Taxi vs Ride Sharing – Let the Free Market Decide

 
 

rideshareThe battle between the entrenched taxicab business and the new ride-sharing industry in Seattle has been depicted as a referendum on innovation and cutting-edge technology for the 21st century.

In other words, the entrepreneurial elite versus up-from-the-bootstraps immigrants, or the past versus the future.

Despite all the characterizations, this should not be the way that this commercial conflict is framed.

And this isn’t about state-of-the-art technology or transformative innovation. After all, we can get instant, on-demand access to a private car or a taxi by using a mobile app for either transportation choice.

No, this is very much a question and issue of regulation versus non-regulation.  Taxis are licensed and regulated, providing some level of consumer protection and safety; but prices are highly fixed, competition is limited, and there’s little incentive for improvements in service.

Ride-sharing, for its part, is, at the moment, a completely unregulated system that offers virtually no consumer protection. The quality and condition of the cars is unknown; the quality and condition of the drivers is unknown; and there are no licensing or insurance standards.

 

So, should ride-sharing be banned?

 

Absolutely not! … Government shouldn’t regulate the quality and level of consumer protection for everything.

There are cases where a completely unregulated system creates such a significant consumer risk that the risk becomes unacceptable. Providing water and food falls into this category.   But, if a consumer wants to get into a car with a driver of his or her choice, for a negotiated price, then local government definitely shouldn’t be involved.

The open, competitive and free market will determine the overall success of the ride-share endeavor.   Taxis are part of a private industry, and they should have to compete with other private entities.

The two key questions are:

  1. Does the market value the consistency and consumer protection that cities provide in the case of taxis?
  2. And are consumers willing to pay the extra cost for that protection?

The emergence of ride-sharing will eventually help us answer those questions.

F_Really_Free_cmyk-2Looking at the big picture, should government regulate Airbnb to protect the hotels in Seattle?   Again, this is a free-market issue based on the quality and offering of the Airbnb locations as opposed to hotels. If hotels do not offer sufficient added value, then they should be allowed to fail in the marketplace.

The one point of commonality in this struggle is that both the taxi business and the emerging ride-sharing industry say that they are creating and protecting jobs.   And they are both right.

That’s one of the reasons why it’s still unclear which transportation option will win out in the end.   And it also helps explain why Seattle recently suspended limits and regulations on ride-share companies, just a month after they were enacted by the City Council and reluctantly signed by Mayor Ed Murray.

The battle over ride-share regulation is being waged in other cities around the nation.   And, in addition to letting the market dynamics play out, we’ll soon find out whether governments are going to get in the way of disruptive new industries that provide fresh choices for consumers in the 21st century.