Conservative jurist
Richard Posner,
writing for the US 7
th Circuit of Appeals, has issued what
is likely to be an influential ruling on the regulation of
soft cabs
(such as Uber, Lyft, etc.; in his ruling Posner refers to these as
“TNPs”) and other taxicabs in the city of Chicago. This is
unfortunate, because Posner’s ruling is riddled with errors,
inaccuracies, and false logic—in fact he all but admits
cribbing part of his argument off the internet! Here I’m going to go
through Posner’s most ridiculous statements point by point; you can
read his full text
here.
The first is
that allowing the TNPs into the taxi and livery
markets has
taken away the plaintiffs’ property for a public use
without
compensating them. A variant of such a claim would
have
merit had the City confiscated taxi medallions, which are the
licenses that authorize the use of an automobile as a taxi.
Confiscation of the medallions would amount to confiscation
of the
taxis: ... Anyway the City is not confiscating any taxi
medallions; it is merely exposing the taxicab companies to
new competition—competition from Uber and the other
TNPs.
Does Posner understand anything about
how the taxi industry works? Of course medallion owners can’t
complain about competition, because they are already in
competition with each other.
Even drivers for the same company are in competition with each other.
It’s like Posner is borrowing an image of a monopoly from a
completely different industry and trying to impose it on the cab
industry. Do your homework, sir.
The
real complaint from the taxi industry was not “we are being
competed against” but “we are being charged licensing fees, etc.,
but other people operating the same business are not being charged
the same fees.” In other words, the argument is not against
competition but against unequal
competition as an effect of unequal regulation.
An apt
comparison would be if someone paid a license fee to run a liquor
store, then complained because the city allowed someone to sell
liquor next door without a license. Or, if the electric company was
only allowed to charge certain rates, but then another electric
company was allowed to operate in the same city, charging whatever
they wanted. Would Posner really argue that such companies had no
legal recourse against the regulator for allowing such unequal
competition?
Posner
then rambles off into another argument borrowed from the
internet—that the difference between Uber and taxis is the simple
fact of historical technological change:
Indeed when new
technologies, or
new business methods, appear, a common
result is the decline
or even disappearance of the old. Were
the old deemed to have a
constitutional right to preclude the
entry of the new into the
markets of the old, economic progress might grind to a halt.
Instead of taxis we might have
horse and buggies; instead
of the telephone, the telegraph;
instead of computers, slide
rules.
What
makes these examples particularly funny, to me, is that I actually research the history of two of these transitions—from
the telegraph to telephone, and from horse-drawn cabs to taxis. I’m
sorry Mr. Posner, but those transitions had almost nothing in common
with this current case. For one thing,
those were actual, significant technological shifts, but
there is no
actual difference in technology between an Uber and a taxi.
Both
are just automobiles, and both can be hailed from a smartphone. I
realize that Posner, like many people, may not be aware that smartphone
apps for taxis have been around longer than Uber (in Chicago, Curb
(formerly Taxi Magic) has been available since 2009). But you would
think that a legal scholar making an important ruling on a case like
this would bother to do some actual research on the history of this
technology, instead of taking Uber’s crypto-history at face value.
The plaintiffs argue that the
City has discriminated
against them by failing to subject
Uber and the other TNPs
to the same rules about licensing
and fares (remember that
taxi fares are set by the City) that the
taxi ordinance subjects the plaintiffs to. That is an
anticompetitive argument. Its
premise is that every new
entrant into a market should be
forced to comply with every
regulation applicable to incumbents in the market with whom the
new entrant will be competing.
Here
Posner briefly comes back to reality before taking another swerve off
into his own imaginary land. At least he states the taxi industry’s
complaints correctly: yes, they are upset that someone competing
against them, offering the same service they do, is not subjected to
the same rules and regulations. In other words, they are asking for a
level playing field. How is this remotely an “anticompetitive
argument?”
