What Uber Can Teach Us About American Government

uber nycUber has been the target of politicians seemingly from the second it came to market. New York mayor Bill de Blasio has taken his bullying a step further than most pols, and thankfully Uber is pushing back. While the outcome of this battle remains unclear, Uber v. New York can teach us quite a bit about the current state of American government and politics.

THE SITUATION IN NEW YORK

New York City has over 8.5 million residents. Its subway system is among the best in the world but remains overcrowded, unreliable, and, at later hours, unsafe. The city’s bus system is similarly well-designed, but even in conjunction with subways, is not a sufficient solution for many New Yorkers’ travel needs.

Taxis are controlled by the city of New York; supply is artificially constrained by making would-be drivers pay exorbitant licensing fees that can cost in the tens of thousands of dollars. Rules designed to protect riders are often flouted. Every New Yorker can probably remember dozens of times where they were denied a ride by an on-duty driver because they didn’t feel like going to a certain location, or when a credit card machine mysteriously malfunctioned, requiring the rider to pay cash. And for customers looking to drive outside of Manhattan: good luck. If the driver somehow doesn’t peel away a moment after you say “Brooklyn”, he will almost certainly have no idea how to navigate and/or use Google Maps. Finally, even finding a vacant cab during peak hours, bad weather, or at crowded locations is often an exercise in futility.

The introduction of Uber drastically improved New Yorkers’ options. From my perspective, a ride with Uber is superior to a New York taxi in literally every facet of the experience, from the cleanliness of the vehicles to the demeanor of the drivers.

But for the purported champion of the people, Bill de Blasio, Uber should not be allowed to continue to grow apace with demand. Per the Wall Street Journal, de Blasio is attempting to limit the number of Uber drivers operating in New York for a year or more, stifling both the firm’s chances to expand in its biggest market and consumer choice. Uber has retaliated with a multifaceted marketing and PR campaign, including the introduction of a “de Blasio” mode on its app per the above screenshot.

A BRIEF NOTE

Uber’s battle with the mayor can teach us many lessons that are broadly applicable to American politics. Before proceeding, I must note that none of these lessons are unique to this case. The service’s popularity provides us with a good opportunity to look inward at our politics, but we must resist the temptation to view these as one-off issues. Instead, I encourage readers to think about lower-profile businesses in their neighborhoods and the business owners in their social circles; these affect everyone.

LICENSING AS A PROTECTOR OF INCUMBENTS

Politicians justify licensing requirements in terms of consumer safety and well-being: we want to make darn sure that the doctor operating on us knows what she’s doing, or that the driver taking us uptown can be fully vouched for. But these functions can be performed by the free market in far more efficient ways. In reality, licensing, as famed economist Milton Friedman noted, is simply a way to keep too many outsiders from entering a business, thus protecting the jobs of incumbent employees. It is time consuming and expensive to receive a license even for such dangerous professions as hair-styling and flower-clipping, which keeps many would-be entrants out of the professions entirely.

And that’s exactly what Bill de Blasio is doing in this case. Historically cab drivers have had to receive expensive “medallions” from the city to operate. The number of medallions distributed is determined by city officials and representatives from the Taxi and Limousine Commission (incumbents). They are incentivized to keep supply artificially low; this hurts consumers but keeps their jobs safe.

By not letting more Uber drivers operate in the city despite growing demand, de Blasio is essentially placing the medallion system on a business he has no legal control over. More people want to ride in Ubers, but yellow cab drivers don’t want to compete with Uber drivers. This illegal licensing scheme hurts consumers at the expense of incumbent employees.

DIFFERENCE IN STATED VS. ACTUAL POLICY GOALS (AND RESULTS)

Almost every new bill passed by congress or a local governing body touts what the law is designed to do. The problem? First, many of these bills aren’t passed for their stated reasons, at least not entirely. Secondly, even if the intentions are completely transparent and worthwhile, laws shouldn’t be judged on their intentions, but on their results. (Try telling your boss that you tried to hit your Q4 sales goal, and that’s what really matters.)

de Blasio and his cronies say that they’re issuing a moratorium on Uber’s growth to evaluate the effects of congestion and pollution in NYC. This stated intention is belied by some obvious realities: New York is a crowded city, but the number of Ubers driving around is a function of the city’s population, not the other way around. Secondly, one of the leading causes of car pollution is idling cars. Standard NYC taxis idle around in locations hoping someone will hail them; it’s massively inefficient. Uber drivers, meanwhile, know exactly where to go for fares and when.

The real intention here is quite clearly to stifle Uber’s growth in their biggest market, thus protecting the jobs of current taxi drivers. And, news flash: if this moratorium passes, New York will still be a really congested city.

