Uber, confronted by regulation, is hailed by European economists

Chelsea Vail | Jun 13, 2017

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Collections IGM Poll

Uber has tried to avoid regulation in Europe and elsewhere by claiming that it is a tech platform, not a transportation service—and therefore not subject to the same rules as taxi companies. In most European countries, authorities have found that argument unconvincing, but the European Court of Justice will have the last word when it rules on the issue later this year. If the court follows the recommendation of its top adviser, Uber would remain, for legal purposes, a transportation service. A ruling against Uber would presumably make taxi companies rejoice, but what would it mean for consumers?

To find out, Chicago Booth’s Initiative on Global Markets posed three questions to its panel of European economic experts. (IGM’s panel of US-based experts has previously expressed enthusiasm for Uber’s pro-competitive influence on the transportation market.) First, it asked whether consumers would benefit from Uber (and Uber-like companies) being treated differently from taxi companies. Second, it asked whether, all else equal, consumers would benefit from Uber being allowed to operate without restrictions on prices or routes. It also asked, more generally, whether existing regulations on taxis, imposed by European cities, are harmful to consumers by limiting competition.

In all three cases, the economists were overwhelmingly on the side of competition. “Competition is always good for consumers, so they clearly gain,” writes Nicholas Bloom of Stanford in agreeing that Uber should be allowed to operate without restrictions. “Taxi companies of course hate it—nobody likes having to compete!” But others were careful to point out that Uber itself may be monopolistic. “Ride-sharing platforms need to be regulated to avoid monopoly power related to large network effects,” writes Agnès Bénassy-Quéré of the Paris School of Economics.

Jan Pieter Krahnen, Goethe University Frankfurt
“Exempting ride-sharing services from existing regulations would put taxi firms at an imposed disadvantage, undermining efficiency.”
Response: Disagree

John Vickers, Oxford University
“New technology changes the nature and extent of market failure. (De)regulation should reflect that.”
Response: Agree

Hans-Joachim Voth, University of Zurich
“Uber, etc., are monopolization plays; where taxi regulation works today, as in most European cities, the long-run impact may be negative.”
Response: Uncertain

Pol Antras, Harvard
“A positive effect on consumer surplus seems clear; on the producer side, there are winners and losers.”
Response: Strongly Agree

Agnès Bénassy-Quéré, Paris School of Economics
“Ride-sharing platforms need to be regulated to avoid monopoly power related to large network effects.”
Response: Disagree

Richard Portes, London Business School
Licensed taxis should retain privileges (bus/taxi lanes, authorization to pick up passengers hailing them on the street…) and compete.”
Response: Agree

Nicholas Bloom, Stanford
“Many taxi regulations help taxi firms and harm consumers—they restrict choice and keep prices high. It’s a classic producer union.”
Response: Strongly Agree

Karl Whelan, University College Dublin
“Restrictive regulations related to pricing or quantity supplied are rarely a good idea unless there is a clear market failure.”
Response: Strongly Agree

Martin Hellwig, Max Planck Institute for Research on Collective Goods
“Key issues are price regulation and entry regulation. We need significant empirical information to assess their effects on consumers.”
Response: Uncertain