In cities in the United States and around the world, people are discovering a welcome alternative to costly, unpredictable and inconvenient taxi cabs. Car-for-hire communications companies like Uber and Lyft enable people to use their smartphones to arrange and pay for affordable limousine ("black car") service or else get a cheap lift ("ridesharing") from private drivers who have passed the companies' background checks. The companies are a godsend to car-less urbanites, make more efficient use of vehicles on the road and are a welcome source of income for drivers.
Despite all the "winners" from these services, there are some politically well connected losers: taxi cab companies. Decades ago, those companies worked with state and local governments to establish a licensing and regulatory system that makes their business model the king of the road. As a result, taxis can overcharge passengers, under-serve certain communities and give unpleasant rides to customers without the cab companies having to worry about competition from other business models. Now, by helping customers connect easily with black cars and private ride-sharers, Uber and Lyft are forcing the cab companies to do a better job at a lower price.
And the cab companies are fighting back, with help from the politicians. For instance, in Annapolis — a city where ridesharing would be especially useful both to get people around town and deliver them to Baltimore, Washington and Ocean City — Mayor Mike Pantelides recently announced that the city will fine any driver using Uber's communications services. This comes on the heels of last summer's attempt to regulate such companies like taxis statewide, under the auspices of the Maryland Public Service Commission.
Some people may side with the mayor, saying that though Uber and Lyft conduct background checks on drivers, gather customer feedback and keep records of transactions, some form of government intervention is also needed to keep customers safe. Perhaps that's true, but Mr. Pantelides and other politicians specifically demand that all cars for hire follow the taxi cab business model. They prohibit other models that are less expensive, more flexible and — judging from Uber and Lyft's popularity — preferred by many customers.
Other people argue that, though taxicab cronyism is unsavory, it should be tolerated because it provides drivers with living wages. But the cab companies, themselves, benefit the most from local governments restricting competition, while data show that many drivers who use Uber and Lyft can make more per hour than their cab-driving brethren.
As a general rule, the public benefits when government only intervenes in private transactions where buyers and sellers have little or no power to protect themselves. Far from being powerless, Uber and Lyft's services give consumers helpful options. It's hard to see how Mr. Pantelides' fines would help the public.
If he and other politicians really wanted to help consumers and cab drivers, they wouldn't force Uber or Lyft to change from being communications companies to being licensed cab companies. Rather, the politicians would allow licensed cab drivers to compete with black car and ridesharing services on a level playing field. They would deregulate taxi service, requiring only that cab companies pay the standard sales taxes, while doing away with the expensive fees and regulations that currently stifle car-for-hire services. That would help consumers because taxis would be better able to compete on both price and ride quality. Cities would no longer need departments to oversee cab regulations at taxpayer cost, which would shrink the overall size of city governments.
Even better, by allowing people to get to their destinations more cheaply and easily, such reforms and the expansion of car-for-hire services would benefit the economy by improving human mobility. Deregulating the taxi industry and permitting new business models would not only be good for Uber and Lyft, but for taxpayers, the economy and — most importantly — the public.
Nick Zaiac is a policy analyst with the Maryland Public Policy Institute. His email is firstname.lastname@example.org.