Uber Seems to Be More Efficient Than Taxis in Time Spent Ferrying Passengers

Economists find more social benefits from ridehailing apps.

For those irked by the thought of cars just wasting time and gas not performing a vital public service, you just might have some extra reason to cheer the rise of smartphone app ridehailing services such as Uber over old fashioned taxis.

This is the conclusion of a new study from the National Bureau of Economic Research, conducted by Judd Cramer and Alan B. Krueger of Princeton.

They examine "capacity utilization" in the competing means of getting hired rides, which is "measured either by the fraction of time that drivers have a farepaying passenger in the car or by the fraction of miles that drivers log in which a passenger is in the car."

The authors admit their results are provisional, as they were only able to find reliable data for Boston, Los Angeles, New York, San Francisco and Seattle. They are comparing the "UberX" brand of Uber, the one that most people use, which summons not limos but private drivers in private cars.

They find from the Current Population Survey that there were in 2015 an approximately equal numbers—half a million each—of taxi drivers and chauffeurs and drivers for Uber and its largest competitor Lyft. "Uber drivers, however, work about half as many hours per week as taxi and limo drivers."

The heart of their (tentative) findings are that "On average, the capacity utilization rate is 30 percent higher for UberX drivers than taxi drivers when measured by time, and 50 percent higher when measured by miles…."

One reason for the tentativeness of the conclusions is they were not always able to get precisely matching reliable data about time and mile measurements for taxis in all five studied cities. And in some cases, the taxi data they were able to get were from slightly earlier times.

But the economists believe that wrinkle would likely only bias the results for taxis seeming to have better capacity utilization: "that the taxi data pertain to a period before Uber made significant inroads into the market likely raise the capacity utilization rate for taxis compared to Uber drivers, as the taxis had less competition for passengers at that time."

Despite all the caveats, the economists offer four tentative guesses as to why the Uber model might lead to more efficient use of car services as applied to actually moving passengers:

1) Uber's more efficient driver-passenger matching technology; 2) Uber's larger scale, which supports faster matches; 3) inefficient taxi regulations; and 4) Uber's flexible labor supply model and surge pricing, which more closely match supply with demand throughout the day.

From Cramer and Krueger's conclusion, for possible policy implications:

….differences in utilization rates have implications for resources other than passengers and drivers. For example, for every mile that taxi drivers in Los Angeles drives with a passenger in the car, they drive 1.46 miles without a passenger; the comparable figure for UberX drivers is 0.56 mile. This difference likely translates to greater traffic congestion and wasteful fuel consumption.

Lastly, our results bear on the literature on occupational licensing. Although occupational licensing can provide many benefits for consumers, workers and society, it could also reduce efficiency and distort markets. Occupational licensing has grown even in fields where there is little public safety or other societal benefit from licensing restrictions. Given that vested interests that benefit from occupational licensing (including the jurisdictions that collect licensing fees) have made it difficult to repeal occupational licensing, one way in which inefficient, unnecessary and counterproductive occupational licensing can be reduced is through disruptive change, such as brought about by a new technology.

Keep that in mind, occupational licensers! Though I think they already know.