Cass Sunstein on Taxi Cab Regulation

Famed Harvard law professor and former Obama Administration official Cass Sunstein is no enemy of regulation in general. But in this recent column, he argues that big cities need to deregulate the taxi market:

People can run into two problems when they need to find a taxi. The first is that they don’t know whether a taxi will be available. The second is that they don’t know when a taxi will be available.

Uber Technologies Inc. (0084207D), a San Francisco-based company, was set up to solve both problems. You can download its application, and it will find out where you are and come pick you up. It will also tell you when it is coming….

Uber is now available in numerous cities, including Atlanta, Boston, Chicago, Dallas, Detroit, Los Angeles, New York, Philadelphia, San Diego, San Francisco and Washington. The good news is that it is serving tens of thousands of customers (and creating jobs in the process).

The less good news is that it is having to fight a series of absurd regulatory battles, which provide a revealing case study in interest-group efforts to block new entrants and innovative approaches.

The basic problem is that the taxi industry is intensely regulated. One goal of regulation isn’t to protect consumers. It is to entrench current providers and to limit competition.

With respect to taxis, some states have a system that isn’t altogether different from socialist-style planning. Some longstanding regulations have the purpose and effect of squelching new entrants. And in the face of fresh competition, the industry has been creative and occasionally shameless….

True, there is an important place for rules designed to promote safety and to prevent fraud or deception. But regulation of the taxi industry goes far beyond those goals. That regulation is a dinosaur; it should become extinct.

Taxi cab regulation was stifling competition and harming consumers long before Uber came along. But, as Sunstein explains, Uber makes its flaws even more intolerable than before.