Regulators Target Uber and Lyft

June 16, 2014

Glenn Harlan Reynolds, a law professor at the University of Tennessee, explains why taxi commissions want to increase regulations on companies such as Uber and Lyft.

Uber and Lyft are both ride-sharing services that provide consumer convenience and employment opportunities in a stagnant economy. Most significantly, they are injecting competition into the taxi industry.

In most cities, taxi services are regulated by a taxi commission and entry into the occupation is limited, holding down the competition that benefits consumers. In Chicago, a taxi license costs a staggering $360,000, and lack of competition in the city means that consumers pay higher prices than they would pay in the absence of the regulatory scheme.

As services like Uber and Lyft have emerged, regulators have swooped in to try to limit their ability to operate and compete with traditional services, insisting that they need regulation in order to protect consumers. But as Reynolds notes, Uber and Lyft are arguably much safer than regulated taxi services. Both Uber and Lyft keep records of where passengers are picked up, when they are picked up and by whom, and their vehicles are tracked.

The taxi industry is not the only one marked by state licensing and protectionism:

  • In Tennessee, the Institute for Justice sued to strike down a law that only allowed caskets to be sold by funeral directors. Funeral directors were charging twice as much for caskets as their competitors.
  • In other states, interior decorators and even florists are licensed.
  • As of 2008, 30 percent of the American workforce needed licenses.

Senator Mike Lee (R -- Utah) has proposed legislation to limit state protectionist measures and make it easier for people to enter licensed occupations.

Source: Glenn Harlan Reynolds, "Regulators Wreck Uber Innovation: Column," USA Today, June 10, 2014.

 

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