Crowd-Sourced Regulation of Ride-Hailing

I am increasingly persuaded that free-market forces regulate safety and quality better than government agencies can, so we should get rid of government regulatory agencies that “protect” consumers by taking away the freedom of consumers and businesses to make exchanges they both desire. In an op-ed posted at “The Hill,”  Patrick McLaughlin of the Mercatus Center and I make the case with respect to the ride-hailing industry. A slice:

For example, Uber sets standards for various aspects of its ride-hailing business, such as the kinds and conditions of cars that may be used, the insurance coverage drivers must have, drivers’ backgrounds and legal records, and the minimum average customer ratings that drivers must maintain. Uber’s customers count on these standards. If they are not satisfied, customers can easily report the driver through the app. With Uber, every customer is an inspector.

Any company that wants to enter the ride-hailing industry and compete with Uber will need to meet or exceed the standards that customers value, such as the quality and safety standards enabled and enforced by Uber’s rating system. For example, Lyft competes with Uber for quality and safety every day and in every market. If either company’s quality or safety falls short of what the public wants, the other, or a third company, will fill in the void.

In other words, market forces provide an effective means of regulating.

Market regulation consistently outperforms government regulation because it responds to customers’ wants as well as to changes in technology and business practices. Even though government regulators may intend for their rules to serve the public interest, sometimes they can only make an educated guess of how to regulate, because they have no competing standard-setters to learn from. Furthermore, this lack of competition means government regulations tend to be static and incapable of evolving and improving.

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