NYC Cracks Down on Ride-Sharing


Technological change can be frightening, even in such a bastion of enlightenment as New York City. How else to explain the Big Apple’s decision this week to crack down on the popular ride-sharing companies Uber and Lyft? Politicians on the New York City Council made all the right noises about concerns over traffic congestion in adopting a one-year moratorium on new vehicle licenses. But Wednesday’s 39-6 vote to stop issuing new licenses to Uber and Lyft drivers is less about limiting congestion than protecting the cab industry.

Yellow cabs have long enjoyed a prominent place in the self-image of New York, as depicted in popular culture from Taxi to Taxi Driver. But like the rest of the country, New Yorkers attach more value to lower prices, better service, and convenience than they do to nostalgia.

New York has a vested interest in the financial success of its cab drivers. The city caps the number of cabs by requiring them to have city-issued medallions that can cost anywhere from a few hundred thousand dollars to $1.4 million apiece (a few are owned by individual cabbies but most are owned by cab companies). But because of competition from ride-sharing companies, many owners are now facing financial ruin because they’re unable to repay the loans they took out to buy the medallions. Given the financial nexus between the city and its cab drivers, it’s not surprising that taxicab unions donate money to local politicians and have been especially successful advocates.

The city, which created much of the problem with its endless regulations and licensing, is probably right to try to help cabbies adjust to the loss of their monopoly. But restricting the new competitors by withholding licenses for ride-sharing cars isn’t the answer. Cabs never would have become popular in New York in the first place if the city more than a century ago had labored harder to protect the horse-carriage industry. Before that, it was probably tempting to outlaw streetlights to protect powerful candle and wick interests. As councilman Eric Ulrich of Queens put it: “This is like putting a cap on Netflix subscriptions because Blockbusters are closing.”

Uber and Lyft said the real effect of the ban on new drivers will be to make transportation less available for residents. “These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs,” said Lyft vice president Joseph Okpaku.

Ouch.

Instead of trying to make Uber and Lyft more like traditional taxi companies by subjecting them to quotas and heavy regulation, what if the city’s progressives embraced actual progress and allowed taxis to operate more like Uber and Lyft? Only belatedly has the city’s notorious Taxi & Limousine Commission (TLC) approved rules enabling features that would seem to have obvious benefits, such as a two-year “pilot program” allowing surge pricing, announced in March. The TLC might also consider slashing the dizzying array of fines and fees it imposes on cab owners; the license for operating a medallion-bearing cab, for example, is $550, and that’s just one of scores of fines and fees. Of course, lobbyists and other representatives of the cab industry don’t want that sort of deregulation—they’d rather just squelch competition. In any case, the city’s going in the opposite direction: Officials are considering new rules imposing minimum pay standards on Uber and Lyft drivers.

The best solution would be to do away with the medallion system entirely, letting the market, not bureaucrats, dictate fares, pay, and service like any other industry. The perversity of the system can hardly be overstated: Imagine a process in which the city of Miami predetermined how many hotels should be allowed to operate. The medallion scheme was created in 1937, when the market for transportation was utterly different than it is in the 21st century.

For now, the TLC insists on—as a former New York City mayoral candidate might have put it—standing athwart history yelling Stop.





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