Local Governments Are Going After Ride Services Like Uber & Lyft to Help Politically Connected Businesses, Not Customers. Any Questions?


Over at USA Today, Glenn Reynolds (a.k.a. The Instapundit) provides a primer about "regulatory capture" and crony capitalism. He explains that the real reason local governments all over the place are going after new ride services such as Uber and Lyft.

Taxi commissions in cities from Los Angeles to Washington, D.C. ostensibly work to regulate providers in the name of public safety. Commissions are there to make sure cab drivers are properly licensed, that the cabs are safe, etc., right?

In reality, regulators are often (always?) "captured" by the very business interests they are supposed to supervise and end up doing the bidding of existing business interests even when that screws customers or potentially innovative ways to deliver services.

Regulators — and the industries they protect — will try to tell you that all this regulation is in service of consumer protection. Why, if you use an unlicensed, unregulated car service, you might be robbed, raped or overcharged! As if those kinds of things never happen in ordinary cabs or limos. (Actually, I think services like Uber and Lyft are actually safer, since they keep a clear record of when, where, and by whom riders are picked up, and track the cars involved.)

The truth is that although occupational regulation is usually presented as a protection for consumers, it's usually demanded by the regulated industries themselves, and not by consumers at all. That's not surprising, because it's usually the regulated industries and the well-off people controlling them who benefit. In Chicago, a taxi medallion (license) costs $360,000 while the actual drivers — employed by the medallion owner — can earn less than minimum wage. And consumers pay higher taxi rates because of reduced competition.

Whole thing here.


This dynamic will not be new to readers of Reason or fans of public-choice economics (or of the socialist historian Gabriel Kolko, who famously argued that railroad "robber barons" approved of the Progressive regulation of their industry as a way of maintaining the lucrative-to-them status quo).

But the idea that regulators are often in cahoots with their regulatees needs more press. It helps to explain why so many regulations fail to achieve their stated goals and also provides a potent argument against the idea that every industry needs more and more rules that will make things safe, fair, and effective. 

As Milton Friedman told Reason's Tibor Machan in 1974:

The case for free enterprise, for competition, is that it's the only system that will keep the capitalists from having too much power. There's the old saying, "If you want to catch a thief, set a thief to catch him." The virtue of free enterprise capitalism is that it sets one businessman against another and it's a most effective device for control.

Keep that in mind next time you hear somebody saying that Amazon is beating up on poor, multi-national book publishing conglomerates that want YOU, dear reader, to pay more for books.

Here's a great vid from Reason TV on Washington, D.C.'s war on Uber: