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Comment by tptacek | Hacker News Reader

It's easy to show how Uber isn't in everyone's best interests: cabs are required to service well-defined metro areas at a standardized fare; in return for agreeing to operate under a set of regulations that makes them part of the transit fabric of a city, regulated cab services is granted a monopoly.

That system doesn't work if cabs are forced to compete at a disadvantage with other services that don't operate under the same constraints.

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For cab service, Uber rides are serviced by already existing metro cab companies. The Uber cabs in here in Chicago were already licensed cabs, but now they can get dispatched via Uber. How is that any different from say, a cab company deciding to dispatch its drivers with their own in-house iPhone app? Do you think that would that be allowed under these regulations?

The deal Chicago has with taxi cabs is that street hails are reserved for regulated medallion taxi cabs; in exchange for that, the medallion owners are required to maintain vehicles, insurance, and coverage areas, and are required to comply with the billing procedures set up by Chicago.

Uber currently uses Chicago tax company drivers directly, but doesn't comply with the regulations the medallion owners are required to comply with --- for instance, Uber adds 20% to the fares, which is something cab companies can't do. Uber's defense for this is that using an iPhone to get a cab isn't a "street hail"; the cab companies argue that they're equivalent. We'll see who wins.

Uber Cab is a relatively new addition- when people discuss "Uber" they are usually referring to the black car service.

If there is sufficient demand for a competing service that puts taxis at a disadvantage, doesn't that indicate a government failure (i.e. the flip side of a market failure)? I would think that indicates that the constraints on taxis are too tight and/or their prices are too high.

No. For instance, it might be more lucrative to operate a cab company that refuses to service North Lawndale and Englewood in Chicago. The company that provides such restricted service competes at an advantage against those companies who comply with the regulations. That doesn't mean there's a market failure, unless you think "universal coverage" is itself fundamentally a market failure because the free market doesn't "want" to serve Englewood.

I don't think that having different transit prices in different regions is itself a market failure. I disagree with the implication that the only two options are universal same-price coverage and certain regions having no service. The regions you mentioned (which I'm assuming are either rough or remote) would most likely simply have higher prices than downtown areas.

I understand why you disagree with the decision city legislatures have made to enforce universal same-price coverage. My only point is that these decisions don't necessarily boil down to special interest protections.

When government has the ability to regulate certain industries, that ability will be utilized by participants of those industries for their own benefit, unless there is a process in place which prevents that. I suspect such a process to be impossible, but that's a separate argument. What's clear is that the process currently does not exist. Thus the distinction between government action that is truly "for the people" and government action was "serves special interests" is mostly nonexistent. There can certainly be overlap, but at the end of the day all government action will be sold as being for the people simply because of the supposedly representative nature of our government (essentially, the government's argument is "you occasionally get to vote, and you haven't overthrown us yet, therefore all of our actions are justified and are in your best interest, and by the way, if you try to overthrow or even disobey us we will kill you and use this same argument to justify that").

I don't think of "special interests" as something conspiratorial or even surprising, but rather obvious and inevitable. Just like any effective craftsman will use every tool at his or her disposal (at least, every tool that will not be widely perceived as unethical/immoral/illegitimate), so will an effective businessperson, and government (being the only organization that can initiate violence without being widely perceived as unethical/immoral/illegitimate) is just another of those tools.

It's a clever sophistry but your "no" isn't really a "no" to the argument.

It's clear that taxi industry is broken. The existing legislation you keep bringing up doesn't protect the costumers the way it should (and maybe, at some point, was supposed to, until it was perverted via medallion system to protect taxi business more than taxi customers).

Uber's self-regulation (via comments, for both drivers and riders) is a better way to provide good service than the regulation which is routinely violated and not enforced.

By which I mean: * taxi drivers routinely avoid picking up people they don't like, who also happen to be minorities/black people. I don't think they are allowed to do that by law but there you go: it's impossible to enforce that law so it isn't. In Uber, a given client can be banned but only because it behaved badly in the past. There's no pre-judging based on his color of the skin * forcing cabs to service undesirable areas - you've got to be kidding me. I once spent an hour phoning different cab companies trying to get a cab to less populated area of SF. Extreme frustration when you call them, they say the cab will be there but isn't and you don't know if it's because they blew you off or the cab is really coming. With Uber - again, no problem. They would be stupid to to not service you and they can manage the fleet effectively to dispatch cars where there is demand. Plus, you get real-time feedback on where the car is - there is no guessing

Ultimately your arguments are dishonest because you present a binary choice: either Uber complies with existing taxi laws (which in most cases means their business cannot operate the way it does) or doesn't, in which case you automatically assume that it's unfair to taxi companies.

