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Ridefair shows nothing is new under the rent-seeking sun

The sharing economy enables consumers and entrepreneurs to creatively and collaboratively use or lend resources they otherwise wouldn’t

In 1845, French economist Frederic Bastiat wrote “The Candlestick Makers’ Petition” and submitted it to the French Parliament. It called passionately on legislators to defend France’s lighting industry from “the unfair competition of a foreign rival” enjoying unfair cost advantages — the sun. Among the remedies the candlemakers proposed: the closing of “all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses.”

Bastiat’s clever letter, exposing the faults in protectionist arguments, is relevant again in modern Toronto. But instead of candlemakers versus the sun, it’s taxi companies and the Toronto Transit Commission’s labour union versus ride-sharing services like Uber and Lyft.

Through their “Ridefair” campaign, the transit union and the taxi companies have teamed up to lobby the city of Toronto to further regulate ride-sharing to ensure the industry “operates in ways that protect our transit system.” Their claim is that ride-sharing has become so popular the TTC has suffered upwards of $74 million in lost fare revenue, which is more than what it loses to “fare evasion,” i.e. people treating their fare as optional.

This call for regulation would likely mean additional taxes on ride-sharing services that would be handed over to the TTC to help fund its revenue gap. In effect, this anti-choice coalition is complaining that ride-sharing is eating into its revenue and claiming that the only solution is to further regulate, i.e., restrict, ride-sharing. But this completely ignores why consumers choose ride-sharing over public transit in the first place. In a competitive market, increased competition usually causes other firms to re-evaluate their practices and focus their efforts on how to bring back customers.

Apart from more taxes, the other remedy they seek is to restrict ride-sharing by capping the number of drivers the apps can engage in the city. But this too is a terrible idea. When New York proposed a driver cap, consumer groups like the Consumer Choice Center and civil rights groups like the N.A.A.C.P and New York Urban League rightly pointed out that such restrictions disproportionately impact minority communities. Ride-sharing’s colourblind and route-blind call systems ensure that riders are not arbitrarily discriminated against, something that is all too common in the taxi industry, sometimes with deadly consequences.

By advocating for higher taxes and more restrictions on ride-sharing instead of making transit more consumer-friendly, Ridefair is practicing rent-seeking — the act of trying to increase one’s share of wealth without actually creating any new wealth. In layman’s terms, Ridefair is calling on the government to regulate in the TTC and the taxi industry’s favour because competition is eating into their share.

Originally published here.

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