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Knocking Down the Peaks of Innovation

  • http://en.wikipedia.org/wiki/Columbia,_Missouri

As in many other towns all over the country, the college town of Columbia, MO, was "plagued" with on-demand, inexpensive rides through the Uber network. Uber is, simply put, an app for one's smartphone that connects those interested in getting a ride with those interested in driving, and provides for simple payment of service. In this sense, the app serves as an arbitrageur in the person transportation market - a Kirznerian pure entrepreneur. Prices are adjusted toward equilibrium as supply meets effective demand. No harm done, right?

Not so, of course, in this world of politics. All over the country, Uber faces all sorts of regulations, taxes, penalties, licensing requirements, and outright prohibitions. In the German capital Berlin, the app was banned since its rides compete with the protected taxi guild. As with all innovation, the status quo is challenged. And with change comes problems for regulators, whose nifty schemes are equipped to maximize (their) value under the status quo. This is what also agonized and indeed threatened the political equilibrium in Columbia.

As was recently the case in Portland, OR, Uber started operations in Columbia “without invitation.” This simply means lawmakers have not yet adjusted regulations to fit the new type of ride-share offered through Uber. Lawmakers did, however, find the time to force Uber to offer all rides for free until they could properly regulate and so “level the playing field.”

Come December 1 and the city council meeting, the council voted to… table the proposal to February 2. Until that date, unless the proposal is tabled again, it is “illegal” for Uber to offer rides in Columbia. An Uber ride is, regulation-wise, somewhere in-between a ride-share and a taxi business but lawmakers cannot decide what exactly – so they need a couple of months to think about it. Meanwhile, they will treat Uber drivers the worst way possible: they need additional permits, insurance, and whatnot. To guarantee the public’s safety, naturally.

Unsurprisingly, the City was able to act very quickly upon tabling the proposal. The police department has already organized several sting operations with plain-clothed officers to “catch” Uber drivers. Funny how government can be on its feet when they smell increased revenue through citations.

Nothing here should be very surprising, but Columbia here serves as a beautiful example of what politics is about and what it does. And also what it means when self-proclaimed “free market” conservatives aim to “level” the playing field. It really means knocking down peaks of innovation and suffocating entrepreneurship. Or, if you wish, “enforcing” the model of perfect competition by fiat: force all businesses to be exactly the same. In the name of “competition.”

Don’t expect to see progress anytime soon.


Contact Per Bylund

Per Bylund is associateprofessor of entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Website: PerBylund.com.

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