The Parisian Taxi Licensing Scam

All over the developed world, there exist various business licensing schemes that have allegedly been created to 'protect consumers'. This is of course nothing but a bald-faced statist lie. Licensing exists solely to protect established businesses against competition from upstarts. Business licensing is a scam invented by rent seekers, period.

Numerous vested interest groups have very effective lobbying mechanisms at their disposal. When they obtain rents by deploying the force of the State on their behalf,  the economic harm and losses in welfare are widely distributed among the population at large. As a result, they usually don't have to fear serious opposition. Their victims simply command no comparable lobbying power. 

The belief  that 'democratic elections' can alter this state of affairs in any way, shape or form is of course a complete illusion. The idea that we allegedly have 'freedom' because we can replace one batch of establishment clowns with another every few years is continually promoted by the elites and their media echo chambers, but only the witless can possibly believe it.

 

An interesting demonstration of how consumers are harmed by licensing scams is the recent confrontation between France's taxi associations and the internet-based 'Uber' service, which allows people to hire private cars instead of taxis. The reason why France has become an especially noteworthy flashpoint is that Parisian taxi services are widely known to be notoriously bad due to the artificial supply restrictions imposed by licensing. People have been complaining for years about shoddy service and endless waiting times. On weekends it frequently happens that frustrated customers begin to fight over who may hire taxis that become available.

Enter Uber: for the first time in living memory, one can order a car plus chauffeur in Paris and actually be reasonably certain that the car will arrive at the designated time, usually within a few minutes. Not surprisingly, the service has become wildly popular. It provides people who own a car and have time on their hands with an additional source of income and provides customers with reliable transportation. What could be better? Naturally, the owners of taxi licenses are miffed at the competition and have petitioned the State to intervene. More recently, they are even resorting to violence:

 

The rivalry between Paris cabbies and Uber turned violent today, as striking taxi drivers began attacking cars booked through Uber and another private-hire service.

“Smashed windows, tires, vandalized vehicle, and bleeding hands,” passenger Kat Borlongan said on her Twitter feed, describing what happened after an Uber car picked her up at Charles de Gaulle Airport (aka Roissy Airport). “Attackers tried to get in the car, but our brave Uber driver maneuvered us to safety, changed the tire on the freeway, and got us home,” she said.

Two other cars, booked through the local Chauffeur Privé service, were targeted in similar attacks near Orly Airport and the Montparnasse train station. “Eggs and stones were thrown, and there were violent blows that broke the cars’ windows and rear-view mirrors,” Chauffeur Privé said in a statement.

The violence erupted during a strike by cabdrivers who are protesting increased competition from private car services. “We strongly condemn this severe violence,” Uber’s local spokesperson said in a statement. “Today’s incident will certainly not tempt Parisians into choosing a taxi for their next ride.”

News of the attacks spread swiftly through Twitter posts posted by Borlongan, a founder of U.K. open-data firm Five by Five, and fellow passenger Renaud Visage, chief technology officer of online-ticketing company Eventbrite in San Francisco. “No more taxis for me, just Uber,” Visage said, adding that he was “shaken up” but unharmed.”

 

(emphasis added)

It seems this altercation may actually backfire for taxi drivers.

 

Promoting the Official Lie Becomes More Difficult

What makes this outbreak of violence all the more astonishing is that the State is already considering to give in to the demands of taxi associations and to order a curtailing of competition by artificially making Uber's service worse for consumers

 

“Anyone who has waited—and waited—at a Paris taxi stand on a Saturday night or a rainy weekday will understand why Parisians are big fans of Uber, the smartphone app that lets you order a car at the touch of a button.

San Francisco-based Uber Technologies, which launched the app in France 18 months ago, says Paris has become its biggest market outside the U.S. The Paris service, pronounced by the locals as “OO-behr,” books tens of thousands of rides per month and continues to grow, says Pierre-Dimitri Gore-Coty, who heads Uber’s French operation. “There’s a big benefit to consumers,” he says.