How about third option: create laws that allow both taxis and Uber, on equal footing?

I'm all for laws protecting the customers of Uber and customers of taxis, but as of today, it seems Uber does much better job with self-regulation than taxis with government regulation.

I'm all for fair competition but as of today Uber is being denied even ability to compete via government regulations lobbied for by taxi companies. We don't have to rally to protect "poor" taxis that provide bad service, from Uber, which provides good service, but rally to allow Uber to compete at all.

Maybe when we do have competition, taxi companies will be forced to finally improve the service they provide, something that decades of legislation haven't been able to achieve.

Maybe when that happens, we won't have to have laws to force companies to service all of Chicago and they'll do it because there's demand and they will do it to profit from that demand.

You know, the way a free market is supposed to work and not the way it currently works when we have law to artificially restrict supply (medallions) and (ineffective) law to "fix" the problem created by artificially restricting supply. Which, if we were to believe you, was done for the benefit of customers and in the spirit of fair competition.

It looks like there's a lot of interesting stuff I could respond to in this comment, but I'm not going to because instead of just making your argument, you attacked me personally; according to your comment, I'm "dishonest" and engaged in "sophistry". Apparently, I'm a tool of the taxi cab lobby.

You could ratchet some of that language back, and I'd be happy to reply (and delete this comment as well).

You're right of course, in explaining how there are opposing interests.

That said, do you think that these granted monopolies have turned out to be a flawed model, that Uber is proof that innovation has been stifled, and now it's just entrenched money holding back progress?

I think that Uber is an improvement for relatively well-off people, a direct no-op for poorer people, and a potential indirect harm to poorer people if Uber harms taxicab service by competing unfairly.

I have no problem at all with Uber's black car service, but I think the taxi service is sketchy.

Wait, poor people take cabs? Isn't the primary cheap mode of transportation in a large city the bus and train system? That's got to be true for SF and NY at least.

Uber is getting pretty cheap too, regardless. Example: my wife just caught a car to SFO from Berkeley for less than $80, and no tip. That's cheaper than a taxi, friendlier, you can call 10 minutes before you need the Uber, and track it to your door.

A taxi would need to be reserved well in advance, would show up at an indeterminate time, the driver would be indeterminately sleepy, and you'd have to deal with tipping and credit cards. He might be smoking too, and if any of this happened with Uber, you'd leave a bad review. A few reviews, no more driver.

Of course, a person on a budget is going to take BART or a shuttle.

A poor person sometimes needs to go someplace very specific on short notice.

Of course, in some cities the cabs don't go the places they are technically "required" to go -- they give a very long estimate of arrival as a way of getting you to go away. Or don't show up at all. I suspect this varies a lot by geographical location.

I've never had a problem calling a cab to get to SFO, which I've done over 20 times. Calling a cab to get to the airport is probably the least painful cab usage scenario in SF. Uber doesn't do much to improve upon that situation, but does make it about 20 dollars more expensive.

The worst cab situation in SF is trying to find a cab at night, which Uber has greatly improved upon.

Yes, poor people take cabs.

Then they are lucky Uber exists. Don't believe in your purported indirect harm, do believe in downward price pressure, and upward quality pressure.

Well, the legislatures of many cities don't agree with you.

> Wait, poor people take cabs? Isn't the primary cheap mode of transportation in a large city the bus and train system?

Buses and trains, in many cities, don't go everywhere, and don't always run when you need to go, so, yes, poor people take cabs.

I would argue that all granted monopolies are flawed models. Either they require the use of force to prevent illicit competitors (who are making consensual business transactions with customers), or they serve the demands of the market well enough that there are no illicit competitors (in which case the granted monopoly is by definition unnecessary).

> I would argue that all granted monopolies are flawed models.

