Taxicab companies in Santa Cruz, California are calling on lawmakers to enact a government crackdown on peer-to-peer economy transportation network companies (TNCs), such as Uber and Lyft.
The taxicab owners say city law enforcement agencies are endangering consumers by allowing these companies to operate in the city.
Santa Cruz ordinances restrict the number of taxicabs allowed to operate in the city at one taxicab per 2,000 residents, meaning an estimated total of 32 individuals are authorized to drive a cab.
Abigail Hall Blanco, an assistant professor of economics at University of Tampa and a research fellow with the Independent Institute, says taxicab companies aren’t concerned about passengers’ safety.
“Cab companies claiming their issue with Uber is one of safety reeks of naked self-interest,” Blanco said. “Perhaps counterintuitively, the regulations of cabs observed in many cities throughout the United States actually benefit cab companies. Several decades ago, government officials and taxi companies saw an opportunity for a mutually beneficial exchange in the form of increased regulation. Government would grant cab companies licenses in exchange for a fee. A limited number of licenses would keep fares artificially high and protect taxi firms from competition, all while pumping money into government coffers.
Regulations Harming Consumers
Blanco says economic innovation is threatening the cozy partnership between government agencies and some businesses.
“Companies like Uber and Lyft threaten this arrangement,” Blanco said. “Government would lose out on licensing fees, and cab companies would have to compete. Cab companies are concerned with their bottom lines. As opposed to competing in the market for customers, they are trying to eliminate competition via government regulation. Taking away options for consumers undoubtedly makes consumers worse off.”
John Kartch, communications director for Americans for Tax Reform, says economic protectionism helps the owners of incumbent businesses and hurts everyday consumers.
“For decades, local taxi cartels have worked with politicians to build protectionist walls around themselves, at the expense of working people,” Kartch said. “Take a look at the absurd Santa Cruz law capping the number of cabs at one per 2,000 people. What is the purpose of the cap? To protect the cartels. And how exactly does the government know the cap should be 2,000?”
Monopoly on Substandard Service
Kartch says the government-granted monopoly on for-hire transportation enables taxicab companies to get away with providing substandard service, because consumers have no legal alternative.
“Consumers have been suffering for years under entrenched taxi regimes who offer poor service, dirty cars, and [supposedly] broken credit card machines,” Kartch said. “Many taxi drivers avoid entire neighborhoods, limiting the mobility of people on a fixed income. Uber and Lyft have dramatically improved the mobility of the poor, the elderly, [the] disabled, and people who simply live far from public transit.”
Dustin Siggins ([email protected]) writes from Washington, DC.
Clive Gaunt and Terry Black, “The Economic Cost of Taxicab Regulation: The Case of Brisbane,” Economic Analysis and Policy, March 1, 1996: https://heartland.org/policy-documents/economic-cost-taxicab-regulation-case-brisbane/