Now, though, the French government could bring Uber’s growth to a screeching halt. Responding to pressure from regular taxi drivers, Prime Minister Jean-Marc Ayrault is considering new rules that would require any car booked via Uber or similar services to wait a minimum of 15 minutes after receiving the order before picking up the passenger.”

The extra wait would undercut a key advantage of Uber, which says it can usually get a chauffeur-driven car to any address in central Paris within a few minutes. “It would be very problematic for us,” says Gore-Coty, who says the company is “in discussions” with the prime minister’s office about the issue.

 

(emphasis added)

At least Mr. Ayrault will no longer be able to promote the lie that this is done to 'protect consumers' – there is simply no way to hide the fact that vested interests and established businesses are to be protected from competition to the detriment of everybody else. So what does his argument consist of? If it weren't so infuriating, it would actually be kind of funny:

 

“In a letter posted on the Facebook  page of a local taxi drivers’ association, Prime Minister Ayrault said he was considering the proposed 15-minute wait to “clarify the distinction” between taxi service and the chauffeur-driven cars provided by Uber and others.”

 

(emphasis added)

He wants to 'clarify the distinction' between Uber and taxis? This has to be the lamest excuse for bestowing privileges on vested interests ever. As far as we can tell, consumers were already well aware of the 'distinction' between Uber and Parisian taxis: the latter provide endless waiting times and crappy service, the former gets you a car within minutes! What Ayrault is proposing is not to clarify, but to remove the distinction. He simply wants to make Uber's service exactly as crappy as the existing taxi services.

 

It Is High Time to End Licensing

The article at Business Week goes on to point out that:

 

Like New York and some other big cities, Paris strictly limits the number of licensed taxis. That means cabs are hard to find at peak times—but because cab owners pay steep licensing fees, they fight hard to keep potential competitors from getting into the business.

[….]

Paris isn’t the only place where regulators have tried to put the brakes on Uber and similar services. Miami and Las Vegas have imposed high minimum fares for chauffeur-driven cars, while Colorado has proposed rules that would bar them from picking up and discharging passengers within 200 feet of hotels, restaurants, and bars.

Still, Uber continues to expand. The company’s website says it now operates in 39 cities in the U.S., Canada, Europe, Asia, and Australia. And regulatory battles are nothing new for its founder, Travis Kalanick. He told Bloomberg Businessweek’s Brad Stone last year that he first realized the company’s business model was working in 2010, “when we got a cease-and-desist letter in San Francisco three months after we launched.”

 

(emphasis added)

In short, taxi licensing is a lucrative scam operated in many big cities. All of them are trying to keep it alive, as the beneficiaries naturally want to keep the rents associated with it flowing into their pockets. However, as the Parisian example  shows so clearly, there is absolutely no argument that can be used to defend this arrangement. In what way does it help consumers when private car services e.g. 'may not pick them up or discharge them within 200 feet of hotels, restaurants, and bars' ? It is glaringly obvious in this case what and who is to be protected.

We wish Uber all the success it so richly deserves. Perhaps for once, vested interests and rent seekers will actually lose a battle.

 


 

 

 

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9 Responses to “Protecting Rent Seekers by Curtailing Competition”

  • No6:

    I am in no doubt that Government is a criminal organisation made legal by itself.
    The question is, how does one get rid of it and keep it gone?

  • mc:

    “However, I have also lived in the opposite situation (a free-for-all, “taxis” without any licensing or registration, charging exorbitant fees, taking you through intentionally prolonged routes, etc, etc.) and, trust me, it isn’t any better.”

