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Tuesday, March 19, 2024
March 19, 2024

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In Our View: Driving Into A New Age

City's move to regulate ride-sharing services aids competition, consumers

The Columbian
Published:

With the advent of ride-sharing services such as Uber, cities across the country are trying to fit modern businesses into an antiquated model.

In the case of Vancouver, that has resulted in a long-anticipated compromise. The city council on Monday agreed to a plan for regulating new companies under the umbrella of regulations for traditional taxi services. The new code imposes the same standards for driver training, background checks, safety precautions, insurance, and operational guidelines on cab companies and ride-sharing endeavors. Each will pay an annual $200 certification fee for each license to pick up riders in Vancouver.

The idea behind such regulations is to protect consumers, ensuring some basic standard of service and expectations for those seeking a ride. “You want to know you’re getting in a safe cab that’s been checked recently,” Graham Hodges, an author and professor at Colgate University, told Time magazine last year. “Taxi regulations developed out of livery and hansom-cab regulations from the 19th century. They’re a necessary part of urban transportation.”

At least they were a necessary part of such transportation. As Vancouver officials agree to update regulations that were first formulated in 1939, a crucial question remains unanswered: Why do cities feel the need to regulate taxi cabs? The answer, of course, is money — as reflected in Vancouver’s annual $200 charge for a taxi certification. That certainly seems more reasonable than the cost of a taxi medallion in New York City, where the average cost last October was $872,000. Yes, according to the New York Times, the right to drive a taxi cab in the city is encroaching upon $1 million — and that represented a 17 percent decline from the peak of 18 months before.

Vancouver’s taxi industry is much different from that of New York, where cabs are part of the lifeblood of the culture and the economy. But the situation in New York is instructive for cities elsewhere. For decades now, cities have engaged in a monopoly to limit the number of taxis that are available, a fact that — despite assertions that this is done to protect consumers — throws the market into disarray.

Limiting the number of taxis raises the cost of a ride across town and places the power of the marketplace in the hands of city officials and those few who purchase the right to provide rides for others. Imagine if cities created a monopoly for electricians or gas stations or grocery stores, artificially limiting permits and undermining the free market. How much could the corner store charge for a gallon of milk if the proprietors knew that consumers had few other options? Cities long have engaged in such actions when it comes to taxi cabs. The model might have made sense when consumers were privy to limited information about a particular cab company, with no access to details regarding the quality or reliability of local operations, but the Information Age has altered that equation.

New companies such as Uber and Lyft have tapped into that new paradigm, allowing drivers to use their personal cars and connecting them with riders through smartphone apps. Similarly, such technology allows consumers to cull information about the companies involved. It’s not quite the perfect information that is required for a true free market, but it is enough to scuttle the justification typically given for the need to allow cities to create a taxi monopoly.

Vancouver’s updated regulations will allow ride-sharing companies to increase the level of competition throughout the city. And the big winners will be consumers.

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