washington, D.C., not only wanted to heavily regulate ridesharing companies, but proposed making them charge no less than five times what D.C. cab companies charge their customers.
So a $20 fare in a cab would cost a passenger using a ridesharing company at least $100?
“That’s right,” said Mitchell, senior research fellow at the Mercatus Center at George Mason University. “But these companies alerted their tech-savvy customers. And, within 24 hours, these tech-savvy customers inundated the city council with about 20,000 complaints. [The] city council has never had that kind of reaction from anything they’ve ever proposed, and they withdrew their proposal.”
There are other examples.
- Virginia’s Department of Motor Vehicles fined Uber and Lyft for not having “proper operating authority” to do business in the state.
- Even in the tech-friendly and eco-friendly mecca of Austin, Texas, the city impounded two Lyft cars from the tony Four Seasons hotel and cited the drivers for not having valid chauffeur licenses.
- In San Francisco, the California Public Utilities Commission says Lyft and Uber can’t take passengers to the airport unless they have permits.
Why the hard line?
Under one regulation, a $20 fare in a cab would have cost a ridesharing passenger at least $100.
“For some [regulators], they see this as a rule-of-law issue,” Mitchell said. “They say, hey, this is what the law says. We can’t just ignore the the law.”
But, Mitchell said, there’s something else at play—the concept of what public-choice economists call “regulatory capture.”
“It’s the idea that over time, regulatory bodies often end up seeing the world in much the same way as the industries they are regulating,” Mitchell said. “It doesn’t always have to be a nefarious [situation], where the taxi cab companies buy them off. Sometimes it’s just, well, the people you end up interacting with the most are the folks you’re regulating.”