SIZE MATTERS

If Uber wins this battle, a main reason will be because it is very large. With an estimated market cap of $40 billion, it has the resources to do things that no small company could dream of: it redesigned a core function of its app within days; it launched a multimillion dollar marketing campaign; it has top-notch legal counsel; it garnered the attention of scores of influential journalists.

Being a big business these days isn’t just nice; it’s a necessity if you’re in a sector of remote concern to politicians. Uber would have no chance at weathering this storm without its giant pile of money and extremely valuable brand.

The issue is that most businesses aren’t so fortunate. While I love and applaud Uber, it is no more worthy than a mom-and-pop cab company that is denied a business permit but lacks the resources to fight back. Many politicians reflexively applaud small businesses while also making it near-impossible for them to flourish.

BUSINESSES MUST GARNER POLITICIANS’ FAVOR TO OPERATE

Even as a large company, Uber’s chances still may not be great were it not for the fact that it happens to run a service favored by Republicans and Democrats in Capitol Hill. David Plouffe, former senior aide to President Obama, runs their policy and messaging operation. Uber has drawn on both pols’ love of the product and Plouffe’s connections to stay out of hot water.

This is great for Uber in its fight against New York. de Blasio has certainly had some super-awkward cocktail parties since this all started and is under immense personal pressure to relent. Unfortunately, Plouffe can only work for one company at a time.

Also: this is not how America is supposed to work. The burden should be on politicians to show why a firm shouldn’t be able to freely operate, and that burden should be extraordinarily high. What a congressman personally thinks of your business or who you know at the top should have no bearing on your freedom to make a living.

CONCLUSION

Uber’s clash with government is uniquely popular among apolitical folks but its struggles are all too common. I applaud readers for following these developments and supporting Uber. But I encourage them to also pay attention when this happens to firms without huge national followings; to support the rights of all businesspeople to freely conduct their affairs and engage in mutually-agreeable transactions with other consenting adults.

It’s easy to stand up to abuses when a company is widely known and loved. But the universal applicability of the rights we want Uber to have is crucial for two reasons. First: when we prevent smaller firms from freely operating, we deny ourselves the opportunity to enjoy goods or services that may one day be equally as enjoyable and/or useful as what Uber provides.

Second: the entire point of post-Magna Carta governance is to allow humans to exercise rights that politicians never had legitimate claim to in the first place. de Blasio and his counterparts cannot take what was never theirs.

Note: this post originally referred to medallions as tokens, and cited an incorrectly-low cost estimate. Per a commenter’s tip, it has been corrected.

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7 thoughts on “What Uber Can Teach Us About American Government

  1. I agree with your views on this, Brian, but I didn’t understand one part of your post. You said:

    “de Blasio and his cronies say that they’re issuing a moratorium on Uber’s growth to evaluate the effects of congestion and pollution in NYC. This stated intention is belied by some obvious realities: New York is a crowded city, but the number of Ubers driving around is a function of the city’s population, not the other way around. ”

    I think the city’s point re congestion is how many more drivers there will be as a result of Ubers driving around, not just a point of “population.” Can you clarify what you meant there?

  2. Hey Stan-thanks for the comment. To be sure, I probably could have worded that a bit more clearly. My point is simply that Uber’s role in the city’s congestion is irrelevant. The population is what drives demand; Uber simply reacts to it. Looking at Uber’s effects on “congestion”, to me, is a bit silly. Folks need to get from Point A to Point B regardless. So if you cap the number of Ubers to improve congestion, you’re just over-taxing public transit and not letting folks get around the city. That’s really not fixing anything.

    1. Thanks for the reply, Brian.

      It was pretty clear from Day One that de Blasio didn’t have the best interests of New York City’s inhabitants in mind. Uber was just another way for him to prove it. Not to go to far afield here, but if one were to study the various US cities that are bankrupt or near bankruptcy (and attendant quality of life issues), the VAST majority of them are run with a certain ideology. An ideology that is never responsible for outcomes, never accountable. Something bad “happens”? Someone else did it. And by all means, keep the power structure in place no matter what.

      Charter schools performing much better than public schools? Well, we’ve got to stop them!

      Uber helping people get jobs and helping others with more efficient transporting? Gotta stop them?

      Police keeping the city much safer than before? Then let’s demean and attack them.

      Well, we get the politicians we elect.

  3. Great article. You should tackle NYC “temporary” rent control next! (“temporarily” enacted after WWII)

  4. The side effects of licensing schemes for safety or minimum income can lead to complacency. On the other hand, when charter bus operations in Japan were deregulated, small businesses grew, prices fell, more older buses were kept on the road, drivers worked longer hours, and killed more people in accidents, sometimes including themselves.

    How about politics returning to Robert’s Rules of Order: legislation restricting rights of others must gain a 2/3 majority.

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