Virginia Regulators Should Let Lyft and Uber Roll

Technological innovation sometimes makes laws obsolete.


Bochumi / Wikimedia Commons

Technological innovation sometimes makes laws obsolete.

Consider the "Red Flag Laws" of the late 19th century, which required early automobiles traveling on roads to be preceded by a man on foot waving a red flag in order to warn others on horses of the vehicle's approach.

Today, most states require cars traveling on roads to have a human driver at the wheel—a regulation that to our descendants will sound just as preposterous as flag-waving does to us.

Yet how do we get from here to there? What is the government's proper response when a new technological innovation obsoletes the very purpose of a law?

One approach is to prohibit the new technology until it can be squared with the law. No outright ban is necessary; the government just mindlessly enforces an obsoleted law until it is changed. This is the approach the Commonwealth of Virginia is now taking against ride-sharing apps Uber and Lyft.

Last week, Richard D. Holcomb, Commissioner of the Department of Motor Vehicles, sent letters to the companies instructing them to cease and desist all operations in Virginia until they obtain "proper authority." Such proper authority doesn't really mean a taxicab permit from the state, since Uber and Lyft are not really taxicab companies. Instead, proper authority will come when the legislature changes the law to accommodate the new technology.

"As you know," Holcomb wrote to Uber, "DMV is actively studying Virginia's passenger carrier laws and business models such as Uber. DMV has invited Uber and other stakeholders to participate in this study and will produce a final report before the next legislative session. I strongly suggest that Uber focus its resources on participation in this study rather than continue illegal operations in the meantime."

Everything which is not permitted is forbidden, seems to be the message, even if the innovation is not only harmless, but actually improves on the rationale for the law.

As my colleague Matt Mitchell has pointed out, taxicab regulations exist to cure the "information asymmetry" between passenger and taxi driver. "A would-be passenger on a curb can't see (or smell) the cab's interior, can't assess the driver's record or confirm that the driver knows his way around," he writes. "Typically, no other cabs are immediately available, so customers can't feasibly walk away if they think it'll be a bad deal."

The way to address this market failure has been regulation: license drivers and regulate prices. In contrast, with Uber, Lyft, and other ride-sharing platforms, passengers rate drivers and vice versa, so you know what you're getting into before you get in the car. Everyone's incentive is to be on their best behavior because poorly rated players are kicked out. "Uber and its competitor, Lyft, solved the asymmetric information problem plaguing the traditional taxi model and obviated the need for state regulators," writes Mitchell.

Yet even though anyone who's ever used these services in Virginia can tell you that Uber and Lyft are quicker, safer, cleaner, and cheaper than taxis, the DMV wants to ban the services until they can develop a study and have the legislature give its consent.

Here's a radical idea: how about allowing the innovation to continue apace while the government studies it and gets its regulatory house in order? Public officials like Mr. Holcomb might say that their job is to enforce the law, and while that's true, public officials also have a responsibility to exercise discretion in the public interest. It's clear that the Virginia legislature did not anticipate the invention of platforms like Uber and Lyft when they designed their motor carrier laws, so it would be perfectly reasonable for the DMV to work with the legislature to clarify the law without first banning the services.

The DMV's alternative, telling Uber and Lyft that they must cease operating because their services don't fit into any of the regulatory buckets it manages, is pathetically robotic and a disservice to the people of Virginia.

Because officials often have little incentive to abstain from mindlessly enforcing regulations, we should require them to exercise discretion. For example, Section 10 of the Communications Act of 1996 requires the FCC to "forbear from applying any regulation or any provision of this chapter … if the Commission determines that enforcement of such regulation or provision is not necessary" to achieve the purpose of the law. This hasn't worked as well as one would hope, but it's a start.

From drone innovation outpacing FAA regulations, to genome sequencing and wearables leaving FDA medical device rules in the dust, we are only going to see more and more instances of new technologies making law obsolete. Rather than react defensively, regulators should allow for permission-less innovation while they determine if and how they will ultimately proceed.

Virginia still has an opportunity to show leadership in the face of technological change. It should let Uber and Lyft roll.

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  1. Last time I was in New York, I used a car service to go everywhere. The cars were nice and clean, and the drivers were knowledgeable.

    Who am I going to believe, my lying eyes?

    1. Do you mean Uber/Lyft type car service, or just normal NY “black car” car service?

      1. Geez nikki, way to race up a conversation on taxis.

        You really are the worst.

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      2. Black car. This was before Uber, but same argument. (although I understand that car services are regulated too, and probably engage in cronyism).

        The difference in quality was amazing though. I took a cab from JFK to Riverdale, and the driver stopped twice to ask for directions, and then hassled me when I wanted to pay with a credit card. The cab also smelled like Episiarch.

