Excellent! This Lyft, Uber, Sidecar stuff is actually working

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NYC-taxi-chartWe’re beginning to see real world evidence that this apps revolution, as Uber, Lyft, Sidecar and the others roll out across the country, is actually working. Another industry being successfully disrupted to the benefit of the consumer.

That’s the message to take from that little chart (above) from Mark Perry over at Carpe Diem. OK, so it’s obvious from the valuations of those companies, the way they’re able to get VC money thrown at them, that they’re doing something right. And that’s just fine from one economic view: they’re clearly producing something that consumers value given that consumers will use the services and that’s what this economy game is all about: producing things that consumers value. But there’s also another way to look at it, a slightly more theoretical manner.

Economists simply hate cartels. The reason being that they’re so obviously a (whether legal or illegal) method of stifling competition to the detriment of the consumer, that consumer interest which we’ve already said is the point of our entire economic system. This is why absolutely every economist has hooted with laughter at Jaron Lanier’s musings, this idea that in order to protect those “middle class jobs” then everyone should be in a cartel though things such as licensure. He’s quite simply reading the economy from the wrong end, concerning himself with producer, not consumer, interests.

Given this hatred of cartels there’s therefore celebrating to be done when one gets broken, as appears to be happening to the taxi cartel in many US cities. Yes, of course, it’s lovely that investors are making money, drivers finding employment, customers getting rides, but the tears of joy come from noting how the market riggers are, slowly but surely, getting screwed as they should be. And that chart shows just what I mean. This is a fascinating little fact:

In fact, there are fewer NYC taxi medallions today (13,605) than there were in 1937 (16,900) when the medallion system first created the NYC taxi cartel.

And that chart is showing the effect of that. That artificial scarcity value of that medallion has meant that it has vastly outperformed the S&P over the past decade. And yes, medallions are an investment, there’s even a traded company (NASDAQ:TAXI) that essentially does nothing except buy and finance such medallions. This is a pretty good waste of societal capital. Artificially create a shortage then watch as hundreds of millions of $ flow in to try to profit from that scarcity. We’d have done better by not engineering the scarcity and that moolah being spent on some other investment somewhere. Pretty much any investment in fact.

And then in just this past year we’re seeing something else happening:

The market value of NYC taxi medallions have increased from $ 241,000 in January 2004 to $ 1,050,000 last June, where the value has remained flat for the last ten months through March.

The value of those medallions simply isn’t rising any more. Or not observably so in recent months. And we could, and almost certainly should, put this down to the effect of those various apps and ridesharing services entering into the market. For which Hurrah! etc. For we’re seeing the disruption of a cartel, a cartel that leads to horrible malinvestment, which is what economists like to see. Cartels being disrupted and the economy becoming ever more efficient.

Milton Friedman’s PhD thesis was on the way in which the American Medical Association is one such cartel. It’s wasn’t published for some time as a result of its explosive nature. But, given the way that IBM is currently programming Watson to undertake much of the diagnostic part of a doctor’s job we can hope that one day the AMA will go the way of the taxi commissions. A cartel, a cartel leading to gross malinvestment, going the way of the dodo as a result of disruptive innovation and technology. One day, one day….

[image via AEI Ideas]

PandoDaily

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SideCar: Wait for Us, New York

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social networks, sharing, mobile apps, ride sharing, social networkingBoth Uber and Hailo have been cleared to start operating their e-hail taxi services in New York City, but SideCar is still sidelined.

The city and the service have been on a collision course since SideCar launched in the Big Apple in March, which came to a head this weekend when two drivers were ticketed.

New York sees SideCar as a taxi service that fails to abide by regulations that govern that industry. SideCar insists that it doesn’t actually provide a paid ride service, but rather connects private citizens. (The app has a recommended contribution for riders rather than an outright charge.)

“New York regulators view ride sharing as competition to taxis and want to shut SideCar down,” wrote CEO Sunil Paul in a blog post.

SideCar describes what it says was a “sting operation” on two of its drivers this weekend: Sandra, a resident clothing handler at Lutheran Augustana Center, and Kristy, a full-time history student saving for grad school. Both were ticketed and questioned. One had her vehicle impounded.

“Despite the TLC’s extremely aggressive enforcement action this weekend, we will continue to work for the right to share resources and bring the benefits of rideshare to New York City. What happens in New York City has implications for the entire sharing economy,” Paul wrote.

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SocialTimes

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