I\u2019ve spent my whole life in dense cities where hailing a cab is not a huge practical problem. Yes, in DC, you would often have to walk a few blocks toward a major commercial corridor to do it. But that never felt like a huge deal. The app-and-GPS aspect of Uber, in other words, struck me as at best a minor convenience. The real win was that the service functioned as an end-around play to evade regulatory restrictions on taxi supply. <\/p>\n
These days, of course, the notion that you might need to walk several blocks and stand in the rain, hoping a cab will cruise by, seems perverse. <\/p>\n
The app-based hailing model that Uber and Lyft and Bolt use makes it feasible to operate in places that aren\u2019t like New York, DC, or Boston. You can visit an auto-oriented city like Nashville or Austin, stay in a hotel downtown, mostly walk places, and then grab a ride to make a few visits to more peripheral locations, saving yourself the trouble of renting a car. Or you can go out drinking in Los Angeles and get a convenient ride home without a designated driver. When traveling abroad, it used to be hard to communicate with cab drivers across language barriers \u2014 today, there\u2019s an app for that. <\/p>\n
App-based ride hailing is not a solution to systemic problems with American land use and transportation policy, but it has had a genuinely large and overwhelmingly positive impact on American life in ways that absolutely do relate to the underlying technology. Yet it\u2019s also true that the regulatory arbitrage aspect of this is a big deal. It used to be the case that taxi markets were cozy cartels with high margins and extremely limited supply. Outside of a handful of dense cities, the whole model was built around bilking visitors traveling to and from the airport. <\/p>\n
What\u2019s sobering, though, is the fact that to some people, this successful act of regulatory arbitrage doesn\u2019t show that the old taxi cartels were bad \u2014 it shows that Uber is bad. <\/p>\n
Hilary Allen, an American University law professor, wrote an article for the Law and Political Economy blog<\/a> recently about why venture capitalists are bad, and she held up Uber specifically as an illustration: <\/p>\n For many readers of this blog, Uber represents a cautionary tale. While the company attributed its initial success to cutting-edge technology\u2014such as dynamic pricing, matching algorithms, real-time data\u2014subsequent analysis has demonstrated that its growth was largely driven by ignoring<\/a>, breaking<\/a>, and then bending<\/a> taxi regulations to suit its business model.<\/p>\n What I want to talk about here is not Allen\u2019s forward-looking argument, which focuses largely on fintech issues. But the breezy way in which she asserts that Uber is a \u201ccautionary tale\u201d and assumes her audience will agree without argumentation. She thinks the fact that Uber busted up the old regulatory system and got a whole new category of companies legalized is a dangerous precedent. I think it\u2019s good! <\/p>\n Because even though the law and political economy movement is not exactly a household name, this group exerts massive intellectual influence. Lina Khan and other members of the \u201cYale Law School school of economics\u201d with ties to the movement played major roles in the Biden administration. LPE-inflected ideas are shaping much of the thinking in the anti-neoliberalism\/anti-abundance space. And \u201cIs Uber bad or were taxi cartels bad?\u201d is a pretty good heuristic for thinking about where you stand on these larger debates. <\/p>\n The term \u201cpolitical economy\u201d has kind of a funny history. <\/p>\n Figures like Adam Smith, David Ricardo, and Thomas Malthus, who we retroactively label as classical economists, did not use the word \u201ceconomics.\u201d They instead talked about \u201cpolitical economy,\u201d a term they picked up from some French guys who were following in the footsteps of Antoine de Montchretien<\/a>. <\/p>\n For a long time, \u201cpolitical economy\u201d did not denote a specific viewpoint. Smith wrote political economy, and so did Karl Marx. It was simply what you wrote about when you wrote about economic policy. <\/p>\n Eventually, though, the economics profession developed. And while economists obviously disagree about a lot of things, mainstream economists have converged on a somewhat limited range of disagreements. If you ask Tyler Cowen and Paul Krugman about economic policy, they will probably not find a lot of consensus. But they will analyze questions using similar tool kits. Neither of them will endorse rent control<\/a> or Trump\u2019s tariffs<\/a>. They don\u2019t believe that \u201cgreedflation\u201d<\/a> is a useful analytic framework. <\/p>\n Economics is not a right-wing discipline per se; most economists are Democrats. But economics departments are less left-wing than other academic departments, and the discipline has a tendency to cut against far-left economic policy views. <\/p>\n The study of economics emphasizes the fact that life is not zero-sum, but it does feature tradeoffs. Economists do not believe that successful entrepreneurs always become rich simply by exploiting lower-paid workers. But they understand that there are tradeoffs inherent to tax and regulatory policy, which means efforts to help one group of people likely have meaningful downsides for others. People on the left generally believe that zero-sum conflict between the rich and everyone else is very important, but outside the sphere of class conflict, they don\u2019t worry that much about tradeoffs. <\/p>\n People who want to talk about the subject matter of economic policy but who don\u2019t have economics PhDs and\/or don\u2019t like the basic analytic frameworks used by economists started to use the phrase \u201cpolitical economy\u201d to describe their anti-economics analytic approaches.