Uber: A better deal for area students

By Lucas Coughlin

Michael Zhadanovsky demonstrates how he sometimes uses the app, Uber, on his mobile phone, to get a ride home from school. (Carmine Galasso/The Record/MCT)
Michael Zhadanovsky demonstrates how he sometimes uses the app, Uber, on his mobile phone, to get a ride home from school. (Carmine Galasso/The Record/MCT)

In 1845, the brilliant French economist and satirist Frederic Bastiat submitted an open letter to the French Parliament. He urged them to “pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights and blinds — in short, all openings, holes, chinks and fissures through which the light of the sun is wont to enter houses” to protect the position of the French candle-making industry.

But while this tract was intended to parody French merchants who sought government protection from foreign competition, its caustic wisdom applies wherever entrenched interests seek to hinder competition.

Now, the University of Massachusetts is not a place where a free-market defender like Bastiat is held in particularly high regard. Off campus, students are about to receive a lesson in market economics that could have come from the pen of Bastiat himself. That is because Uber, the popular ride-sharing program, has begun operating in Amherst. Founded in 2009, Uber pairs those seeking rides with drivers through a smartphone app and tends to cost significantly less and require shorter waiting times than traditional taxis.

Only 10 cab companies are currently licensed to operate in Amherst despite the huge demand for taxi services. Like the guilds of medieval Europe, cab companies everywhere take advantage of artificial limitation of competition in order to charge more per ride than they otherwise would be able to. Uber threatens to destroy this business model by introducing competition outside of this glorified cartel, and it has taken over much of the taxi industry in cities where it operates.

It is true that ride sharing has probably cost some cab drivers their jobs – similar to the way the automobile industry cost jobs in horse-powered fields. If government policy had been to protect the horse-breeding industry at the dawn of the automobile, the equestrian field would have at least temporarily retained more jobs than it did. But the stifling of innovation would have made society considerably worse off. Particular industries may benefit in the short term from government protectionism through intervention, but only at the expense of everyone else.

Conversely, the loss of the taxi industry is a gain of the rest of us.

In a Salon.com article, Andrew Leonard worries that Uber “will… dump [their drivers] entirely in a nanosecond when self-driving cars prove that they are cheaper and safer” and that “When Uber starts using its logistics clout and unlimited investment capital to go after UPS and Hertz and FedEx, regulators will start wondering about antitrust issues.”,Here, however unwittingly, Leonard demonstrates the promise of innovative companies like Uber.

Emerging technologies that save labor or lessen costs will cause individuals to lose their jobs, and it is right to sympathize with those that do. But in economics, which inherently deals with a world in which resources are finite, there are always tradeoffs. It makes no sense to protect the jobs of some at the expense of everyone.

When considering the passage of any regulation, it is vital to consider the question that lies at the heart of almost all political questions: cui bono? Who benefits? Invariably, the answer is the industry or group that stands to be harmed by innovation. The same reason why teachers unions oppose the expansion of voucher programs and charter schools, service workers unions oppose laborsaving technology and cab drivers oppose Uber. Whatever populist ideals they may purport to be defending, the impetus behind such campaigns is narrow self-interest.

Lucas Coughlin is a Collegian contributor. He can be reached at [email protected].