October 26, 2015

Lyft, Uber, and the sharing economy creates new opportunities for entrepreneurs

By Lyft, Uber, and the sharing economy creates new opportunities for entrepreneurs

Los Angeles Mayor Eric Garcetti promised in his State of the City address this past April that Uber, Lyft, and other ridesharing companies would be allowed to pick up passengers at LAX by the summer. This promise drew thunderous applause from the audience. It’s now October…and passengers still cannot use these services.

Unsurprisingly, the regulatory and bureaucratic state are to blame for this delay. While passengers struggle to find ways out of LAX and into the sprawling greater Los Angeles area, there is one group that often gets left out of the discussion: the drivers.

Uber and Lyft are part of the emerging “sharing economy.” The advent of new technology, such as the smart phone, has allowed ordinary people to become entrepreneurs. The ability to give car rides, rent out the extra guest bedroom, or cook a meal for someone has helped people build friendships and make ends meet. Indeed, the sharing economy introduces the ideas and benefits of economic liberty, freedom, and free markets to the average individual.

Unfortunately, many cities, states, and the federal government operate under the assumption that you’re not allowed to act unless you get permission first. The regulatory state has gotten so horrendous that nearly one-third of jobs in America require government approval. Regulations have become so stifling that even the White House has called many of these restrictions into question!

Those who favor government regulation claim that it is necessary to protect consumers. Even if consumers need protection, many regulations serve no purpose other than economic protectionism, which drives competitors out of business. When ridesharing was initially introduced in Houston, for example, the city regulated Uber and Lyft so tightly that it was impractical to operate. Uber and Lyft eventually gave up and ceased operations in Houston. These regulations did not protect Houston consumers; they only protected Houston’s special interests. If Houston really cared about consumers, it would have allowed Uber and Lyft to operate under safe conditions.

There are potential legitimate reasons to regulate various activities. For example, the regulation that Los Angeles is working on would require Uber and Lyft drivers to wait in a designated area for rides and limit the total number of drivers in the area. Even though this rule isn’t ideal for drivers, the government can at least present a legitimate interest in controlling the flow of airport traffic, and argue that this regulation is targeted towards achieving that purpose. However, it is unclear why Los Angeles’ proposed regulations require drivers to pick up passengers from the departure level. Without an explanation, this seems like an irrational regulation meant to inconvenience passengers and discourage them from using ridesharing services.

Drivers should enjoy a presumption that they may work. Los Angeles (and other cities that have yet to ensure that ridesharers are allowed to operate) should work swiftly to ensure that ridesharing drivers may operate at all public access points in airports. Regulations should be thought out and minimize interference with aspiring entrepreneurs. As ridesharing has become normalized, the price of taxi medallions, which are basically permits to operate a taxi, have plummeted. Now entrepreneurs have more options: they may work for Lyft, Uber, or enter the taxi business. Indeed, the ridesharing economy has put the American Dream at the fingertips of millions of Americans.

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