<\/p>\n Beginning in the 1960s, but really gaining steam in the 1970s and 1980s, there was a big push under the heading \u201claw and economics\u201d<\/a> to get judges and courts and regulators and legal analysts to incorporate economics into their analysis. One of the pioneering works of YIMBY scholarship is David Schleicher\u2019s \u201cThe City as a Law and Economics Subject,\u201d<\/a> calling on scholars of land use law to think more seriously about research findings in agglomeration economics. <\/p>\n The \u201claw and political economy\u201d project, by contrast, is a push by left-wing legal scholars to do the reverse of \u2014 they argue that regulators should stop caring about economic analysis. <\/p>\n This school of thought got a major political boost from the growing prominence of the software industry. A lot of normal citizens, journalists, and elected officials all correctly perceived that the rise of smartphones and social media poses questions for regulatory policy that are beyond the scope of economic efficiency considerations. But that doesn\u2019t mean we should abandon economic analysis entirely.<\/p>\n And I think this Uber example is important precisely for that reason. When we\u2019re talking about LPE and critics of \u201cneoliberalism\u201d and \u201cbig tech,\u201d we\u2019re not talking about people who are worried that Instagram is making teenagers depressed. We\u2019re talking about people who think it\u2019s bad that apps broke the power of taxi cartels. <\/p>\n The taxi industry as a whole is not that large or important in the grand scheme of things. But the dynamics around ride-hailing really do, I think, illustrate the core differences between economic analysis and the LPE worldview in which Uber serves as a cautionary tale.<\/p>\n Historically, the taxi market did not feature any large companies or other exemplars of corporate power. And while there may well have been a billionaire somewhere in America who owned a taxi company, I\u2019m pretty sure that nobody became billionaire-rich in the taxi game. What we had instead was a highly fragmented landscape of localized businesses. If your view is that antitrust policy\u2019s goal should be to stop companies from being big<\/a>, the taxi situation was great. But if you believe the goal should be to promote competitive markets with high output and good prices<\/a>, then it was terrible, because the taxi industry had massive regulatory barriers to entry. Regulatory barriers raise prices, but they also generate substantial deadweight loss<\/a>. In the case of the taxi market, economic resources are redistributed away from taxi riders and to the owners of taxi companies or taxi medallions, but that redistributive bucket is leaky<\/a>. <\/p>\n Exactly as Allen and other critics charge, Uber essentially tore down these barriers to entry by relying on VC financing to operate in legal gray areas and, eventually, to win regulatory and political fights that couldn\u2019t be won without those deep pockets. <\/p>\n Uber also generates tons of fine-grained data about prices paid and wages earned. This data allows you to estimate the consumer surplus unlocked<\/a> by Uber and to see that drivers really value the ability to set their own hours<\/a>. Ubers also have a higher capacity utilization than pre-Uber taxis<\/a> \u2014 i.e., someone is actually riding in the car a larger share of the time \u2014 so it\u2019s not just that the number of available cabs increased, they\u2019re being used more efficiently. Making cabs more available reduced drunk driving deaths<\/a>, which is good, though it does also have downsides like more traffic congestion<\/a>. There was early optimism that ride-hailing might put a big dent in the well-known phenomenon of racial discrimination in cab pickups. This was true in some cases, but there is an ongoing problem of discrimination against people with stereotypically Black names<\/a>. It turns out, though, that a small tweak to the driver-side user interface can fix this<\/a>. <\/p>\n All things considered, this is a great track record! The rise of ride-hailing apps did not usher in a utopian era, but on average, things got better for most people. The increased traffic congestion is a serious downside, but note that this is a downside that occurs precisely because the product is making people\u2019s lives better. As transportation technology continues to improve, with self-driving cars, for example, managing congestion through pricing will only become more urgent. But again, this happens because things are getting better. If you made everyone\u2019s car worse, people would drive less and traffic might ameliorate, but that would still be bad, all things considered. <\/p>\n Note that while nothing about \u201cthe invention of ride-hailing apps made life better\u201d is antithetical to solid progressive ideas like progressive taxation and a social safety net, it is antithetical to core elements of the anti-neoliberalism push. <\/p>\n The bad guys in this instance were not the richest people in America or huge corporations wielding concentrated power \u2014 they were a disaggregated network of largely anonymous small business owners. We have more competition now, but also a marketplace that\u2019s dominated by a much smaller number of large global companies. And that\u2019s good! <\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/08\/https:\/\/substack-post-media.s3.amazonaws.com\/public\/images\/fd12a44f-45c2-4701-a82a-ecc1076a71d9_1082.jpeg\")
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