New York will regret opting for more statism

Jonathan Jurado

August 15, 2018

Last week, New York City decided to place a cap on the number of operational licenses it issues to potential Uber and Lyft drivers. It was judged by many as a move to save the city’s Yellow Cab system. There has been a long history of controversy and even physical alterations between ride-hailing apps and taxi companies, but this is the first time any such cap has been implemented. However, the cap will be implemented for just one year and any such renewal is subject to how the city and the public react to it. There are many considerations here, but the overarching point is this: New York is going to regret opting for more statism.

The environmental consideration is that this should result in fewer vehicles on the streets so, therefore, less congestion in the city. Though it’s not entirely clear whether this will actually hold as those consumers that are no longer able to take an Uber, may simply opt to take a taxi or even their own car.

The economic considerations are varied: by restricting the number of vehicles consumers can take, it is likely that prices will increase, and this could see a boost in wages for drivers. Again, it is unclear whether higher prices will translate into higher wages as the taxi companies or ride-sharing apps could pocket the difference. But one thing is clear: consumers will lose out on every front, with higher prices, less choice and longer waiting times.

These new restrictions will also make it harder for start-ups to enter the market and compete with Uber – if the license cap has been reached, a new license won’t be issued, regardless of whether it’s a newcomer requesting one. Perhaps the Yellow Cab system will benefit, but even that is up for debate – if consumers judge the system to be too protected or even too pricey, they will still avoid the service, be it through the subway or through their own private vehicles. Regulation of the gig economy must be carefully considered and measured, and this hasty approach is unlikely to help any of the parties involved because it demonises and outright stifles competition and innovation.

Internationally, there are a number of cities that have tried to restrict or even ban Uber and other ride-sharing apps. Montreal and Barcelona are two examples. Where are they now? Well, Barcelona recently re-issued Uber a licence, after having suspended it in 2014. The traditional taxi companies now must find a way to make their offering more efficient, more user-friendly and perhaps even cheaper if they want to survive – the regulators can only hold off Uber for so long. Eventually, innovation and technology will disrupt and challenge traditional industries; and those industries should lobby for unwarranted regulation against them to be dropped, not the erection of barriers designed to make life more difficult for dynamic market entrants.

In the UK, such a cap hasn’t yet been imposed. However, London has had its issues with Uber – recently Transport for London decided to renew Uber’s license,  after having previously suspended it. Indeed, the Mayor of London, Sadiq Khan, has said that he has no problem with Uber as long as “they play by the rules” – let’s just hope that quotas or caps on the number of licenses don’t become the “rules”.

As the West deals with Donald Trump’s protectionism and isolationism, Britain should take this opportunity to be a strong, powerful voice for free markets – because to undermine economic freedom is to undermine the British way of life. So, let the gig economy evolve as it has to this day, and more importantly let the free market, not the state, decide how much of it we want in our lives.


Written by Jonathan Jurado

Jonathan Jurado is a Master's student studying Business Analytics at ESADE Business School in Barcelona.


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