Friday, October 3, 2014

Bad arguments against Uber

This note by Catherine Rampell makes a pretty odd argument that Uber is bad for consumers. For example:

Medallions and other regulations capping the number of livery cars available are often derided as taxi cartel protectionism. But they can benefit the public, too. They limit the number of empty cars driving around looking for passengers, snarling intersections and polluting the air.

There's a lot wrong here--for example, if there is too much capacity then eventually drivers will go do something else with their time. But I want to focus on the congestion + pollution argument.

A good argument can be made that congestion and carbon are mispriced for the usual externality reasons. But Rampell has failed to argue that Uber and its customers uniquely deserve to bear the cost of correcting that market failure. I own a car; why should people who ride in Uber cars pay for their pollution and congestion while I drive around with impunity? This is a very silly way to make policy. Why don't we just put a cap on the number of cars Ford can produce every year? Or limit UPS to X trucks per city?

So yes, there is an externality associated with Uber cars driving around. But it's the same as the externality involved with everyone else driving around in cars. This is a car problem, not an Uber problem. Rampell hasn't explained why the Uber people should pay more for their externalities than everyone else.

She also uses this common argument:

In other words, for all their bellyaching about the bullies of Big Taxi, Uber and Lyft are becoming pretty big bullies themselves. Nothing about their behavior suggests the ultimate winner of the ride-sharing wars will wield its power beneficently when it controls the market and can raise consumer prices at will. Consumers will just be trading in one monopoly — loathed Big Taxi — for another, less regulated one.

Obviously the difference is that Big Taxi's market power is a result of rent seeking and regulatory capture, while Uber's is the result of being amazingly good at giving consumers something they want. If Uber and Lyft get so big that they have market power, there will exist strong incentives for new entrants to undercut them. The very existence of Uber and Lyft suggests that this market doesn't have special natural monopoly problems, unless we create them by regulating enduring market power into existence. Rampell certainly hasn't made an argument for why she thinks someone could take over this market without having to worry about new entrants.

If these are the best anti-Uber arguments out there, it's no wonder these economists can't find anything wrong with it.


  1. This comment has been removed by the author.

  2. How does payment work? How is the fare calculated? What if there are multiple passengers who want to get in together but different drop-off points.