Austin controversies

Austin voters speak, and vote to turn Uber and Lyft into taxis

May 8, 2016

Over our fondest wishes and most eloquent argument, the voters of Austin have voted to defeat Proposition 1, which would have overturned an Austin ordinance that regulates the ridesharing companies Uber and Lyft. These regulations are so onerous that Uber and Lyft threatened to leave Austin if Proposition 1 did not pass. Both firms have now announced that they will in fact stop doing business inside the Austin city limits starting tomorrow morning. (This is personally annoying in a very specific way, insofar as your Editor’s travel plans for the coming week, involving complex logistics with his daughter, depended on Uber. Sad!)

The opponents of Proposition 1, which included the flower and chivalry of the city’s Democratic establishment – the politicians, media, liberal activist groups, and so forth – made the election about “corporate greed,” and if you did not believe that they argued it was about safety, and finally they claimed that Uber and Lyft would not leave town anyway. Regarding the last point, the same Luddites made much of Uber and Lyft spending more than $8 million campaigning for the referendum, which to your Editor and other economic thinkers amounted to virtual proof that Uber and Lyft indeed considered the city regulations to be an existential threat to their business model. Why would two money-losing companies waste that much coin on a lark?

In fact, the fight was really over political power. The city’s politicians by and large believe that one must not disrupt local monopolies, however poorly they perform, without seeking permission. Uber and Lyft offended this sensibility by taking the point of view, after reading the existing taxi law, that they did not need permission. We know this to be true, because “senior city officials” — household names in this town — told us as much in private conversations.

All of that being the case, why did the town’s Democratic establishment come out so strongly against Uber and Lyft (and why are they trying to push out Airbnb and HomeAway)? Because progressives hate the “share economy.” For more than 50 years progressives have been using employers as leverage to push social change, whether in opportunity, health care, or political speech, and they do not want to lose that lever. The share economy, which turns workers into capitalists — their cars and houses become working capital in the truest sense of the term — is anathema for progressives who believe that the purpose of government is to change the way people behave. Austin’s new city council is surprisingly extreme in this view, considering that the new economy has produced the tax base that enables Austin’s municipal profligacy, but cause and effect has never been very important to politicians of any party, at any time.

The battle is not over, either in Austin or in general. We suspect that the thousands of people who will come to Austin for next year’s session of the Texas legislature will be universally irritated that they cannot use Uber to get around. We would wager more than a plug nickel that the “lege” will extend the logic of last year’s ban on local fracking ordinances to ridesharing and perhaps to other local regulation of disruptive businesses.

More generally, ridesharing is here to stay, because its underlying logic is too powerful. Uber, which reduces traffic and the demands on scarce parking, enables carpooling among strangers, reduces drunk driving, and allows the livery business to respond quickly to hour-by-hour changes in demand, is such a quantum improvement over taxis that it will win eventually. After all, if Uber and Lyft had existed first, would anybody have said “let’s establish a fleet of yellow cars, give them a local monopoly, and impose fixed fares so there are chronic shortages when people need them most”?

Not in Bernie Sanders’ wildest dreams.

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1 Comment

  • Reply Bryan McGrath May 8, 2016 at 7:42 pm

    I am buoyed by reports of the Texas State Legislature taking this matter up……

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