Uber and the Green New Deal

A few thoughts on Uber.

Uber's expenses exceed its revenues by about $1 billion per year. (Here's a recent article laying out the numbers.) The company is able to continue operating thanks to cash from investors. One question is whether those investors are delusional. I think that question turns on whether Uber can attain a position in the market that allows it to charge higher fares without losing too much market share to its competitors. Another possibility is that Uber only needs to survive long enough to deploy its driverless car technology, at which point perhaps its fares will allow it to turn a profit. (Of course this is really just another version of the first possibility—Uber will need some way to charge profitable fares without its competitors taking over the market.)

Whatever eventually happens with Uber, in the meantime it is operating at fares that are presently below the fares that would prevail in a normal market (where I'm defining "normal" to mean a market that is in equilibrium). As many have noted, this amounts to a large transfer of wealth from investors to consumers. However, it also amounts to a sustained attack on existing market participants such as drivers and medallion owners. It's important not to take a reductive view of suicide, but it's hard not to see a link between Uber's behavior and the recent spate of suicides among New York taxi/limo drivers.

On a human level of course this has been devastating. And I think there is a very strong argument that taxi drivers and medallion owners relied on the existing regulatory framework and deserved to see it enforced against violators like Uber (or at least, they deserved for regulators not to tolerate Uber without very good reason, which in my opinion has never been forthcoming).

But it's fair to say that the existing regulatory structure was suboptimal for any number of reasons, and perhaps blowing it up is best for the city in the long run. On this view the economic pain suffered by taxi drivers and medallion owners is perhaps regrettable, but it is largely inevitable, in the same way that tobacco farmers were bound to suffer once the government adopted a (rightly) hostile attitude to the tobacco industry. Of course drivers and medallion owners aren't quite as complicit as people who profit from what amounts to a death industry, but it's certainly true that from a detached viewpoint we often regard economic pain as the cost of progress. In other words, we don't want to intervene directly to protect incumbent providers from competition, although we might prefer a stronger safety net so that individuals aren't driven to desperation.

Now to be clear, I don't count myself in this camp. I think the existing regulatory structure was flawed but basically sound. At any rate, I don't believe that allowing it to collapse under the pressure of massive entry through a regulatory loophole is good policy.

I bring all of this up partly because I think it's interesting in its own right, but also because of an observation Matt Yglesias made on Twitter, to the effect that de-carbonizing the economy will be very disruptive, and an important part of the project would be some kind of support for displaced workers. I think this is right, and it strikes me as the most difficult part of the project. It will be like the New York taxi driver experience, but on a much larger scale, and with severe political consequences for the Democrats if they mismanage it. (And one way to mismanage it would be to water down the program any time it touches anyone sympathetic, which I think is the natural political instinct in cases like this.)

It is a real problem of political economics and it strikes me as a daunting one.