In late November, the Illinois General Assembly abandoned a plan to override outgoing Gov. Pat Quinn’s veto of heavy restrictions on ridesharing network companies.
Explaining his August veto, Quinn had said “a one-size-fits-all approach” to commercial ridesharing companies—such as Lyft or Uber—was inadvisable and such services were “best regulated at the local level.”
Among other provisions of the bill Quinn vetoed, House Bill 4075, individuals who want to work as drivers would be forced to undergo testing of their etiquette by state regulators. Other proposed regulations would have included government restrictions on the number of hours per week drivers can work, similar to those imposed on commercial truck drivers.
The legislation would also have prohibited ridesharing drivers from picking up or dropping off passengers in areas with designated taxi stands or queues, such as airports. Other proposed requirements included the purchase of expensive commercial insurance policies and professional licenses.
Adam C. Smith, assistant professor of economics and director of the Center for Free Market Studies at Johnson & Wales University, says he was unsurprised by the General Assembly refraining from overriding Quinn’s veto.
“I think the main thing is that these are very popular services, and so when they’re trying to put unnecessary restraints on those services they’re basically putting themselves in opposition to voters,” he said. “I would speculate that politicians are reluctant to put themselves in opposition to voters like that so obviously and so publicly.”
Smith said the General Assembly’s abandonment of the proposed override exemplified pro-consumer policies transcending partisan politics.
“It exposes how unique the issue is and how it can unite both sides of the aisle, mainly because it’s so beneficial to consumers and to voters. If that’s the case, whoever opposes it is going to put themselves in the crossfire,” he said. “If you’re going to impose rules—the fewer rules, the better.”
Regulations Spurring Price Hikes
Smith warned placing additional regulations on ridesharing companies would hurt on consumers and local economies.
“So, even if prices are set by a centralized cab company, which has kind of been the status quo, those prices are just moved upwards, in terms of paying for the licenses or medallions or however they’re allocating it,” Smith said. “The bottom line is you’ve still got the same amount of demand but less supply,… so, higher prices and fewer services available.”
Although regulatory bills are usually passed without controversy, Smith said, speculating lawmakers may have been reluctant to crack down on such a popular service.
“It normally doesn’t matter, because voters are largely ignorant of legislative issues, but this is one that people will be aware of very quickly, and the negative consequences of that will be felt at home,” Smith explained.
‘The Irish Experience’
A 2002 study by Trinity College Economics Department Senior Lecturer Sean D. Barrett on the effects of the Irish High Court’s decision to deregulate the taxicab market in Dublin, Ireland provides support for Smith’s argument consumers benefit from fewer regulations.
After studying consumer surveys conducted by economic consultancy firms, Barrett concluded consumers’ transportation experiences had measurably improved with the decrease in barriers to market entry.
“The impact of the large increase in market entry was shown in the declines in waiting times for taxis, with the proportion of people waiting more than five minutes decreasing from 75 percent in 1997 to 52 percent in 2001,” Barrett wrote, and “just under half of all taxi users considered that the service had improved with only 5 percent indicating that the service had got worse.”
Barrett also found decreases in the amount of time passengers had to wait for service, even during high-demand periods, as the removal of market barriers allowed the transportation supply to meet the demand.
“After midnight the average waiting time was in excess of 30 minutes for 43% of the hours surveyed in 1997 and for only 6.2 percent in 2001,” Barrett wrote. “20.3 percent of hours surveyed had waiting times of less than five minutes in 1997, but under deregulation this increased to 60.2 percent in 2001.”
“The Irish experience is that there should be full and immediate deregulation rather than mere liberalisation of taxi markets,” Barrett concluded, and deregulation’s benefits “are significant in an economy with many cases of regulatory capture.”
Paula Bolyard ([email protected]) writes from Doylestown, Ohio.
“Regulatory Capture, Property Rights and Taxi Deregulation: A Case Study,” Sean D. Barrett, http://heartland.org/policy-documents/regulatory-capture-property-rights-and-taxi-deregulation-case-study/