    Then you would *LOVE* Uber, because it has a rating system for both the driver and the passenger, and uses GPS to track the cars. A rude driver in an unclean car that is unreliable gets drummed out of the system almost instantly, compared to the Taxi situation where it is always you praying for an empty taxi, taking a gamble on the stranger driving you, and then having no expectation of the car will even have AC in Florida on Labor Day, the heater in Wisconsin in January, or a puddle of baby vomit occupying the rear seat.
    The app knows where you were picked up and dropped off, and there is no opportunity for fare gouging, or even being robbed for your cash (or the driver) as you pay Uber directly a fare agreed up front that includes both waiting time and/or distance.

    The app even gives you the GPS location of the car on the way to pick you up, allowing you to know to the very second when the driver will arrive. With the information advantage of the internet, branding of quality transport that is reliable is the long term result that would arise with deregulation.
    Remember, it is the “free for all” which provides the incentive for a company to offer an efficient service, and it is the regulation of rent-seeking that prevents the better solution from ever materializing.

    • Vess:

      OK, I went to Uber’s site and read the specs. Indeed, it sounds like a very good idea. It seems useful only if every potential customer has a smart phone but that’s besides the point and is probably the case in most civilized parts of the world anyway.

      However, to me Uber looks just like a normal taxi operator that hires part-time non-professional drivers and their cars. Why is licensing a problem and why this idiocy with forcing them to wait 15 min? Can’t Uber, the company, get a license for operating a taxi service – and be correspondingly liable for all the potential misdeeds of the drivers they hire? As long as there is enforced and regulated transparency and accountability (as opposed to a free-for-all-crooks situation), I have no problem with it.

  • Vess:

    There is something in the libertarian ideology that keeps bothering me… The libertarians seem to live in some kind of Utopia where everybody always acts honestly and rationally in their best financial interest. Unfortunately, the reality is rather different. People are mostly nasty, greedy, dishonest bastards who would be happy to screw each other any way they could – even when it is not in their best financial interest…

    Let me say up-front, that I fully agree that the French taxi situation and the proposed competition-hampering “solution” are utter idiocies (ueber-idiocies?). However, I have also lived in the opposite situation (a free-for-all, “taxis” without any licensing or registration, charging exorbitant fees, taking you through intentionally prolonged routes, etc, etc.) and, trust me, it isn’t any better.

    So, my question is – how do you find the right balance?

    I’m sure you would agree that the FDA is a huge obstacle to the development and quick introduction of new drugs. But what if it didn’t exist? We’d be back to the times of snake oil salesmen and drugs of dubious quality that often caused more harm than good. So, what to do? You can’t wait for the free market and word of mouth to decide which drugs are most successful (because more people buy them) – by the time it happens and the harmful nature of a new drug is discovered (and people stop buying it), countless would die or otherwise come to harm.

    Where is the balance?

    A totally free market (even with strong enforcement of the property laws) is likely to result in much harm because the crooks always move faster than the honest market participants. But give the government regulatory power and it keeps expanding itself until it becomes and obstacle. I don’t see a solution. Do you?

    • Rick T:

      Vess: I’m curious where you lived where there was a “free-for-all, taxis without any licensing or registration, charging exorbitant fees…” It seems unusual that there would be many competitors but exorbitant fees. I’ve never seen that. I have been to a few places over the years where there was no regulation, such as some of the smaller Caribbean islands, where anyone with a car could be in the taxi business if they wanted to be, and the prices and service were quite good. Picking up people at the airport and taking them to their hotel was, if anything, a loss leader, so they could demonstrate their friendly personality and island knowledge, in the hopes that you would hire them for more lucrative tours of the island during your vacation.

      Keep in mind that when the government takes on the task of regulating and licensing something, that prevents the coming into existence of private rating agencies, such as Consumer Reports, that would otherwise exist. Websites that rate products, restaurants, hotels, and other services in which, even if subject to licensing, are in very ample supply, are making it easier for consumers to get what they want in the marketplace without the need of any regulatory oversight.

      For example, Uber users get to rate their drivers, a strong incentive for the latter to offer good performance, while the regulated taxis in my area, Boston, are by and large a disgrace in terms of filthy vehicles in disrepair and drivers unfamiliar with local geography. Some taxi rides work out fine, but there is no rating system.

