I can certainly understand the rage that the Seattle Council inspired by threatening to severely restrict, if not strangle altogether, a ridesharing option that many people find valuable. However, the problem is not that ridesharing rules will be aligned with conventional taxi rules; instead, the problem is that existing taxi rules are terrible.
The ridesharing proposal actually consists of two components: “safety” regulations that enforce minimum standards for insurance, maintenance, and so on; and a limit on size of the ridesharing fleet, hours driven, etc. Although no set of rules is perfect, there are enough information asymmetries that the case for some health-and-safety regulation is strong.
What’s indefensible is the limits on supply, which are a recipe for both high prices and the shortages and poor service that Andrew experienced. According to a report in The Stranger earlier this year, “The city limits the number of taxi licenses in order to maintain a ‘competitive, safe, fair, and viable’ industry… ‘The concern is if you flood the market with too many cabs, no one will make a living.”
What’s actually keeping taxi drivers from making a living is having to pay a rentier class for the right to drive a cab. It is the opposite of the “competitive” and “fair” industry the city desires, and completely orthogonal to whether or not it is “safe.” Unfortunately, the decades under the current system means that someone is going to take a hit to make the system better.
If we simply eliminate the cap on licenses, then current license holders take the loss. In some cases, these may turn out to be cartoon villain businessmen; in other cases, they’ll be immigrants who started with nothing and dutifully saved until they no longer had to rent a license. The second option to take the hit is taxpayers; the government could simply buy out license holders at current market prices. The third option is to maintain the status quo, which screws consumers and non-license owning operators.
Seattle last experimented with taxi deregulation in 1979 — and the experiment was not a happy one. I would summarize the three core complaints in the report as (i) rates increased, although less than the very high inflation rate at the time; (ii) there were too many taxicabs, clogging up the airport and the approaches to King Street Station; and (iii) opaque prices due to rider ignorance, preventing the price signal from operating properly. The second item obviously is a “good problem to have” from the current perspective, where it’s hard to get a timely cab. The third is exactly the kind of opacity that modern information technology solves, or at least mitigates. It’s time to give price and supply deregulation another shot.