A dangerous outbreak of voluntary trading activity is sweeping the planet, and citizens everywhere are calling on their governments to do something about it.
Rogue technologies have lowered the transaction costs that previously protected consumers from the knowledge that various goods and services were available for sale. As a result, people who previously relied on licensed taxis and properly-regulated hotels are being lured into potentially disastrous transactions with other people.
One of these rogue technologies tricks users into arranging rides with other people who just happen to have a car and who are willing to sell rides for money. In one version, the technology goes by the ominous name of “Uber.”
Licensed taxi drivers, alarmed at the threat to their customers, rose up and held a one-day strike in cities across Europe and South America this past week, demanding the government step in and take action. In cities from Rio to Berlin, they heroically demanded protection for their vulnerable passengers, in some cases bravely attacking cars suspected of being private taxis.
Central London was gridlocked as its famous black cabs halted in protest. In London, would-be taxi drivers study for as long as seven years to gain “The Knowledge” that entitles them to call themselves cab drivers and undergo criminal background checks before paying more than $60,000 (USD) for their cabs. Needless to say, their concern for their passengers is honed to a fine point in this process, and so the prospect of any ill-use befalling people from random Uber drivers is topmost in their minds. One of them explained the danger of Uber to the Daily Beast in these terms: “Say you have a problem with me—I pick you up, and me and you have a few words: I say, ‘Oh, fuck off, you wanker! Get out.’ You’d take my number down, and my head’s on the chopping block. I have to go up and explain myself and if it ain’t right they'll suspend me or take my license away.”
In a sick, ironic twist, the strike drew the attention of many previously unsuspecting passengers to the existence of Uber. A spokesperson claims that sign-ups for the service have increased 850 percent. “London wants Uber in a big way,” she added.
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The Internet is making it easier for people to communicate and arrange mutually beneficial trades. Some of these trades involve things like people renting their homes when they are not using them, or making some money giving rides to people or doing odd jobs. These trades have the usual benefits associated with trading in general: each party benefits. Furthermore, they have the obviously salutary economic effect of putting underutilized resources like vacant homes and car seats and human labour to good use.
But needless to say, the people who make use of these services to sell things that were previously more difficult to sell are entering into competition with existing businesses like taxi companies and hotels.
Some of these existing companies are heavily regulated and taxed. The example of London’s black cabs is typical. In other cities, a carefully limited number of taxi licenses become more and more expensive, until finally it costs more to become a taxi driver than it costs to purchase a house.
The taxes and regulations were created for that purpose. They serve to make it harder to get into the business so that competition is minimized and prices remain high. Good for the existing businesses, bad for everybody else.
Anyone who has jumped through the hoops and gotten into such a racket the old-fashioned way has a good reason to be upset by things that make it easy for people to find alternatives. But why anyone else should be upset about it is not obvious.
“But it isn’t fair!” shout those who have done things the old-fashioned way. (Pro-taxi protesters in Berlin held signs reading “Fairer Wettbewerb für alle”—fair competition for all—emphasis no doubt on “fair”.) And they are right. So do away with the taxes and regulations and everyone can play by the same rules. “We don’t mean that!”
The regulations, some will say, in addition to protecting existing business from competition and keeping prices high, do sometimes serve the worthy purpose of mandating safety: fire standards for the hotels, criminal background checks for cabbies, etc.
That is true. In the days when transaction costs made it hard to find information about a hotel in another city or a taxi company, health and safety regulations did serve that purpose.
But the same technology that makes it easier to find a person with a spare room also makes it easy to find out what that person’s past customers have to say about him or her. In other words, the transaction costs have gone down for both of these things, and the utility of regulation is thus diminished.
This much is obvious to everyone who has used one of these services, and their numbers are growing. When will the newspapers and webzines catch up with the new reality? Never, if folks like Salon’s resident Luddite Andrew Leonard can help it. It seems it’s always easier to identify with rent-seeking producers than with the consumers they’re gouging.
But there are scattered signs of hope. Just as the gridlocking protest in London drove business straight to Uber, so the mounting absurdity of not being allowed to sell and rent the things that belong to you is starting to penetrate even the densest heads. May we live to see the day when the absurdity of it becomes evident to everyone.
* Larry Deck is a librarian who lives in Montreal.