George Stigler taught us about regulatory capture many years ago. Regulators are more likely to work on behalf of those they regulate than anyone else. Public choice economics would ask: how can it be any other way? Yet, most people are still taught that regulators work for the "public interest."
Exhibit A in this discussion has to be the $1 million price tag for a New York city taxi medallion. This is the market value of the asset that allows operators to work in a closed market.
Today's WSJ includes Andy Kessler's interview with Uber's Travis Kalanick ("The Transportation Trustbuster ... The co-founder of Uber talks about how he's bringing limo service to the urban masses -- and how he learned to beat the taxi cartel and city hall").
Regulators will always try to curb entrepreneurs, but entrepreneurs will always try to elude (even run circles around) the regulators. In the modern age of apps and social media, you almost have to feel sorry for the city hall klutzes. Kalanick was clever enough to find limos with capacity and time on their hands, to note that limos without meters are usually beyond the reach of city regulators who have a lock on metered cabs, and that when pushed, the likes of Kalanick can mobilize the support of customers and fans via social media. "Operation Rolling Thunder" involved creating a Twitter hashtag (#UberDCLove). Approximately 50,000 emails and 37,000 tweets followed. Read the interview for the satisfying result.
This is the latest installment of an old story. The new part is how technology lowers transactions costs, allowing consumers to actually get organized and become politically potent.
Matt Mitchell adds the important observation that once past the "velvet rope", Uber had the ability as well as the incentive to work to keep competitors out.