Having failed once to smother Uber in its crib, the taxicab industry has returned for another try. Uber, relatively new to DC and immensely popular with its customers, is a technology company that uses an app to connect customers with taxis, sedans and SUV services.
The technical economic term for what the taxicab industry is doing is “rent seeking” a process by which a company or group of companies uses its power to influence government to squash competition. Another technical economic term describes what the DC Taxicab Commission has become — a “captured” government agency. In a captured industry, regulators have been co-opted to do the bidding of the industry they’re supposed to oversee.
The Commission, at the behest of the industry it’s supposed to supervise, has promulgated another set of onerous regulations designed to run Uber out of business. It it is only natural that companies in any given industry don’t like competition. It forces them to either cut their prices or improve their performance, or both.
The District government is failing in its basic responsibility. It is not the job of a regulatory agency to protect an industry from competition. It is the job of the DC Taxicab Commission to ensure a level playing field which fosters fair competition. Does this mean that a taxicab company could go out of business? Perhaps. Or will taxicab companies innovate, like DuPont Cab which informed me by postcard that it has implemented a brand new dispatching service to meet all of my transportation needs? This postcard arrived about three months after Uber came to town. Absent Uber’s arrival, I doubt I’d have received any such announcement. That’s the power of competition.
Another factor at play here is perceptions about the District, and they are at least as important as a properly functioning regulatory system. Uber is a software/technology company. The District is purportedly trying to build a technology industry. Technology entrepreneurs pay attention to the news, and they see regulators trying to strangle Uber, and it gives them one good reason not to start a business in DC or bring one here from out of state. If we truly intend to become a hotbed for technology entrepreneurship, regulating technology out of business is exactly the opposite of what we want to do.
Rent seeking is a hidden scourge on our economy, and the DC Taxicab industry and Uber is just one example. The upstart food truck industry is undergoing the same type of attack. The Washington Restaurant Association promulgated a package of regulations so onerous that it would essentially drive food trucks out of the District and then used its political power to get the Council to do its bidding and propose the rules. Only a popular revolt by its customers managed to stave off Council action for the moment.
Competition is the most powerful economic force in the free enterprise system. It forces prices downward and makes businesses improve and innovate or die. Most of the regulatory changes happen in the background, unseen by consumers. But we suffer the consequences nonetheless — and it’s not illegal. These types of government actions that squash competition have a corrosive effect on free enterprise and also undermine trust in government. We all pay for the damage.
Here’s a letter from the Consumer Electronics Association making the same point: