Ride-sharing solves a coordination problem by matching drivers and passengers at the moment of demand through an online platform. It does so more efficiently than traditional taxi services by closely aligning the incentives of the ride-sharing company and the consumer.
This is the market at its best — entrepreneurs meeting consumer needs in new ways.
According to the Texas A&M Transportation Institute, 43 states have passed ride-sharing regulations, and of those, 35 require background checks for ride-sharing drivers. Notably, none of those states require fingerprint-based background checks for ride-sharing drivers.
But don’t tell that to cities in Texas. Over the last few years, Texas cities like Houston have passed heavy regulations on the ride-sharing industry in the name of public safety. Often, these regulations mirror those foisted on the taxi industry — fingerprint background checks against an FBI database to screen drivers, or vehicle inspection mandates for cars.
For decades, the transportation service sector stagnated under taxicab and limousine regulations. Expensive barriers to entry prevented competition; there was no incentive to improve quality of service. Ride-sharing’s innovative business model enabled it to avoid many of these regulations, compete on quality, and thrive.
These regulations are wrong-headed, and substantially raise the cost of providing the service while providing little to no public benefit. For example, fingerprint background checks are often incomplete and inaccurate. This is why in 2013 the National Employment Law Project determined that “FBI records are routinely flawed.”
Similarly, vehicle inspections have not been shown to measurably improve road safety. This is why states have moved away from requiring periodic vehicle inspections for passenger vehicles. In 1975, 31 states and the District of Columbia required regular inspections — now only 17 do. Further, Texas is one of the 17 states that continues to mandate regular vehicle inspections. Why do we need additional inspections for ride-sharing vehicles?
Any analysis of public safety must acknowledge that burdensome ride-sharing regulations can harm public safety. For instance, a June 2016 study from Providence College indicates that when Uber enters a city, DUI rates decrease by 15 percent to 62 percent. In contrast, a KEYE news report showed that in the weeks after Uber and Lyft stopped providing services to Austin in May 2016, DUI arrest rates spiked by 7.5 percent.
Ride-sharing reform is part of a broader conversation about regulation and innovation in this country. In the name of public safety, bureaucrats are using regulatory tools to require proof that new technologies and business models will not harm society. Call this “the precautionary principle,” where would-be entrepreneurs have to kiss the ring of public officials before deploying new devices and services.
In contrast, there is the historic American model of leaving the people relatively free to experiment with new technologies and business models to meet each other’s needs. Call this “permissionless innovation,” where we largely allow market forces determine which products and services succeed.
In Texas, it’s time to move toward permissionless innovation in ride-sharing. Four ride-sharing bills — House Bill 100 and Senate Bills 113, 176, and 361 — have been filed in the Texas Legislature, all of which would eliminate city overregulation and replace it with a statewide structure of low and uniform rules.
All of these bills respond to public safety concerns by requiring drivers and vehicles to meet certain safety standards, while allowing for companies to meet those standards in less burdensome ways. This is the political sweet spot.
At the end of the day, ride-sharing reform is not about protecting Uber or Lyft or any specific business model. Ride-sharing reform is about preserving an environment of liberty, where entrepreneurs have the freedom to innovate and meet consumer needs in new and unexpected ways.
Public safety regulations should be based on evidence, not fear-mongering rhetoric. It’s time to send a message to cities that stifle innovation and strangle economic opportunity: don’t drive out ride-sharing.