November 29, 2014

WALTER RUSSELL MEAD: Piece By Piece, The Blue Model Sickens And Dies.

The old regulated taxi system was one of the classic examples of the blue model system: a regulated, quasi-monopoly that seemed to many people to be the best and indeed the only way to combine the ideals of protection for consumers and a decent living for providers of services. Over time the taxi system everywhere tended to become less effective if only because of a tendency toward regulatory capture by crony capitalists—often, owners of companies who owned many of the artificially limited taxi medallions—who channeled campaign contributions and other sources of influence into focused efforts to limit the supply of medallions, raising prices for consumers and, often, leading to low incomes for the drivers who had to lease medallions at high prices from the handful of sources.

Consumer discontent with the old system, plus driver discontent (many drivers report better earnings and more flexible incomes from the internet-empowered dispatch services), plus the technological advancements and creative entrepreneurial thinking that mades it possible for Uber and Lyft to replace both Manhattan style street taxis and the car dispatching services found in many other cities, is now driving the destruction of the old system. . . .

This is only one illustration of the wave of creative destruction now sweeping through American life. We shouldn’t be naive about it—change always brings problems, and change this big and this complex isn’t going to be easy. Not all the experiments will work out well, and companies that start out sleek and cute could well morph into gargantuan, market distorting monopolies of their own in time. But none of that changes the reality that more and more elements of the blue model have reached their sell by dates.


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