Catherine Rampell has a new opinion piece claiming that taxi deregulation is bad for consumers, doubling down on a previous piece in which she made the same claim. The lesson she draws from this is that Uber will eventually be bad for consumers as well.
Her first post was written in response to an IGM Chicago panel of more than 40 leading economists asked to respond to the following statement:
Letting car services such as Uber or Lyft compete with taxi firms on equal footing regarding genuine safety and insurance requirements, but without restrictions on prices or routes, raises consumer welfare.
The ideologically diverse panel unanimously agreed.
Her first post didn’t include any sources that contradicted the panel, but her more recent one included links to three papers: one from a taxicab lobbyist group, one written by city planners for the Department of Transportation, and one by a McGill law professor. All three said taxi deregulation was bad for consumers.
According to Rampell, allowing Uber and Lyft is really a repeat of earlier, failed attempts to deregulate the taxi market, and, according to her three sources, we should expect the same, allegedly bad outcomes. She suggests cracking down on ridesharing services with taxi-style regulation.
Using a paper from a lobbyist might suggest she’s scraping the bottom of the academic barrel, and raises a question: is Catherine Rampell accurately conveying the research on taxi deregulation?
The short answer is no, at least if you’re interested in what economists say. According to a literature review conducted by Adrian Moore and Ted Balaker, the majority of economists working on this issue think taxi deregulation is a good idea, and has worked out well in practice.
In addition, the primary problem she raises on her own is the exact one ridesharing applications address:
“…fares were relatively opaque and unpredictable; and consumers were reluctant to price-shop or interrogate drivers about their insurance and safety records. They just hopped into the first available cab.”
Uber and Lyft make money because they are able to easily pair drivers and customers, establish fair rates, facilitate payment, and ensure safety and insurance.
The conventional wisdom that taxi cartels decrease consumer welfare and competition makes things better seems to be right. It’s probably why so many people enjoy ridesharing services.