I had a conversation with my mother several months ago about how I commute on a regular basis around Washington. As many young Millennials would reply, I told her how I frequently use Uber, the innovative ridesharing platform that brings a personal driver to your location at the push of a button.
To my surprise, my mother was extremely skeptical about this seemingly strange method of transportation. She exclaimed, “You’re trying to tell me you just get in some random stranger’s car without thinking twice?”
While I laughed at my mother’s shock, her sentiment is shared by many individuals and groups around the country, who question the safety of Uber, Lyft, Sidecar and the other various transportation network companies. Are such concerns warranted? Or are they simply typical of general consumer skepticism about new technology, combined with extensive negative public relations from frustrated competitors?
The Federal Trade Commission held a workshop this week focused on that very issue, exploring consumer concerns about the platforms, participants and regulators of what is being called the “sharing” economy. The sharing economy generally is described as an economic model based on sharing, trading or renting products or services that enable users to access some of the benefits of ownership. From Uber to Airbnb and beyond, hundreds of these peer-to-peer platforms have become a vital part of the economy, particularly in urban areas.
The abundant benefits of peer-to-peer platforms range from the cost savings that can accompany bypassing needless and counter-productive regulations to the efficiency gains that stem from eliminating intermediaries and more efficiently matching buyers and sellers. Looking at TNCs, specifically, their biggest appeal have been in offering the prospect of simplicity, reduced commute times and lower prices.
But critics like Matthew Daus, former chair of the City of New York’s Taxi and Limousine Commission, claim TNCs lack sufficient safety standards, such as government background checks for their drivers, which he said raises huge questions about consumer protection. Taxi companies and some regulators have helped catalyze these negative perceptions of TNCs. In several states, local governments have attempted to regulate and limit TNCs, claiming jurisdiction on the grounds of dispatching technicalities, insurance issues, licensing and many other claims.
Someone like my mother may lack information about how these services work. And Ginger Jin of the University of Maryland acknowledged the Internet could hypothetically exacerbate these kinds of information asymmetries. However, she notes the Internet also provides the tools to address these problems. Trust mechanisms – such as the ability to define acceptable users, reputation ratings, third-party regulators and the creation of user networks – have enabled peer-to-peer platforms to gain consumer trust and bolster their reputations.
As Steve Salter of the Council of Better Business Bureaus noted: “Platforms simply have a greater incentive than regulators to get things right.”
In reality, TNC background checks are much more substantial than critics claim, as they cover local, state and federal criminal and driving offenses, as well as cross-referencing state sex-offender databases. TNC apps also generally allow users to screen drivers before their trip, as the rider can see the driver’s name, face, rating and type of car they are driving. Additionally, unlike a taxi, which typically needs to be hailed from the street, TNCs can be ordered from the safety of one’s own home.
TNCs also carry insurance, in some cases up to 20 times more than that required of taxis. Joshua Gans, professor at the University of Toronto, said it was thanks to Uber’s high degree of accountability that it is one of the only transportation services he trusts with driving his children.
Ridesharing has resulted in declining drunk-driving rates, expanded employment for women and the greatest transportation innovation in decades. Alas, many governments would rather regulate it on the basis of questionable claims than let it flourish. As Adam Thierer of the Mercatus Center put it, we need to stop “regulating up” and start “regulating down,” shedding unnecessary existing rules that limit innovation. Or as Ashwini Chhabra, Uber’s head of policy development for Uber, put it: “What we need for 21st century innovations are equally 21st century regulations.”
As TNCs continue to expand and gain positive exposure, public misconceptions about the degree of consumer protection already in place hopefully will fade away. This won’t be an easy task, as market incumbents inevitably will continue to push back. Nevertheless, Uber and other ridesharing platforms’ success with self-regulation has exhibited the efficiency of free markets and cautions against too stringent an approach to regulating the sharing economy.
P.S. Don’t worry, mom, I’m in good hands with the “strangers.”