Queensland blocks Uber taxi competition

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By Leith van Onselen

Late last month I got excited when Queensland Premier, Campbell Newman, indicated that his Government would break ranks with its New South Wales and Victorian counterparts and would not regulate Uber’s ride-sharing service:

“We are a deregulation-minded government,” [Campbell Newman] told ABC radio.

“We don’t believe in more red tape and regulation unless it’s absolutely necessary.”

Unfortunately, shortly after writing this article, it appears that Mr Newman received advice from his Transport Minister, Scott Emerson, and completely changed his tune, issuing a cease-and-desist notice to Uber, effectively banning its ride sharing service.

According to Transport Minister, Scott Emerson, while the Government “welcomed innovation in transport technologies, passenger safety is always our first priority”. As such:

“The department is working with Uber to outline what safety regulations it needs to operate in Queensland, such as driver authorisation, including detailed criminal history checks, vehicle standards, a taxi licence and proper insurance.”

Not surprisingly, the taxi cartel has strongly backed the Government’s cease-and-desist order, with Taxi Council Queensland CEO, Benjamin Wash, stating:

“Companies that do not meet regulatory requirements jeopardise the industry’s reputation, put lives at risk and hurt small business people who have invested heavily in meeting the regulations”.

The Queensland Government’s decision to effectively ban ride sharing is a disappointing outcome.

Ride-sharing is an economic no-brainer, providing greater choice to consumers and lowering costs, while also improving productivity by facilitating a more efficient use of the existing transport fleet. Yet, as I keep arguing, economic no-brainers tend to be resisted by incumbent interests who are threatened by it.

Everywhere in the world where ridesharing has been tried, a storm of opposition has been aroused by vested interests; not just in the Taxi industry, but in public transport monopolies and government.

As argued by Colin Clark (a distinguished colleague of J M Keynes), in possibly his last published work, “Regional and Urban Location” (1982):

Anyone who defends the taxi monopoly, and restrictions on multiple hiring, while at the same time complaining about the use of fuel, is totally incoherent. The abolition of the taxi monopoly would cheapen travel, save fuel, reduce congestion, and would have one further great advantage, to which hardly any attention has been drawn, namely that it would provide employment opportunities for the unskilled…..

Yet defending the taxi cartel remains the status quo not just in Australia, but throughout the world. As illustrated in the Washington Post over the weekend, taxi licences (“medallions”) have been one of the best performing investments going around, thanks to the artificial scarcity of supply derived through government regulation:

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The Queensland Transport Department’s opposition to Uber on safety grounds is also spurious. Uber’s drivers must be over 24 years of age and have no criminal record. Vehicles must also be covered by comprehensive insurance, have at least four doors and be manufactured after 2005.

Moreover, Uber has other built-in checks and balances that are not available to users of taxis. For example, Uber customers get to see the drivers’ rankings and their reputation via the website, which allows customers some control over who their driver is. It is also in the driver’s best interest to impress you, as after your journey is complete, you are required to give them a rating out of 5 stars. A low star rating results in less fares for the driver.

By contrast, with a taxi it is pot-luck as to who your driver is, and there is no mechanism to rank their performance.

Adults in Australia should be free to choose their transport options. If they do not trust Uber and want to take a taxi. Fine, take a taxi. Similar, if they want to use Uber, let them exercise their choice and do so. But their choices should not be limited by archaic and monopolist regulations that seem more interested in maintaining inflated taxi plate values, rather than offering consumers real value.

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Comments

  1. Hoocoodanode?

    “Australians lets us all be renters,
    for we have scum policies,
    with no wealth from soil,
    or reason to toil,
    or home is bid by Chinese…”

      • Stephen Morris

        You’re not allowed to call a referendum.

        That in itself is a major part of the problem (as discussed below).

  2. I used Uber twice on the weekend, in Sydney.

    Both times, the driver was a licensed hire car, with hire car plates. I asked the driver whether he needs a taxi license and he said no, its a hire car license. He said you can’t buy them outright – you pay an annual license fee of $8k, which is a lot, but better than paying hundreds of thousands for a taxi license.

