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How Uber Threatens Our Way of Life


The online tech and science magazine Verge recently published an essay on the economic and political impact of disruptive ride-sharing startup Uber: Uber can't be stopped. So what happens next? Whereas one might expect an online tech magazine like Verge, itself part of a wave of disruptive publishing efforts, to be optimistic about innovative tech initiatives, the essay offers a surprisingly bleak, pessimistic, and politicized “analysis.”

Apparently, Verge sees mostly problems with Uber’s challenging of the privileged and guild-based taxi business. Rather than discussing what Uber offers the market for person transportation, the author discusses the problems involved with Uber having a “monopoly” situation. This is a very strange perspective on the issue, considering how Uber is challenging the legal privilege of licensed taxi corporations.

The recent and still ongoing struggle in cities like St. Louis, Mo., offers a good illustration. The city won’t allow Uber to compete with taxi and refers to the industry-based regulatory body called the Metropolitan Taxi Commission (MTC), which consists mostly of representatives of existing taxi companies (!). Needless to say, the MTC has been somewhat uncooperative.

A similar example is the college town of Columbia, Mo., where the local political elite could find no regulatory “solutions” to the Uber challenge to existing taxi businesses. Instead, the city postponed the decision and publicly stated that Uber was “illegal” due to a lack of proper regulation. This “lack” of regulation, of course, was sufficient reason for local police to conduct sting operations against Uber drivers.

The political response to Uber is expected in both practice and rhetoric. The potential disruption that Uber offers by challenging existing guilds head on, and by offering consumer better and cheaper services, is supposedly harmful because it is unregulated. It is not a “level playing field” and therefore the entry of Uber into the (overly regulated) market is “unfair.”

The Verge essay takes sides with the political elites in St. Louis, Columbia, and many other cities around the world. The author of the aforementioned essay, a Ben Popper, makes the same claims about “level playing field” and the implied unfairness of competing with legally privileged guilds. But he goes a little further by claiming the regulatory trump card monopoly. Uber, we are told, is a problem because it is so much bigger than competing app-based ride-sharing companies like Lyft. It has a monopoly.

The problem of monopoly is supposedly that it harms consumers, who under monopoly are not offered a sufficient number of choices and therefore are “forced” to pay too high prices as producers can demand payment above the (equilibrium) market price. This makes it very difficult to understand the author’s argument, but it seems to say that Uber’s challenging of the existing privileged guilds by offering a non-guild alternative is harmful to consumers because there are very few similar challenges to the guilds.

That Uber offers better services to lower prices should be the very core of what we mean by competition (not monopoly), and it has proven to be of enough benefit to consumers. After all, a great many consumers choose to ride with Uber drivers instead of traditional taxi companies. That Uber thereby disrupts a privileged and corrupt industry is an added benefit. But Verge will have none of it.

The problem is apparently that the inefficient status quo is challenged. But the arguments we’re offered tend to be smears more than actual arguments. Apart from the very strange view of “monopoly,” the author notes a tragic rape incident in India. He even quotes Hillary Clinton’s expressed concern over “work-place protections” and “what a good job will look like in the future.” Apparently, “what she said makes a lot of sense” to Popper. In the same sense as added competition in an industry is symptomatic of “monopoly,” I presume.

But let’s not jump to conclusions. Perhaps I’m overly sensitive to economic fallacies presented as truths and political rhetoric used as though it expresses obvious facts. For the sake of balance and fairness, let’s allow Popper to explain the real problem of Uber. He ends his essay thusly:

We should be wary of Uber, which has so far flouted almost all attempts at regulation. Its CEO Travis Kalanick is an avowed acolyte of Ayn Rand, and his swashbuckling style a perfect fit for a modern day John Galt. In the wake of New York City’s defeat, a discussion of how to regulate it, partner with it, and sensibly grow it is more pressing than ever.

That’s what it comes down to according to Verge’s writer. Uber should be stopped because its CEO likes Ayn Rand. And because the benevolent political class has not been able to stop him. Yet.


Contact Per Bylund

Per Bylund, PhD, is a Senior Fellow of the Mises Institute and Associate Professor of Entrepreneurship and Johnny D. Pope Chair in the School of Entrepreneurship in the Spears School of Business at Oklahoma State University, and an Associate Fellow of the Ratio Institute in Stockholm. He has previously held faculty positions at Baylor University and the University of Missouri. Dr. Bylund has published research in top journals in both entrepreneurship and management as well as in both the Quarterly Journal of Austrian Economics and the Review of Austrian Economics. He is the author of three full-length books: How to Think about the Economy: A Primer, The Seen, the Unseen, and the Unrealized: How Regulations Affect our Everyday Lives, and The Problem of Production: A New Theory of the Firm. He has edited The Modern Guide to Austrian Economics and The Next Generation of Austrian Economics: Essays In Honor of Joseph T. Salerno. He has founded four business startups and writes a column for Entrepreneur magazine. For more information see PerBylund.com.

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