Then
Posner launches into his already infamous “taxi drivers are like
dogs” argument. Let’s just quote this, slightly amended for
clarity to show what he is strongly
implying:
[Taxi drivers] on average are
bigger, stronger, and more aggressive than [Uber drivers], are feared
by more people, can give people serious bites, and make a lot of
noise outdoors, barking
and howling. Feral [Uber drivers]
generally are innocuous, and many
pet [Uber drivers] are
confined indoors.
Thank
you, Mr. Posner, for so clearly and cluelessly articulating part of
the deeply racist and classist imagery at the heart of Uber’s
popularity. This ugly little quote is too packed with significance to
be fully dealt with here. Suffice it to say for now that the contrast
Posner is articulating is known, in US history, as “the house slave
and the field slave.”
Let’s
move on to Posner’s next insanity, where he takes issue with the
lower court judge who had granted some merit to one of the
cabdrivers’ claims:
She ruled that the City, by failing
to place as
many regulatory burdens on the TNPs as on the
taxicab
companies, might have denied the latter the equal protection
of the law. But this was taking equal protection literally, and
it
should not be taken so. Otherwise prospective entrants to
a market
who had lower costs than incumbent firms would
not be allowed to
enter the market unless some regulatory
entity burdened the new
entrants with regulations, whether
or not necessary or even
appropriate, that eliminated any
cost advantage the new
entrants would otherwise have in
competing with the incumbent
firms.
“Equal
protection of the law” should not be taken literally?
Wow, Mr. Posner. Just, wow. I suppose we ought to leave that one wide
open to interpretation, huh? Otherwise we all might have to be
treated... equally...
well, we can’t have that!
The
next sentence is where his argument gets really ridiculous. According
to Posner, if we had to offer all competitors equal protection (or,
an equal playing field, basically), we would have to handicap any new
entrants who had a special advantage. Like saying: runner A is faster
than runner B, so if they compete, runner A has to carry weights to
make them run the same speed.
Well,
this is a fascinating diversion into philosophical speculation, but
it has nothing whatsoever to do with the real-life case that Posner
is supposedly writing about. The taxi operators are not asking for
additional burdens,
above and beyond what taxis bear, to be placed on Uber and Lyft to
make them competitive; they are just asking for equal
regulations.
Equal treatment. Literally.
Mind
you, there is a very important truth buried here, which Posner has
completely failed to recognize. Uber and Lyft really aren’t in a
truly competitive market situation against taxis, because while taxis
have to compete in a real market, Uber and Lyft (for the time being)
are being subsidized by a constant influx of new investment capital.
How “competitive” is it to have to keep a small business
legitimately afloat while competing against someone who can lose
money hand over fist, while constantly attracting more funding? There
is no real “market” here as long as Uber (and its backers) have a
heavy hand on the scales.
Posner
finally turns to his most important argument, that taxis and soft
cabs like Uber are too different to be regulated in the same way.
First of all, he repeats the very tired argument that taxis can be
hailed off the streets, but that Ubers can only (legally) be hailed
with a phone app. What Posner completely fails to understand is that
this difference is the
wholly arbitrary effect of regulation,
not a pre-existing difference that regulation is “responding” to.
Not
that regulation never responds to the nature of the industry
regulated: in fact, much existing taxi regulation is just such a
response. In many cities, for instance, it was long illegal for cabs
to take street hails—regulators wanted cabs only to pick up at set
locations like cabstands, or to respond to orders via phone. Over
time, those restrictions were worn away by demand. In some cities,
such as Mexico City, there are still different categories of taxi,
some of which respond to street hails, while some can only be picked
up at stands, and others can only be ordered by phone. This is,
incidentally, a very inefficient system, brought about by regulation
that arbitrarily creates a distinction between dispatch modes. There
is an inherent pull, I would argue, for taxis to ultimately be made
available by all dispatch modes. Uber (and other soft cabs) is in
fact already starting to experience this.
Right
now soft cabs are only (legally) hailable by phone; but this is just
the arbitrary effect of the exemption that regulators have created.
