HuffPost Argues That Regulations Should Be Equally Painful for Everyone

July 3, 2014 - 3:30 PM

"A society that puts equality-in the sense of equality of outcome-ahead of freedom will end up with neither equality nor freedom.... On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality" - Milton Friedman

In a June 23rd Huffington Post piece, liberal pundit Dean Baker clumsily pushes one of the left's favorite crusades: the case against inequality:

"In a country where rules are enforced or not enforced to benefit the rich and screw the middle class, you will have increasing inequality and a middle class that is seeing few of the benefits of economic growth.

If people recognized this fact, then we might see more of a political drive to demand rules that treat people equally. Thankfully we have economists who tell us the problem is just the natural development of technology and globalization, and reporters and columnists who drive home this argument. This allows millions of professional types to spend hours fretting about inequality, while never doing anything to address the rigged rules that are its cause. See, it's all so complicated."

It's not the regulations that are the problem, according to Baker; it's the fact that some innovative entrepreneurs are able to circumvent the anti-competitive regime of regulations to better serve consumers that somehow is offensive to him

Exhibit A? Uber.

Uber is a brilliant new startup transportation venture connecting passengers with private drivers for hire and ridesharing services. It's the ultimate market-driven solution, utilizing modern technology seamlessly connecting drivers with riders all across the country. Through its app or text messages, Uber arranges pickups in dozens of cities around the world. It even allows customers to track their reserved car's location.

Passengers get more choice and convenience. Drivers get more customers.

Who could be against this?

Big Taxi and Lefties like Dave Baker.

Why?

Uber has managed to ingeniously circumvent the regulatory burden with which traditional taxi cab drivers are encumbered.

Baker laments that the wealth-driven capitalists at Uber have been able to get around regulations imposed upon the old taxi cab systems. They're cleaning up on Wall Street, while the working class taxi cab drivers are crushed asunder by the regulations.

In his column, Baker poignantly retells a heart wrenching conversation he had with a cabbie on his way from the airport: The taxi cab driver is forced to pay the outrageous, crushing fees imposed on him by the powers that be for the right to use a medallion, etc. while the folks at Uber circumvent the regulations as the lawless brigands they are:

"The medallion is far from the only cost the city imposes on cab drivers. It requires a special license, which involves four days of classes (i.e. lost work time), plus fees. They also must get a special background check by the F.B.I. and a special badge, both of which involve additional fees. In addition, cab owners must have a special safety inspection for their car and brakes, which means yet more time and fees. And they must carry a $1 million insurance policy to protect passengers, which costs around $750 a month...."

Baker goes on to explain the truly unfortunate predicament the driver is in:

"My cab driver was complaining about all of these expenses because he has to compete against two ride services, Uber and Lyft, that have largely escaped the same set of regulations. These companies and their drivers are not subjected to the same set of rules that are imposed on traditional cab services. This has put my cab driver and others like him at an enormous disadvantage, and made Uber the latest Wall Street wonder with an implicit market capitalization of $17 billion."

If only state and local governments were able to enforce the onerous regulations they put into place, we wouldn't have such agonizing stories Baker argues in this column. Everyone would be in the same boat. No inequality, everyone would be equally as miserable.

To be fair, Baker does leave room for the possibility that some regulations ought to be improved.  He even goes on to suggest that Uber's entry into the market may incentivize this process.

But, he's fundamentally mischaracterizing the problem.

It's just ridiculous to criticize Uber for getting around regulations by offering an efficient service to willing and happy customers. Criticizing Uber for end-running indefensible regulations is like blaming boats for a flood. His complaint should be focused on the regulations that benefit (and enrich) cab companies that have cozy relationship with the regulators; regulations that stifle competition and raise prices, just like airline regulations until market pressure from Southwest Airlines paved the way for deregulation.

The problem is not Uber - it's the world view that we just need to get the regulatory regime right... next time.