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Don’t Blame Rideshare, Blame Regulation

By: Contributor - Oct 30, 2014, 11:55 am

EspañolBy Johannes Schmidt

For the second time this month, taxicabs descended on downtown Washington, DC, on Tuesday to protest the DC Council’s decision to pass the Transportation Network Services Innovation Act of 2014 — a bill that finally put the question of rideshare legality in the District of Columbia to rest. But do taxi drivers understand who their enemy really is?

DC cabdrivers have protested against Council moves to formally legalize ridesharing services
DC cabbies have protested council moves to formally legalize ridesharing services. (Flickr/Rich Renomenon)

The bill, introduced by Council Members Mary Chen and David Grosso, will essentially require that rideshare companies insure their drivers for up to US$1 million, conduct background checks on new drivers, and furnish affiliated vehicles with distinguishing markers. As far as safety regulations go, these aren’t too bad and would probably be practiced even if the bill hadn’t passed. Providing safety helps appeal to costumers and is a competitive tactic in a free market.

In fact, Uber has been insuring and running background checks for some time now, and Lyft’s distinguishing pink mustache was certainly not mandated by any council regulation.

Taxi drivers are still angry, however, and they should be. In a press release, Teamsters stated that rideshare companies “currently do not follow the same rules and regulations that taxi drivers must follow, and the bill in its current form falls far too short in providing fairness.”

That’s absolutely true. But why, then, are taxi drivers going against rideshare and not regulators?

Since rideshare services arrived in DC, taxi companies have seen their revenue reduced between 20-30 percent, but an inability to compete is what’s really to blame. City-mandated rates mean that taxis must charge a $3.25 base fare plus $2.16 per additional mile, while rideshare drivers are free to charge whatever they please, freely competing for frugal costumers across the Metropolitan Area. In addition, innovative technology has made using rideshare services both more pleasant and user-friendly.

So, does “fairness” mean more stringent regulation for rideshare services, or a deregulation of the taxi industry?

In my mind, although equity is often defined by subjective value judgments, “fairness” in this case can be best achieved by allowing taxi drivers to compete with their rideshare counterparts. Had they been allowed to set their own prices, had access to innovative mobile applications, and been motivated to provide excellent customer service, taxis might not feel like a thing of the past.

Unfortunately, union pressures and government regulations have made it impossible for taxi drivers to compete within the current market. That’s certainly not how it should be. Every aspect of government regulation should be equitable, and policy shouldn’t be able to designate favorites within a market.

Neither businesses nor individuals should act based on regulatory consequences. As David Brunori, Professor of Public Policy at The George Washington University, notes, “market conditions and economic efficiency… should dictate business decisions.”

While cab drivers circle Freedom Plaza, ironically giving up their share of the market to rideshare drivers, they should recognize that the real enemy is regulation and not the competition that they could so desperately benefit from.

Rideshare services have certainly made my life easier and my riding experience both cheaper and more pleasant. I would be excited to welcome the 2,000 plus members of the Washington, DC, Taxi Operators Association to come and take my business, should they be willing and able to compete for it. I know that drivers and customers could all benefit from more competition in the transportation market.

Johannes Schmidt is a program associate and Sound Money Project fellow at the Atlas Network in Washington, DC.

Edited by Laurie Blair and Fergus Hodgson.