Uber and Social Insurance Regulations

There is altogether too much discussion in the world about Uber. The percentage of people in this country who regularly utilize taxis is surely miniscule. So who can really be bothered to care that much about it? Nonetheless, people like to talk about it and so I figure it's worth chiming in here where I think I have something worth adding.

In the New York Times, Justin Wolfers has a piece titled "Uber Improves Life, Economists Agree," which struck me as worth a response. When you dig into it, you find economists saying Uber improves consumers' lives, reasoning that if it didn't, they wouldn't be using it. This seems to sidestep the issues most people usually raise about Uber, which are focused not on consumers' lives, but the lives of workers, both in the Taxi industry and more broadly insofar as Uber is said to forebode an increase in precarious independent contractor labor more generally. At minimum then, Uber can't be said to improve life in some general manner, but only that improves some lives while making others worse.

In the taxonomy of whose lives it improves, it's not as simple as saying consumers win and some workers lose. There is a plausible reason to believe that there is a divide among consumers as well, with some winning and others losing.

For instance, consider the regulatory concerns raised about handicap accessibility. Most of the time regulatory concerns are brought up, commenters I read seem rather dismissive about it, as if it's all concocted. But disability accessibility in particular is a serious issue.

In a lot of cities, the taxis are required to be able to take wheelchair-bound passengers. For instance, in London, 100% of the black taxis apparently must be accessible. Although this is a regulatory regime, it is actually a form of implicit social insurance. If taxis were not required to make their cars handicap accessible, very few probably would. The cost of doing so probably outweighs any additional revenue a cab drive might hope to get out of it. But, reasonably, people don't like the way this turns out. So, the regulation is there to make sure every cab does so, with the costs of that regulation being passed on to the entire population of cab users.

That is a common approach for certain kinds of social insurance. The alternative of taxing the public and then I guess setting up an agency that helps pay to outfit cabs to be accessible is not as efficient as just levying an implicit tax on all cab users to fund the accessibility measures.

For this regulatory social insurance to work, it's necessary that every cab driver actually participate. If cabs come into the market who don't have to undertake those costs (like Uber), they can charge lower fares by only serving the non-handicapped. This then creates an adverse selection problem where the pool of non-disabled people necessary to make the regulatory social insurance work defect to the service that is cheaper because it is cutting out the disabled, and the whole system unravels in a death spiral.

The net result is that disabled people have less options to get around.

You may be able to think of ways to work around this, and maybe you can say it won't work out that way because there will always still be a sufficient number of conventional accessible taxis floating about. But that's up in the air. It's also plausible that the handicap-accessible fleet will get pushed out of business by its handicap-inaccessible competitors and the lives of disabled consumers will get worse. This is a legitimate concern.

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