If it sometimes seems like it’s impossible to restore the free market, as if every new wave of government regulation is irreversible, then consider that one form of regulation, which is common in the most dogmatically big-government enclaves in the country, is being pretty much completely dismantled before our eyes. And it’s the hippest thing ever.
I was reminded of this by a recent report about yet another attempt to help traditional taxis compete with “ride-sharing” services like Uber and Lyft: a new app called Arro, which allows you to both hail a traditional taxi and pay for it from your phone. So Arro takes a twentieth-century business and finally drags into the twenty-first century. This certainly might help improve the taxi experience relative to how things were done before. But it won’t fend off Uber and Lyft, because it doesn’t change the central issues, which are political rather than technological.
The big mistake people make about these new ride-sharing services is to think of them as technology companies, because the technological interface is what you see and use. That’s why Arro thinks it can compete simply by duplicating the interface. But Uber and Lyft are really in the business of busting the taxi monopoly—through a series of complex and ongoing legal battles—and creating businesses that operate according to the laws of free-market economics rather than the dictates of government.
The real essence of “ride-sharing” is to allow drivers to do two things government planners previously did not allow.
The first is to knock down the artificial barriers to entry to the taxi business, allowing anyone with a car and a license to offer his or her services, without having to pay the large dollar figures for an artificially limited number of taxi medallions. The second is to adjust prices to increase the supply of drivers to meet demand. In the old system, rates are uniformly set by the government at mandated prices, and a lot of us remember what that used to mean in places like New York City. Every taxi was available for the same rate, every time of the day, in every neighborhood—if you could get one, which you frequently couldn’t.
Arro’s big selling point is that it offers “always fair pricing,” with no surge pricing rates. Which is to say: the same old system. But what is the point of that? Not being able to match supply with demand—leading to chronic shortages and inefficient use of resources—is precisely what market forces and market pricing are supposed to prevent.
Uber has been hit with complaints that it’s running “an Objectivist LARP,” a live-action role playing of a capitalist utopia from an Ayn Rand novel. That’s pretty much what it is doing, and the results are awesome. And the benefits don’t stop with more drivers and lower rates. Uber is ploughing a fair portion of its profits into another wave of technological innovation—self-driving cars—that promises to offer even greater improvements in the future.
All of this should counter some of the despair about how to promote free markets, especially among urban elites who have been programmed by their college educations to embrace the rhetoric of the Left. Give them half a chance, and they will flock to capitalist innovations run according to the laws of the market.
The problem is that they don’t want to admit it. That’s where the euphemism “ride-sharing” comes in. To cover up the capitalistic nature of the activity, they tell themselves they’re “sharing” something that they are quite obviously paying for, and paying at market rates. Imagine what could be accomplished if they were just willing to drop the euphemisms and embrace the free market.
There is increasing speculation that Uber’s long-anticipated initial public offering could be valued at $100 billion, a value that has been created by undercutting the prices of traditional taxis and offering more and better service. If that’s how much wealth can be generated just by rediscovering the laws of economics in this one narrow area, think what could be accomplished if we do it for the economy as a whole.
It would be like Uber, but for everything.