Tuesday, 1 July 2014

What is it about transport?

So Uber, the DIY taxi service app, is up and running in Auckland, according to this report this morning from Radio New Zealand.


More competition is just what's needed, especially in Auckland. When the taxi fare from Auckland Airport to our place on the North Shore routinely runs to $120-140 - sometimes more than the return airfare to Wellington - some additional competitive alternatives are a jolly good idea. There are some already - I've recently shifted to a shuttle bus service, which costs $62 - but more won't hurt.

I have some sympathy, though, for the incumbent taxi companies who claim to be competitively disadvantaged by the regulatory overhead they've got to carry. Ideally, this could be resolved by lessening the burden on the taxis rather than piling regulatory requirements onto Uber drivers.

But I can't say I'm optimistic about seeing rational, efficient, pro-competition transport policy. Globally, transport seems to be one of those sectors where policymakers can't leave the damn thing alone - either lumbering it with excess regulatory baggage, or, alternatively, favouring the producer interest of transport incumbents with anti-consumer jackups.

A classic example is the Irish taxi industry. As detailed in this new (short) report from my old stamping ground, Dublin's Economic and Social Research Institute,  the Irish have gone back to the bad old system they used to have, of limiting the number of taxi licenses, with the explicit aim of assisting the taxi trade, and despite the clear evidence that consumer service worsens with reduced taxi availability.

What is it about transport that attracts these bad policies?

It's not as if there's some sort of market failure that these policies, however cackhandedly, are trying to solve. There are perfectly adequate and economically efficient mechanisms for the market to work its own problems out if it's got any - prices can fall, taxi drivers can leave, shipping lines and airlines can add or subtract routes - whereas the regulatory routes are typically inefficient (in all three senses of the economics term) and often inequitably anti-consumer. And there are functioning secondary markets for transport equipment - not just for taxis, but also for aircraft and ships - which means there are no issues of catastrophically stranded sunk costs to bother about.

Perhaps the answer is that passenger safety is the Trojan horse that's being used as the pretext for producer protection or superfluous regulation of transport businesses, in the same way that patient safety has been misused as a pretext for anti-competitive behaviour in the medical profession.

In any event,  I wish Uber well - and I hope the policy environment let's us enjoy a good, clean contest between Uber and the rest of the industry.

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