Austin voters recently considered some new regulations on so-called ride-sharing services, particularly a requirement that their drivers get fingerprinted. Uber and Lyft, the biggest names in this space, promised to skip town if these rules were upheld.
Spoiler alert: They were.
In turn, the two companies made good on their word and left.
Thousands of Austinites lost their flexible jobs as drivers. Tens of thousands more lost a favorite mode of transportation. To many this shock seemed needless. To make things worse, there’s a widespread assumption that the original regulatory burden was motivated not by public safety concerns so much as by special interests – namely the Austin taxicab cartel, which has struggled with the nimble competition introduced by ride-sharing.
Others see big interests on the other end of this controversy. For example, many view Uber/Lyft’s efforts to influence the referendum – through radio advertisements, mass texts, door-to-door solicitation, and so on – as overly intrusive, sometimes intimidating, and altogether a clear-cut case of swaying a democratic outcome with corporate wealth.
From this perspective, the companies were, as one blogger put it, “trying to take the law into their own hands.”
That certainly introduces the fundamental problem here: how society should effect safety in private services like ride-sharing. Should safety practices be determined by governments or by corporations? By voters or by consumers? By democracy? Or by the democratic marketplace?
Most people would say, well, some combination of those things – give companies some room to play but let government blow the whistle. That vaguely describes the present system. But many Austin locals were happier with the ride-sharing situation before government and democracy intervened.
Because the regulation and democracy inherent to the marketplace had subtly been at work all along.
Whenever you hail an Uber driver, you’re indicating a preference for that ride-sharing service over any alternative method of transportation. You’re essentially voting for ride-sharing in that form.
Because you actually have one hundred percent of the vote when it comes to which service you’ll end up with, you’re likely to vote sensibly, taking into account your alternatives, your preferences, your wallet, and your safety. At least, you probably aren’t being motivated by corporate interests, municipal politics, political ideology, or career considerations – precisely the forces that propelled both sides of the city’s recent referendum.
So choosing market services is like casting especially rational votes in a democracy. But this sort of market democracy is much more elaborate and responsive than municipal voting. It comprehensively accounts for the public’s total demand for a service (conveyed by everyone’s voluntary payments towards it), the social burden of the service’s safety measures (conveyed by the prices the company has to pay for them), and the cost of mistakes when safety fails (conveyed by damages and liability expenditures and lost revenue due to fallen demand).
All these crowd-sourced figures constantly update in light of new information. And even though they represent vastly different economic signals, they share the same unit – dollars – which lets economic actors like Uber and Lyft apply the powerful tool of mathematics to determine an efficient, society-oriented approach to safety.
This brings us to a groundbreaking economic insight: In complex post-hunter-gatherer societies, doing math with market-sourced prices – which dynamically compile and quantify dispersed, disparate information – is the only reliable tool for guiding knowledge-limited people towards using resources in a socially beneficial way, in light of society’s infinite wants and needs and unknowable, ever-changing conditions.
The 20th-century economist Ludwig von Mises called this concept economic calculation. He used it to explain why the fascist and communist governments of his time would inevitably fail, because they lacked the distributed control of property necessary to form rational market prices usable for informing resource allocation. (It is interesting to note that the Nazi regime felt so threatened by Mises’ ideas that it raided his study and destroyed his work; Mises, an Austrian intellectual, barely escaped to America with his life.)
Economic calculation is a complex mechanism, but we don’t have to understand it for it to work. As citizens of society we must only appreciate that a market economy with distributed control naturally seeks a balance between our unlimited desires, like safety, and the limited resources available to satisfy them.
Now, what does all this have to do with Austin’s new ride-sharing decision?
Contrast the market’s above-described decision-making machinery with our recent government referendum. A majority of eligible citizens didn’t even participate; voter turnout was seventeen percent. Only a subset of this group represents the victorious proponents of regulating ride-sharing. Quite a few were confused about which side they were actually voting for. Moreover, many of Austin’s heaviest ride-sharing users – visitors and tourists, locals from outside the city limits, and those too busy to vote – couldn’t participate at all.
Why should the result of such an indirect, incomplete, and unintelligent popularity contest override the invested and nuanced decisions of the hundreds of thousands of people who chose ride-sharing in Austin over its entire lifespan in town, funneled through the elegant mechanisms of a market economy?
Government referendums are shoddy democracies. In these political spectacles, decisions are detached from practice, options are limited, participation is a nuisance and likely inconsequential, and then, after a one-time determination, the outcome is suddenly universal, absolute, and compulsory. Besides, in this case the law had already been dictated by city officials and special interests. The vote was merely an effort to diminish an illiberal decree.
In effect the municipal government has, through the very illusion of voting, taken away our ability to actually vote in the marketplace. Policy was determined top-down and coercively by centralized authority, in a more communistic or fascistic manner, rather than ground-up and voluntarily via the market, in a more democratic, liberal, and libertarian manner. The end result was the loss of two safe and popular services. Austin is now less efficient and less safe, and therefore poorer. Yes, poorer.
It all seems regressive. My hometown is proud of being unique, but then regulating away ride-sharing is a big step backwards. Forcing one’s preferences on others isn’t special; it’s typical. The city government’s policy falls in step with a long-established tradition of tyrants, tycoons, and bureaucrats who throughout history have wielded government power to enforce their own interests, the whole time professing to serve the people.
When will we, the people, wise up?
Ride-sharing is innovative and new. Government paternalism, on the other hand, is getting old. A final message to our municipal overlords, then: Let us decide what’s best for us. And please let Austin “keep Austin weird”.