Today’s ‘ride sharing’ business seems to us, instructive. Uber, Lyft and other such businesses are regularly in current headlines; few seem to notice. They are perfect illustrations of the old saw: “The more we change, the more we remain the same.”
What is ‘ride sharing?; Simply, an app that lets you, who needs a ride from where you are to somewhere else, use your cell phone to contact a car owner who is interested in picking up and delivering you, for money. “Oh!” you say; “I get it, a taxi!” No so, says Uber, a company that provides the Internet service that connects you with your chauffeur. Uber owns no cars and hardly owns you, the passenger; it only connects the two of you as needed. That is important, when local (and national) cab companies have government-imposed monopolies on taxi service. So has been born this new competition for ancient taxi monopolies, claiming to be outside the laws regulating taxis. And hereby hangs an ancient and brand new, economic war.
Taxi service sold itself to politicians ages ago in return for monopoly. Licensing and regulation excluded competition, the money from the monopoly was split with government and all remained stable, in the U.S, at least. Apparently elsewhere as well; Uber is operating in many places.
Uber was banned (but was still operating) in New Delhi, Spain, Thailand, Portland (OR) and around the globe. New York City has suspended four of its five Uber bases after the company refused to hand over its trip records (to be used against it). Why so much opposition to a new, economical, job-creating and much-needed (Have you ever needed a cab when you were far from an airport or major hotel?) new type o service?
Traditional cab service requires a lot of investment in equipment and facilities and in legal (and illegal) payoffs to governments and politicians for the necessary licenses and regulations. Governments sell the right to be in the taxi business. Organized crime has been involved too, via extortion of cab drivers and companies. All these extra costs appear in fares charged. Uber doesn’t pay most of those. It’s only an Internet service, after all, right?? Its drivers aren’t employees, but independent businessmen and women. Mostly men though, drivers occupy an exposed position, security-wise. But that’s no policy of Uber’s. It will apparently take on anyone with suitable wheels who can pass their background check and investigation who is appropriately licensed. For an entrenched, high-cost cab operator, that’s tough competition. Worse, governments and politicians aren’t receiving their rake-offs. Only Uber and its drivers (and passengers) win; we can’t have that!
This seems a perfect model of an economic impact on a political iceberg. Back when Adam Smith wrote his seminal “The Wealth of Nations” and thereby gained credit as the Father of Economics, (highly debatable) it wasn’t called “economics:” it was called “political economy.” Watching the unfolding history of Uber, explains why and suggests returning to that. No economic enterprise after all, can exist significantly unless it has at least the passive sanction of government. (Even drugs) Plus, economics does not define its operations any more than government regulation, these days. “Economics” is really a subset of political science, seems to us.
If you consider for a moment, this also explains why Europe and North American are now such high cost producers that their markets are leaving them behind in favor of lower cost competitors in Asia and elsewhere. But Uber and its competition are well armed against that sort of thing; their world-wide web market costs the same everywhere and everything that costs differently in various places, is paid for by locals, not by Uber. Well, except perhaps for advertising.
Will Uber et al improve the mobility of passengers and the incomes of drivers? Or will it be squelched by greedy government and horse-and-buggy cab companies? We dunno; stay tuned. If we owned a cab company, we’d adopt internet dispatching, quick and set up wide area cooperative advertising. We’d sell our cabs to our drivers, cheap and adopt the newer, more efficient business model. Passengers would benefit and the less efficiently managed would disappear. That’s economics. When, that is, the politicians allow it to function.
Henry Ford’s product could not be headed off by the carriage trade; its impact was simply too great. Uber et al, are less obvious to the public. We will have to see whether politics will squelch economics again. Watching the U.S. President and Congress managing the nations’ debt and deficit, it’s difficult to be optimistic. But we try … An Uber driver will come get us and deliver us to from and to places that no cab ever sees … That has to be worth something!