      If by some miracle US citizens voted in a libertarian administration and gave libertarians a huge majority in both houses of Congress, that wouldn’t necessarily lead to the end of the FDA. Libertarianism does not favor theft of any kind, whether by force or fraud, and a specialized agency like the FDA to make sure that drug makers were not making false claims would be something I think many libertarians could support.

      • Vess:

        I’ve lived in many places. :) The particular place I was referring to was Bulgaria in the early 90s. (The situation is no longer like that there; the taxis are regulated and the taxi service has improved much since then.)

        When you are thinking “competition is good for low prices”, you are thinking honest, rational individuals and honest free-market competition. It doesn’t work like that. Once you are in an unregulated taxi, there is no competition. There is only the taxi driver and the price is whatever the driver tells you it is. There is no sealed taxi meter approved by some official agency. There are no enforceable rules that the driver has to take the shortest (or fastest) route or to ask you which route to take. You are basically at the mercy of the driver. No competition. The driver does not care if you dislike the experience, because you are unlikely to get him again anyway.

        Your experience with the Caribbean taxis literally made me chuckle. “Demonstrate their friendly personality and local knowledge”? Har-har. The only things the taxi drivers I was talking about were interested in was how to get more money from the hapless customer. In fact, we quickly learned to avoid the “taxis” waiting near airports and railway stations, because they were the most dishonest ones, relying that most of their customers would come from far away and would have no clue what the fair price should be.

        Again, please understand me well. I am not a fan of government regulation. In fact, I hate it. I am just pointing out that a free-for-all market doesn’t work, either, because most people aren’t honest, rational and well-meaning. Or at least enough of them aren’t to make the life miserable for the rest. There must be some kind of balance between the two – but I don’t see how to strike that balance in a reliable way. It always tends to get out of control towards one of the two extremes – and they are both bad, albeit in different ways.

    • bubbly:

      “There is something in the libertarian ideology that keeps bothering me… The libertarians seem to live in some kind of Utopia where everybody always acts honestly and rationally in their best financial interest.”
      Where did you get that? This is definitely incorrect.

  • The ultimate state supported game would be for everyone to screw everyone equally, meaning we would all get paid for never getting out of bed. But, that would destroy the political class, who does get paid for never getting out of bed. The real solution to this problem would be for the uber drivers to be allowed to shoot dead anyone who attacks their car and as far as that goes, the taxi drivers as well, as they have property and passengers to protect. Or put those attacking the cars in jail. Might throw a few organized criminals we call government in jail with them.

    There is a lot of save us in the game. I was in the mortgage business here in Texas back in the 1990’s. There were a couple of things going on, one being that people be allowed to extract equity out of their homes, the other that mortgage brokers be licensed. Both passed, though the equity extraction was limited, thus we didn’t have a total housing collapse here, despite the bubble in new homes.

    The purpose of the mortgage license? To restrict competition. Conduits were open to the major mortgage outfits to everyone who they would approve. Quality control was through the underwriting of the mortgages. Which way did quality control go from there? Did it get better or worse? Result was the state received license fees, the participants had to go to total nonsense schooling and nothing happened on the other end other than less competition.

    The other one was one people demanded, the Do Not Call list. Ever wonder why the big banks will offer you money to open an account with their bank? Because the one outfit that can call you for insurance, real estate, etc. is your bank. They took about everything under the sun and wiped out the little guy and put your bank in the drivers seat. One bank has sent me an offer for $200 to open an account. How do they make that back if they don’t open channels to sell me other stuff?

  • Kreditanstalt:

    What’s new? The entire history of the modern-day nation-state has consisted of a never-ending parade of groups and individuals – from overpaid workers to protected banks to the entitled elderly and a hundred thousand others – engaged in an ongoing and often hubristic wrestling for control of the government gun, the better to extract wealth, protection against competition, monopoly privileges and power.

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