Pur Autre Vie

I'm not wrong, I'm just an asshole

Monday, September 01, 2014

Not Math Problems, Exactly

I've written in defense of taxis before, and I won't repeat my arguments here.  The short version is that if you want there to be a cheap way for people to travel around the city by car, you can't allow market entrants to replicate taxi service without being subject to comparable regulatory burdens.

But that's not the same thing as saying that the New York taxi system is perfect.  And in particular, research like this highlights how much room there is for improvement.  In short, it would be possible, using smartphone technology, to facilitate ride-sharing with the result that people would pay less and there would be fewer taxis on the road.

Of course, the politics are tricky - taxi medallions have surged in value in recent years, and the issue of jobs is always a sensitive one.  (And this research is indicative but far from exhaustive - we would need a more realistic assessment of the policy to draw robust conclusions.)  But this is exactly the kind of thing that a well-run society embraces, providing better service at lower cost to its citizens.  It's the kind of thing we have a right to demand in light of the monopoly granted to the medallion-owners.  You submit to the regulatory system, you get protection from Uber and Lyft (which I hope we will provide) - and in exchange, you obey the city's imperatives.  (The flip side, of course, is that if there is no regulatory protection, then there is no ability to issue imperatives, and we are left to the tender mercies of the market.)


Blogger Sarang said...

It seems to me at least somewhat useful for regulators to have Uber around as a threat to exert leverage over medallion owners. You know, "1000 more taxis or we deregulate." Outside of NYC, even in mid-sized towns it can be appallingly hard to find a taxi.

8:07 PM  
Blogger Sarang said...

This comment has been removed by the author.

8:08 PM  
Blogger James said...

I guess ultimately my hope is that all of this will become moot with driverless cars. I don't hold out a lot of hope for our current system - one way or another it is going to become increasingly suboptimal, I feel.

8:29 PM  
Anonymous Anonymous said...

I will post on something relating to Uber on my own blog as part of my ongoing series, but I (and the majority of your interlocutors in the blog commenting gig) continue to think you are incorrect on the Uber / Lyft, no need to go through all fo that again here; but I will note that Lyft recently rolled out a new ride sharing system that accomplishes just this and they did it ahead of the publication of this research. Public service is the best way to provision some, but not all goods. For responsiveness to innovation like the possibility of smartphone aps, private industry has a much better track record.

7:22 AM  
Blogger James said...

The great thing about Uber's business model is that it allows the company to function as a taxi company without paying the taxes that apply to taxi companies. So for instance, surcharges paid by taxi cabs result in about $87.5 million for the MTA every year. Also, the last time I checked, Uber cost about twice as much as a taxi. So to believe that Uber is better, you have to believe that its advantages are so great that they outweigh (A) cheap fares, and (B) $87.5 million in transit funding. You're welcome to believe those things but I would think there would have to be truly massive benefits to Uber-style service in order for it to outweigh the advantages of the taxi system. The transit subsidies alone strike me as a very big deal.

9:58 AM  
Blogger James said...

(It reminds me a little of the Airbnb debates. I would be much more sympathetic to the Airbnb advocates if they were on board with paying the full hospitality taxes that hotels pay. As it is, I regard them basically as tax cheats. I am not impressed by an entrepreneurial idea that basically amounts to tax arbitrage.)

10:11 AM  
Anonymous Anonymous said...

I think for both uber and air BnB the tax issue is largely irrelevant to the value proposition of the product. You could add in taxes for either with, I think, no significant change in their competiveness. Obviously they would prefer not to pay taxes, and obviously they should be compelled to pay taxes despite their preference. But the value proposition isn’t the +/- a few percentage points.
For Uber it value is substantially improved convenience and a better interface (and some benefit from not being a shady monopolistic industry).
I’ve used Air BnB less (ie not at all) but again I think the bulk of its price advantage comes from more diverse and in some cases better locations and from lower fixed costs and only a small percentage if any form tax avoidance (when you’re comparing $70 to $190 adding in or subtracting 10-15% tax really doesn’t matter).
Just because a company has a shady tax policy doesn’t mean you can act like its real business innovations don’t exist. Compare to GE, a company with very bad tax policy that has nonetheless been a constant fount of real innovation.

2:48 PM  

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