June 23, 2014

JOHN FUND: Uber Alles: The taxi industry tries to regulate a technology-fueled competitor.

Uber and Lyft are straight out of the “creative destruction” model that economist Joseph Schumpeter said was the essence of free markets. Competition can serve as a powerful force to improve the operation of economies. Uber has built a better, tech-savvy mousetrap for transportation services. Uber drivers’ cars are often newer and cleaner than traditional cabs, and customers can easily request upgrades. Drivers are screened, and a passenger can see a picture of the driver and his or her customer-service rating before getting into the car. Low-ranked drivers can be and are removed from the system, an accountability system that’s missing from most cab companies.

Many drivers with an entrepreneurial bent also like Uber because they can decide what hours they will work and use the service to earn a supplementary income if they happen to be unemployed. Armando Rojas, an immigrant from Colombia who now lives in New York City, told me he likes the flexibility of Uber “and the fact you are more your own man.” Having said that, he complains the company has lately added fees, which, combined with new taxes, make it almost as difficult for him to make ends meet as it would be if he were driving a cab.

The latest battleground between Uber and its enemies is in Cambridge, Mass., the home of both MIT and Harvard, powerhouses of scientific research. But the low-tech cab industry is pulling all the strings it can to get local government to kill innovation and unplug Uber.

Local government is mostly about rent-extraction.