Sure, granted monopolies are (at best) a blunt instrument for internalizing externalities; the questions aren't whether they are imperfect (they are), the question is whether more finely-tuned mechanisms of internalizing the externalities have their own costs which outweigh the benefits. (Also, of course, whether the externalities are accurately assessed.)

> Either they require the use of force to prevent illicit competitors (who are making consensual business transactions with customers)

You seem to suggest that consensual business transactions are always desirable, which (even making the usual assumptions that make this true when considering only the effects on the direct participants) only is sensible if you completely discount the possibility of externalities.

> You seem to suggest that consensual business transactions are always desirable, which (even making the usual assumptions that make this true when considering only the effects on the direct participants) only is sensible if you completely discount the possibility of externalities.

Not at all. I recognize the existence and inevitability of market failures. I just think that regulations will lead to more market failures ("government failures") and will (on average) decrease economic efficiency.

> (who are making consensual business transactions with customers)

...using public property (public roads, public rights of way for water lines or telephone lines, etc).

A city excluding illicit competitors from using its roads "requires the use of force" no more than vindicating the right of a property owner to exclude others requires the use of force as a general matter.

> A city excluding illicit competitors from using its roads "requires the use of force" no more than vindicating the right of a property owner to exclude others requires the use of force as a general matter.

They key difference is not so much the use of force itself, but rather who we consider to be legitimate purveyors of force. When it comes to property rights, obviously there are many varying philosophies and codes that people adhere to, but most people who believe in any form of personal property rights believe that the owners themselves can legitimately use force to defend that property. In other words, there is no monopoly on the legitimate use of force for enforcing property rights.

Government, on the other hand, enjoys a monopoly on the legitimate use of force for many things. If a random group of people went around to every house in a region forcefully taking money in order to fund roads, hospitals, charities, etc., the vast majority of society would not see this as legitimate. Likewise, if 9 of the 10 families on your block agreed to forcefully take and use your family's house and property as they saw fit, the vast majority of society would not see this as legitimate. The fact that the majority of people in a region agreed on the use of force would not legitimize it. So government is unique in this regard: it can and does do both of those things and more, and society sees them as the only group of people who can legitimately do that. This is the quality of government I don't care for, and what I believe leads to economic inefficiency.

Municipalities can ban Uber even within your framework. In that situation, the justification for the use of force derives not from the government's monopoly on the use of force, but from a property owner's right to use force to exclude anyone from their property (i.e. the public roads).

I suppose that's true if you consider "public property" to be equivalent to "private property" that just happens to have the government as its owner. But by that logic, governments could have arbitrary control over all public property, meaning they could do things like ban political dissidents from using roads. In reality though, the mini-framework I presented is too simplistic to extend to public property. The key difference is that public property, unlike traditional personal private property, is funded by taxation, which is why we reflexively reject the idea of the government exercising certain control over public property.

You don't have to consider the government as the outright owner of public property. You can think of the government as holding public property in trust. Trustees are empowered to exercise the rights of property ownership as long as they do so consistently with their fiduciary duties. So a municipality could still exclude Uber from the public roads based on its right to exclude others from property it holds in trust.

> My point is that even within that framework, municipalities do not need to resort to the government's monopoly on the use of force to exclude Uber from the public roads.

Sure they do.

> The public built the roads that Uber runs its service on, and the public, acting through municipal governments, is entitled to exclude Uber from those roads.

Perhaps, but, in any case, that doesn't relieve them of the need to rely on the so-called "monopoly on force" to exclude Uber, it just, at best, is the justification for that particular use of it.

There is a difference between using a power to achieve an end, and necessarily needing to use that power to achieve that end. Cities might use their monopoly on force, as governments, to enforce a ban on Uber, but even if they did not have that power, they could use their rights as the entities that build and maintain the roads Uber runs on.

> Cities might use their monopoly on force, as governments, to enforce a ban on Uber, but even if they did not have that power, they could use their rights as the entities that build and maintain the roads Uber runs on.

No, they couldn't. Rights are a theoretical justification for excluding someone, the government's compulsory power is a mechanism for excluding someone.

The former cannot substitute for the latter (and vice versa.)

I'm presupposing a point of baddox's hypothetical, which posits a mechanism for enforcing the right to exclude others from property independent of the government's monopoly on force.

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