        The black cars were a pleasant experience, and half the price.

        1. Yeah I love me a black car.

          1. Once you go black, you never go back.

            1. Razistttts

        2. When I lived there, I used black cars for anything that wasn’t spur of the moment travel. Much better.

          1. Thankfully with Uber I can even use it for “spur of the moment travel” when I don’t feel like finding a parking space or I plan on having a few beers. I’ve never had to wait more than about 8 minutes, which is usually enough time to finish a drink, put on my shoes, and walk outside to meet the car.

    2. C’mon Virginia, know what’s best for the people! go to http://www.lyftvsuber.com/ to try out Uber or Lyft for yourself. $25 of free ride credit, and up to $500 new driver sign-up bonuses!! drivers can make as much as $35/hr (personally, I drive once or twice a week for a little extra cash). you’ll see what all the hype is about 🙂

  2. Everything which is not permitted is forbidden, seems to be the message, even if the innovation is not only harmless, but actually improves on the rationale for the law.

    Yep. Everything must be controlled and planned. Emergent order must be destroyed.

    1. All fish in the ocean that are not caught by authorized commercial fishing companies are now illegal. And so it goes.

  3. crap. looks like I’ll have to write a letter to my state delegate and senator.

  4. Finally used Uber this weekend, it was fast, comfortable and somehow cheaper than Yellowcab. Fuck Yellowcab.

    1. How do I know that this is the real Apatheist?

      1. The real one has crystal in his monocle. The fake one has a plastic lens.

      2. Fuck that imposter! I’ve been working so much I haven’t been in the same thread at the same time yet.

  5. I’m pretty sure this has something to do with the Washington Flyer taxi monopoly, which I am certain nets someone a pretty penny.

    I have no idea why, but the regulators are absolutely obsessed with making sure that nobody except Washginton Flyer can pick people up from the airport.

    1. Question and answer:

      I have no idea why,

      I am certain nets someone a pretty penny.

  6. Kill the DMV with fire.

  7. Why flying carpets can replace traditional taxis, if we follow the lessons of Game of Thrones.

    1. Which reminds me…I’m confused about the scene in Game of Thrones where Jabba the Hutt presides over the Quiddich competition.

      1. If the Harry Potter series had a rancor, then maybe I could’ve suffered through those movies.

  8. The bottom line is that Uber and Lyft ARE operating as a passenger and/or taxi service and should be regulated as such. If the argument is taxi’s/passenger services are over-regulated, and potentially monopolistic – I agree, and we should address.

    Just because some perceive these (and other) companies to be technologically innovative isn’t a valid argument.

    I’ve said it before and will say it again – limited government for all (not just the cool techies)

    1. True, but one way of attacking the regulatory state is to first destroy the industries that benefit from it.

      Right now you have entrenched interests who have an interest in defending the regulatory structure.

      One way of deal with it would be to say “The law applies to all!” and then let the regulations destroy all the new startups, so there is no more opposition.

      The other way is to let the new startups destroy the entrenched interests, and then tear down the regulations.

  9. “Technological innovation sometimes makes laws obsolete.”

    But the vigorish is always there!

  10. Technological innovation sometimes makes laws obsolete.

    Yes, which is why we craft new laws to correct technological innovation.

  11. Rather than react defensively, regulators should allow for permission-less innovation while they determine if and how they will ultimately proceed.

    That will never happen so long as the only judicial scrutiny regulators must withstand is the Rational Basis Test, where the burden of proof rests with the person challenging the rule, as opposed to having regulators be forced to justify the efficacy of the rules they make.

  12. Fortunately, Uber just raised an obscene amount of money (based on an even more obscene valuation) so it can simply bribe legi-critters instead of go through all of this…

  13. How about an emergency session of the Virginia Legislature wherein they pass the following law: “The Commonwealth of Virginia shall make no law regarding the licensing of public transportation. All current laws are null and void.”

  14. “Yeah! Yeah! Don’t come between me an my Uterus!”
    “Um, I think he said ‘Uber-Lyft'”.
    “Oh, then tax and regulate the shit out of it!”

    1. ^^^This. Thanks for a laugh and the truth in one comment.

  15. Sam brighton says that stuff aint goona fly man.


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  17. I’m honestly not sure what the right answer is in regards to rideshare regulation. It’s such new technology that I think regulators are having a tough time figuring out what to do. It’s simply going to take some time. I’ve been looking into the two companies, Lyft vs Uber at http://lyftgyft.com/compare-tr…..-companies and I have to say I’m impressed with Lyft so far.

  18. as i got transportation business, i first give prior to safety on road. so it should be safe by anyway

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