    The price was about the same as a taxi, but the cars arrived very quickly, and as soon as I booked the car, I could track it on a map, meaning I could see how far it was from arriving. The car was much more comfy than a normal taxi, and the drivers were friendly and knew where they were going.

    For all those reasons, and the fact that I support the concept, I will continue to use Uber.

    • Yup I’ve used Uber in Melbourne, experience was much better than cabs — and I have pretty good cab experiences by and large, I can pretty much walk out my front door and hail one on St Kilda Rd within 5 minutes 24/7… and Uber was still better.

    • Yup, and the envisioned path into the future of both Google and Uber’s CEO will be to eliminate the need for ‘drivers’ altogether.

      Slap an Uber decal on one of Google’s developed-from-the-ground-up self-driving SMART car ripoffs and then you’ve REALLY got a technological disruption.

  3. When have they supposedly started to block it? I caught three Ubers in Brisbane on Saturday night, and every weekend I use it there appears to be more and more drivers out there.

  4. Stephen Morris

    For those willing to think outside the square (and that immediately excludes most of the human race) the really interesting question here is not whether taxi licensing should be abolished.

    The really interesting question is why taxi licensing was not abolished years ago. Or why it was ever allowed to come into being.

    In answering that, we get a glimpse into the solipsistic narrow-mindedness of human beings that renders them unable to comprehend any preferences other than their own . . . and in the process often prevents beneficial transactions from taking place.

    As noted in this article, there seems to be widespread (although not unanimous) agreement that taxi licensing is detrimental. In Australia I can recall this debate being active at least since 1988. Milton Friedman was railing against it decades before that.

    And yet nothing happens.

    Why is that? If there is such obvious benefit from a policy, then why does it not come to pass?

    The issue here is not about the benefit of removing licensing. The issue here is about the way in which that benefit is to be distributed amongst the parties.

    Cameron Murray last week estimated the value of licences in the three largest states as being about $6 billion. (For the sake of brevity I will ignore the epistemological problems surrounding the allocation of cardinal values to ordinal preferences.)

    It is possible in principle to eliminate the taxi monopoly by paying out $6 billion to the licence holders to cancel their licences. The public (or the state) would bear the cost. This option allocates all benefit from the transaction to the existing licence-holders.

    Alternatively, it is possible to eliminate the monopoly by simply cancelling the licences without compensation. The licence holders bear the cost. This option allocates all benefit from the transaction to the travelling public.

    Coasians will immediately identify this as the same issue which arose in The Problem of Social Cost.

    Are farmers entitled to grow corn near the tracks without the risk of fire? Or are railway owners entitled to run locomotives without having to pay for spark catchers on their funnels?

    Is Dr Sturges entitled to practice auscultation in his consulting room? Or is Mr Bridgman entitled to make confectionary using noisy mortars and pestles next door?

    Is Mr Lefever’s entitled to stack timber on his roof? Or is Mr Bryant entitled to have a smoke-free room without having to pay for a new chimney?

    As Coase tells us, if a) the initial-state distribution of rights is well-defined, b) there is benefit in re-arranging the distribution of rights, and c) there is no transaction cost barrier to prevent that re-arrangement, then it ought to proceed irrespective of how one initially assigns the rights.

    But that in itself doesn’t tell us how the rights are assigned initially!

    The real issue here is not the that there is a problem with taxi monopolies. That is an issue on which there seems to be widespread agreement.

    The real issue here is who is entitled to the benefits of abolishing it . . . and negotiating a solution to that problem.

    It is worth remembering that many licence holders in the taxi industry are individuals or families who have invested their life savings on an implicit understanding that this was public policy. The licence regime was certainly legislated, even if the precise number of licences was not.

    It is worth remembering that many of these people have not actually benefited from the licence monopoly themselves. They have bought their part of the monopoly at full price from a previous owner.

    Often, the initial rent-seekers have long since cashed out and will bear no pain from restructuring the monopoly they helped to create. One could simply bankrupt the current licensees. The pain will be borne – at least in part – by secondary market buyers who have gained little and who may lose everything.

    But it is not self-evident that that is the “correct” course of action. It is not self-evident that the initial-state distribution entitles them to nothing.