But anyone coming out of a busy concert and trying to hail an Uber
knows that dozens or hundreds of vehicles converging at once, each
looking for a specific person, is a complete mess. Now, imagine that
the Ubers were instead allowed to line up at the concert exit, and
everyone coming out could just take the first one in line. Wouldn’t
that be more convenient? Rest assured that, at some point in the near
future, regulators will be asked to make this change.
Or
say that, as Posner believes, licensed taxis are completely driven
out of business. Who then will serve the demand for street hails?
Uber, of course, will be given the right to accept flags off the
street. And it is perfectly rational, in fact almost inevitable, that
this will happen. The only irrational aspect to it would be the
inconvenient fact that Ubers had first been created as a separate
category on the temporary, and arbitrary basis that they were
excluded from these forms of dispatch. But
there is no inherent reason for this exclusion, or for the legal
distinction between taxis and soft cabs.
Posner
then makes a series of false or illogical statements in rapid
succession:
A
major difference is that customers, rather than being able to
hail an Uber car, must sign up with
Uber before being able to
summon it...
Remember,
you can e-hail taxis just like soft cabs, requiring all the same
pre-arrangement. This is an absolute red herring.
Unlike
taxicab service Uber assumes primary responsibility
for
screening potential drivers and hiring only those found
to be
qualified, and the passengers receive more information
in advance
about their prospective rides—information that
includes not
only the driver’s name but also pictures of him
(or her) and of
the car.
This
is an odd way to put it, because for taxicabs the “primary
responsibility” for these falls to regulators. Uber is only exempt
from this (and thus allowed to take “primary responsibility”)
because they were granted an exemption by lawmakers. Furthermore, if
you’ve followed Uber in the news and the courts at
all
you are likely to have a dim view of their sense of “responsibility.”
Posner is really arguing here that you should simply trust this
corporation when it comes to safety. But if Uber was really
committed to safety, and background checks, etc., why are they so
against being required
to follow the same level of safety regulations as taxis already face?
Furthermore,
the TNPs use part‐time
drivers extensively, and it is
believed that these part‐timers
drive their cars fewer miles on
average than taxicab drivers,
who are constantly patrolling the
streets in hope of being
hailed; and the fewer miles driven the
less likely a vehicle is
to experience wear and tear that may impair
the comfort of a
ride in it and even increase the risk of
an accident or a
breakdown.
If
Posner was posting this on Wikipedia, an editor would flag “it is
believed” as weasel words. Not only is Posner’s statement
weaselly, it is precisely the opposite of “what is believed.”
Having studied and written about this very aspect of the industry, I
find these falsehoods particularly insulting. The truth is that the
core of Uber and other soft cab services are provided by drivers who rely on it as a job; incidental or “part-time” drivers as Posner imagines them only provide
a fraction of overall rides. Second, part-time and incidental drivers
are not more efficient in their mileage than full-time drivers; in
fact, the opposite is likely to be the case, as I pointed out in my 2014 publication on this very question. Mayber Posner should have
read some of the literature before jumping to these assumptions?
Posner
ends by showing his true colors, with a paean to the disastrous
experiments in taxi deregulation back in the 1970s. He lauds the fact
that “the deregulation movement has surged with the advent of the
TNPs.” Which leads to the most important lesson to be learned from
this entire saga:
There
is really no such thing as “deregulation;” there is only
different regulation.
Posner
completely fails to understand (or to admit) that all
the differences between soft cabs and taxicabs
which he feels justify
separate
regulatory regimes for the two forms of on-demand car service, were
in fact created by those very regulations.
Thus, even though he celebrates this as “deregulation” it is
really just an arbitrary shift—from one game, involving a certain
set of rules and certain players, to another game, with different
players and different rules. Even the neoliberal economist Friedrich
Hayek recognized that markets are artifacts
in this way. The surprising thing is that Posner does not apparently
realize this—that regulators are not “recognizing” a real
distinction between two markets, but creating
that distinction;
and Posner in issuing his decision, is actively assisting in that
creation.
