Should cities set limits on ride sharing?

Credit: Associated Press

Jeff Cockrell | Aug 27, 2018

Sections Public Policy

When New York City imposed a cap on ride-sharing licenses earlier this month, it became the first major American city to legislate the number of Uber and Lyft drivers cruising its streets. But the concerns driving New York’s regulation, including increased traffic congestion and low wages for drivers, aren’t exclusive to New York, and politicians from London to Chicago have expressed interest in establishing similar limits in their cities.

Critics of such legislation—including, naturally, Uber and Lyft themselves—warn that restricting the supply of ride-sharing services will hamper competition, raise prices, and lead to longer waits, particularly in areas that have historically been underserved by taxis.

Will limiting the number of ride-sharing vehicles in a city make the residents of that city better off? Is there a better way to achieve some of the objectives targeted by proponents of such limits? To find out, Chicago Booth’s Initiative on Global Markets polled its US Economic Experts Panel. Of the panelists who responded, 64 percent said they believed capping ride-sharing vehicles in a city would make residents worse off, while virtually all respondents agreed that traffic congestion could be better addressed via taxation.

“Individuals do not fully internalize the congestion cost to others of their own driving,” wrote Stanford’s Darrell Duffie. “That’s a clear argument for a congestion tax.” 

Judith Chevalier,Yale
“Congestion externalities [are] important, but a ride-sharing-specific policy disproportionately penalizes one group of congestion contributors.”
Response: Uncertain

Oliver HartHarvard
“Taxi drivers may gain, but standard theory suggests that the losses will outweigh the gains. Lower congestion could possibly overturn this.”
Response: Agree 

Kenneth JuddStanford
“Congestion is a serious problem in the center of these cities. Caps would help alleviate congestion.”
Response: Disagree

Larry SamuelsonYale
“Taxes are a much more flexible and subtle instrument than caps.”
Response: Strongly agree

José ScheinkmanColumbia
“A true congestion tax affecting all driving would also generate needed funds for public transportation.”
Response: Strongly agree

Richard ThalerChicago Booth
“Congestion taxes are clearly better and help the folks away from the center city who need the ride sharing most.”
Response: Strongly agree