    Of course, solipsistically narrow-minded people simply assume that the “correct” initial-state distribution is the one they themselves prefer.

    I can predict right now that some people will respond to this comment by simply reciting – as an Article of Faith – their own belief that the licence-holders should bear all the cost. But reciting one’s beliefs like a religious creed is no substitute for rigorous analysis.

    For those people who can see both sides of an argument the “truth” is so self-evident. Ultimately this is a matter of aggregating the subjective preferences of those involved.

    What we can say with some objectivity is that the current system of aggregating preferences (the current “institutional arrangements” as Coase would have called them) has not allowed a potentially value-adding transaction to take place.

    We are stuck in a “metastable” equilibrium. (Those familiar with chemistry will recognise the parallel immediately.) It is not a true equilibrium, but it is sustained over time because of transaction costs barriers (like energy barriers) and the anti-catalytic effects of Prisoners’ Dilemma which magnify small barriers into large ones.

    What are these barriers?

    In the field of preference aggregation two of them stand out.

    One is the prohibition on people initiating and voting on legislation without the intermediation of (potentially corrupt) political agents. To change legislation one must either work through the existing cartel of political agency or try (an herculean task) to establish an entirely new political party.

    The second – and greater – barrier is the prohibition on people establishing their own polities to govern themselves as they might wish.

    The first barrier may be reduced by more directly democratic means of government.

    The second may be reduced through the use of Polity Markets.

    However, many people are not really interested in such efficient solutions. What they really want is simply to get their own way. What they really want is to ram their own preferences down the throats of everyone else.

    Such people hate the idea of truly “efficient government”. Such people define “democracy” as meaning “good policies” where they themselves define “good”. The last thing they want to reduce transaction cost barriers!!

    If they could ever bring themselves to shake off this solipsistic narrow-mindedness we might just be able to create a better world. (“Better” defined here to mean more closely approximating equilibrium outcomes.)

    – – – –

    p.s. I do not own a taxi licence, and I currently know no-one who does.

    • Stephen, many thanks for your comment! Somewhat to the detriment to my productivity this afternoon, I found it to be extremely thought provoking with some new (to me) concepts to consider.

    • And yet Stephen through inadequate definition you have made equilibrium your preference. For shame!

      • Stephen Morris

        Not quite.

        My preference is for an absence of a priori privileging, and only then because there is no logical means of identifying the individuals who are to be privileged a priori. Thus it is a preference for “not doing things that are logically impossible to do”.

        In terms of equilibrium, one might accept a non-equilibrium (metastable) state if suich were chosen by a non-privileging aggregation of preferences.

        As I was trying to explain last week when the comments editor banned me, such a “deliberate metastable” state could be achieved through manner-and-form legislation.

        For example, one might consider entrenching a metastable state using the following doubly-entrenched manner and form legislation:

        Article xxx.1 [sets out the matter to be entrenched]

        Article xxx.2 The matters set out in this Article are to be interpreted by the Supreme Court and may not be amended except in the manner and form set out in Clause xxx.3

        Article xxx.3 This Article, including this clause of this Article, may be amended only in the following manner and form:

        a) pursuant to a referendum in which voting is compulsory and in which at least 75% of voters approve the amendment; or

        b) pursuant to two referendums held at least two years apart, in which voting is compulsory and in which a majority of voters in each case approve the amendment.

        This allows for democratic amendment of an entrenched state but also ensures that any such amendment either is widely supported or is made only after careful consideration.

        The sorts of non-equilibrium states I was referring to above were those which are naturally occurring and do not arise from a non-privileged aggregation of preferences.

    • Your point is, as usual, well made. It’s interesting how much of ‘good policy’ is just something that suits me.

      My question is, would direct democracy have its own weaknesses given how easy opinion is swayed with clever marketing. Would we just end up in a new media manipulation hell, truth would be even more meaningless.

      As an aside, re the proto-states, I’ve found it a little intriguing to watch the criticism of FIFA by the press. Not enough corporate governance, too much corruption, good free to air (no ads in game) etc, and yet we get a pretty good event, untainted by the corporate banality that is the scourge of other professional sports. It is clear this is just a battle between two powerful wealthy groups, the state sanctioned corporate cartel executives that want control for their own benefit, and the existing owners. That the former just dresses up its quest in new-speak is neither here nor there.

