Let’s compare and contrast two viewpoints on Uber and see what that tells us about one’s trust of market forces vs. trust of government force.
1. From Steve Horwitz’s article in The Freeman “Uber Solves the Fundamental Problem of the Marketplace (Or, Turning Strangers into ‘Honorary Kin’)“:
As an economic innovation, Uber exemplifies the way creative entrepreneurs discover new methods of providing better, less expensive consumer products and services. It also demonstrates how such creativity helps people navigate around barriers to entry created by government regulations that, though designed to protect consumers, end up protecting incumbent firms.
The fundamental problem of markets is the need to establish trust among strangers. In a wonderful book called In the Company of Strangers, Paul Seabright explores this formulation in great depth. He argues that for markets to work more fully, we need various institutions that allow strangers to be less suspicious of one another. We need to turn them into “honorary friends,” or in my own preferred version, “honorary kin.”
After all, what makes us willing to get into the backseat of a stranger’s car? With taxis, there are the obvious markers that are designed to generate trust: yellow or green paint, a corporate name, and the name and picture of the driver, among others. Many of those markers are possible because of the corporate structure that puts all of the drivers in similar-looking vehicles with the same company’s name.
That is not how Uber works. Not only are you getting into the backseat of a stranger’s car; you are getting into the backseat of their personal vehicle, which has no obvious marking that it is intended to provide rides to strangers. But Uber overcomes this apparent problem in several ways that make clever use of technology. When you request your ride, you are immediately given identifying information about the driver and car, including a thumbnail picture of the driver, the color and make of the car, and its license plate.
An additional way in which Uber establishes trust is by using GPS technology to show you exactly where your car is and how long (and what path) it will take to get to you. Watching the car drive up on the Uber app as you see it in front of you is a major signal of trust. Uber also gives you a cell number for your driver, which is useful if the pickup location is ambiguous. It also makes retrieving anything you left in the car much easier. Have you ever tried to get a lost item back from a cab company?
Uber also establishes trust through its rating system, which works much like those of eBay and other online, anonymous exchange-based sites. Riders rate drivers, and the driver’s rating appears alongside the identifying information about the car. Drivers rate riders, too, so if you misbehave in a car, you are less likely to get picked up the next time you need a ride. After all, sellers also have to trust buyers!
Finally, Uber has the profit incentive. If drivers are not trustworthy, people will not use the service, and Uber will suffer. Notice that taxi companies with various forms of government protection from competition (e.g., the taxi medallions in New York City) do not face the same strong incentive effects here. They don’t have to please their customers in quite the same way. And that might explain why my recent Uber driver had a bottle of water waiting for me in a very clean, very comfortable, and relatively new car. That does not describe most taxi rides in most cities.
Living out beautiful anarchy by finding ways around the state and crony-capitalist providers like cab companies requires that the alternatives, such as Uber, solve the problem of turning strangers into honorary kin. Thankfully, modern technology, such as the combination of GPS, electronic payment, and smartphones that Uber and other services in the sharing economy are using, provides effective ways of doing so and makes us willing to get in the backseats of strangers’ cars as if they were the backseat of our parents’ minivan.
2. Now compare that to this critical and unappreciative report on Uber from Detroit Free Press columnist Mitch Albom:
I am from the generation whose mothers preached “Don’t ever get in a car with a stranger!” So right from the start, Uber had me nervous. Let’s see. You download an app onto your phone. You type in where you are. A driver you never met before suddenly appears, knows your name and has a loose connection to your credit card. The vehicle may be a Lincoln, an SUV or a six-year-old Kia, the same car the driver just took to the grocery store, or, for all you know, the drug pickup. You get in.
Well. You get in. I am standing on the sidewalk, still trying to get the iPhone turned on. Uber, based in California, is a techie-first phenomenon, belonging to the generation that believes nothing bad could happen from sharing every piece of personal information with the entire universe. My generation is more afraid. Actually terrified. And perhaps, in the end, more practical. We are also dinosaurs.
So while young people gleefully hail Uber cars on their way out of bars, and cities everywhere argue over whether Uber unfairly competes, avoids taxes or influences legislation, Baby Boomers are still mumbling, “Wait, you just get IN the car? And the driver could be ANYONE?” Well. Sort of. To be an Uber driver, you do have to sign up. And, according to Uber, you undergo some sort of background check, although the depth of that check seems in question.
The drivers, who, as Uber advertises, work only when they want to (lest Uber have to pay them salaries, benefits and all that yucky old-fashioned stuff) and supposedly have to pass a driving test. But you don’t have to look far (like a Forbes magazine article) to read stories of applicants who were given an Uber cell phone with no driving training and told to get out there and start making money.
So, dinosaurs like me (you know, anyone over 26) wonder how this is much different than trusting your life to the car that just pulled up when you had a flat tire. After all, Uber bills itself as “the world’s safest, most reliable ride,” but that’s pretty hard to believe when someone like me could be driving for them in a matter of days. Just ask my family. They see me pull up, they turn the other way and stick out their thumbs.
But then, we are a generation that likes its cabs yellow and its hands free. I guess it’s archaic to believe that uniform cars, a state or city licensed organization, regulation and full-time drivers make for a more reliable transportation system. Maybe we’re too nostalgic. But at least cabbies used to get their information through a radio dispatch. Uber drivers are like musical chairs — closest one wins. And their customers come through cell phones. When your business depends on how quickly you read an app while behind the wheel, I get nervous.
This is not to say Uber is a bad idea. It isn’t. But like most tech-based ideas, it turns muddy when human beings get involved. There have already been several alleged assaults between Uber drivers and passengers. And Uber drivers complain there are too many of them now to make the promised money.
Maybe you trust Uber, maybe you don’t. To me, this is about a larger notion, that everybody is a specialist as soon as they start doing something. You blog, you’re a journalist. You sell an eBay item, you’re a retailer. It’s an egalitarian approach to life, we can all do anything, have anything, share everything, someone else’s music, someone else’s movie, someone else’s car.
MP: It seems like those most skeptical and critical of Uber and the sharing economy are those of the progressive and liberal political persuasion – like Mitch Albom. Reason? Progressives seem to trust the heavy hand of government force more than they trust the invisible hand of market, they have more faith in regulated monopolies/cartels (e.g. Big Taxi, public schools) than market competition (Uber, charter schools), and in general favor government solutions and government force over market solutions and voluntary exchange. Or put differently, progressives don’t believe in the magic or miracle of the marketplace, they don’t trust the market and have instead learned to subjugate themselves to the power of the state, with its volumes of liberty-crushing regulations and armies of regulators.
One’s position on Uber tells us a lot about their economic and political views and their relative trust of the market to regulate itself through vigorous market competition versus their trust in the power of the state to regulate, but so often, stifle the market to the detriment of consumers. In the end, it’s another opportunity to invoke Bastiat’s words of wisdom from 1850: “Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.” When it comes to transportation, there’s no question that Uber is doing a much better job of serving the interests of the consumer and the human race than Big Taxi by offering lower prices and faster and better service. As the world progresses forward and consumers increasingly choose Uber and Lyft over Big Taxi when they have a choice, the “progressives” aren’t being very “progressive” in their thinking.
Steve Horwitz 1, Mitch Albom 0.
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