NCPA - National Center for Policy Analysis

Do Governments Impede Transportation Innovation?

July 1, 2015

The recent evolution of transportation has been led by technological innovations, such as Uber and Google's driverless cars. These innovations are helping to reduce accidents and make transportation more efficient, writes Robert Krol of the Mercatus Institute.

Companies with older technologies resist change by lobbying to limit innovation. However, blocking innovation is harder for governments when consumers receive substantial benefits and when the cost of lobbying is high.

  • In the early 20th century, car owners providing transportation service, called jitneys, were faster and more flexible than trains, causing railroad revenue to decline.

  • Railroads sought protection from government and created high barriers to entry for the jitney.

  • After substantially curtailing their flexibility, jitneys were effectively eliminated by 1917.

Similarly, taxicabs are using regulation to ban services like Uber.  The taxicab industry should be deregulated so it can compete with ridesharing services and eventually adopt similar technology. As consumers become familiar with these new technologies, blocking the innovation will become more politically difficult.

Governments should also refrain from regulation that may hinder innovation in driverless cars. The annual cost of traffic accidents is $300 billion in the United States, 93 percent of which is caused by human error. Widespread adoption of autonomous vehicles will generate large benefits by reducing human-error accidents.  Driverless cars would reduce demand for drivers and farmers, and perhaps automobile repair due to fewer accidents.

These new technologies offer to transform transportation, but the key is to avoid government intervention that would block this innovation, says Krol.

Source:  Robert Krol, "Do Governments Impede Transportation Innovation?" Mercatus Institute, June 24, 2015.


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