      • Edit:

        “As an aside, re the proto-states, I’ve found it a little intriguing to watch the criticism of FIFA by the press. Not enough corporate governance, too much corruption etc, and yet we get a pretty good event, good free to air (no ads in game) relatively untainted by the corporate banality that is the scourge of other professional sports.”

      • Stephen Morris

        There is one thing that makes direct democracies categorically different from all other forms of government:

        If the People do not like direct democracy as a form of government it is a straightforward matter for them to call a referendum to limit or abolish it. That they do not do so provides direct and ongoing evidence of their support for it.

        The same cannot be said of non-democratic forms of government which invariably require some elite (such as professional politicians) to agree to any change. One cannot infer popular support for non-democratic regimes in the same way one can infer it for democratic regimes.

        In practice people never do vote to abolish or limit direct democracy. Even in California (held up as the paragon of “bad government” by elitists) all three attempts to do so were either defeated at the ballot box or were withdrawn in the face of imminent defeat.

        Whatever the elitists might say, it seems that the People actully do prefer direct democracy over other forms of government.

        And their views should count. It is, after all, their country!!

        Isn’t it??

  5. Licensing power is the power to create an unnatural monopoly. They go against the Statutes of Monopolies in that they “are contrary to your Majesty’s laws, which your Majesty’s declaration is truly consonant and agreeable to the ancient and fundamental laws of this your realm”.

    Governments are no better than mafia syndicates.

    • Stephen Morris

      Or to look at it the other way around, mafia are sometimes described as “proto-states”. They offer protection from other mafia in return for the payment of “protection money”.

      A kingdom is simply a long-established hereditary mafia, often ruling a large area.

      Mafia tend to spring into existence to fill the gap in authority where the sovereign state is weak. Conversely, successful sovereign states need to suppress local mafia in order to establish and maintain their rule.

    • Governments are no better than mafia syndicates.

      +1. During the election I saw the Labor candidate in person. Bloody oily bastard. Quite intimidating just looking at him.

  6. The Queensland Transport Department’s opposition to Uber on safety grounds is also spurious. Uber’s drivers must be over 24 years of age and have no criminal record. Vehicles must also be covered by comprehensive insurance, have at least four doors and be manufactured after 2005.

    Do standard vehicle insurance policies cover commercial usage of the vehicle ? My guess would be no. If not, is this something Uber makes clear to drivers and passengers, and do they verify that drivers have appropriate insurance ?

    Moreover, Uber has other built-in checks and balances that are not available to users of taxis. For example, Uber customers get to see the drivers’ rankings and their reputation via the website, which allows customers some control over who their driver is. It is also in the driver’s best interest to impress you, as after your journey is complete, you are required to give them a rating out of 5 stars. A low star rating results in less fares for the driver.

    I’m sure that driver rating will really weigh on the mind of a serial killer.

    There are quite valid security concerns around the Uber model relevant to both passengers and drivers that are easily addressed (eg: video cameras, external labelling of vehicles). Uber has not even made a token gesture to try and do this.

  7. Deregulate everything so “consumers” can democratically vote in the market place…. barf~~~~

    skippy…. its worked great for the financial services sector…. snicker….

    • Everything except the actual “money” of course, don’t want voters making the wrong choice right? Long BTC

      • LOL @ “actual or real money” when at the end of the day… its a symbol with a value attached. Nothing more… nothing less.

        Money is not, as the classic account in Carl Menger goes, simply the most salable commodity MIG. Seems some still operate on opinions which no longer function due to changes in creation and destruction. Seems we have on foot in reality and another in antiquity, Cog Dis Meta do burn…. eh.

        skippy…. lack of regulation has severely effected BTC it seems, someone has over 50%.

        A Bitcoin mining pool, called GHash and operated by an anonymous entity called CEX.io, just reached 51% of total network mining power today. Bitcoin is no longer decentralized. GHash can control Bitcoin transactions. – See more at: http://hackingdistributed.com/p/2014/06/13/in-ghash-bitcoin-trusts/#sthash.bvoBicOE.dpuf