Ridesharing an Option Regulators Want to Keep from Residents
Recently, Ray Mundy, a professor at UMSL (also the head of a consultant group that works for the nation’s top taxi companies and part of the staff of Airport Ground Transportation Association, an airport taxi lobbyist group), was interviewed on a local radio station. While Mundy failed to state his conflict of interest, he lost no time accusing ridesharing companies like Lyft and Uber of having improper background checks, using inadequate insurance, price gouging, and destroying the cab industry that the needy rely on. But in reality, his statements are misleading, and his recommendation to ban these services will only serve to hurt Missouri residents. I will take his issues point by point:
- Lyft and Uber have insurance gaps.
This statement may have had validity a few months ago, but this is no longer the case. In July, both Uber and Lyft changed their insurance policies so that cars operate under liability insurance whenever the ridesharing apps are activated. Commercial insurance becomes primary (not secondary as Mundy stated in the interview) when a passenger has been accepted. Both Lyft and Uber detail their policies, and no driver or customer needs to use these systems if they find them inadequate. But regulators and those of Mundy’s persuasion would rather legislate additional insurance (shown not to improve safety) or ban ridesharing.
- Every time the taxi industry has been deregulated, it’s been reregulated.
This statement is empirically false, as a Reason study demonstrates.
- Ridesharing companies do not perform adequate background checks.
Mundy claims Uber and Lyft drivers might be dangerous because they do not use the same type of background check as most cab companies. Peruse Uber’s qualifications for yourself:
According the Mundy, these tests do not go back as far as taxi checks and do not include arrests where there are no convictions. That seems like a contrived standard, and once again, customers can decide whether they feel Uber or Lyft drivers are safe. But Mundy and other regulators would rather residents did not have such options.
- Uber and Lyft use price gouging.
Mundy, and other defenders of taxi regulations, do not like Uber and Lyft using variable pricing, such as charging more money at different times of night or when demand is higher. In reality, allowing for higher fares means drivers have a larger incentive to take fares at 2 a.m. or on New Year’s Eve. It allows the price mechanism to match supply with demand. But Mundy and other regulators would rather Saint Louisans wait hours for cabs that don’t come rather than have the choice to pay a higher fare.
- Uber hurts the poor, because cab companies cannot cross-subsidize service.
It is well known that, despite stringent regulations, taxis around the country refuse fares and avoid depressed neighborhoods. The best protection against fare refusal and more service is a large, diverse supply of for-hire vehicles, which ridesharing can help provide. And what’s more, cities like Saint Louis spend hundreds of millions of dollars a year on extensive public transit and para-transit services to serve the poor and the disabled. The for-hire vehicle market should not be regulated in order to duplicate those efforts.
If there is a common theme to Mundy’s and regulators’ arguments, it is that city officials, and not city residents, should decide whether ridesharing companies are safe enough, charge the right amount, and provide the right kind of service. But in reality, the corrective action of riders and drivers making their own decisions regarding Uber and Lyft are a far better test of all those criteria, and even Mundy admits the popularity of ridesharing where it has not been quashed by city government. The reality is that most Saint Louisans don’t see cabs as an option, because the service does not meet their needs. That’s a shame, because that hurts residents and hurts the city. But Mundy and the taxicab commission would rather keep it the way it is than let residents make their own choices.