May 14, 2014

Lyft And Kansas City’s Stifling Taxicab Regulations

This week, Kansas City officials have been hard at work trying to keep ridesharing out of the city of fountains. First, the city rushed through an ordinance requiring permits for vehicles taking “donations” (as Lyft does) for travel. Then, the city pursued an injunction against Lyft for operating in Kansas City.

Some city officials, like Assistant City Manager Rick Usher, have argued that Lyft simply needs to apply for the proper permits. Why didn’t Lyft think of that? Its drivers go through background checks, have insurance, and get their vehicles inspected. Why not go one step further and get permits? The reason Lyft has not done so is that Kansas City’s Livery and Taxicab regulations prohibit Lyft’s business model.

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According to Kansas City ordinances, the definition of a livery vehicle is:

. . . a public six-passenger or less motor vehicle with driver included, for hire only by written agreement for exclusive use at a charge fixed in advance.

The livery classification was designed to encompass pre-arranged limo and premium sedan services. Lyft charges by both time and distance (not a fixed charge) and, of course, has no advance written agreements. In addition, the Kansas City taxicab code states that livery vehicles cannot:

. . . solicit passengers for transportation in a livery vehicle on any public way or at any public airport or operate a livery vehicle so as to cruise in search of patronage . . . no passenger shall be accepted for any trip in such vehicle without previous engagement for such trip at a fixed charge through the business office from which the vehicle is operated.

If Lyft’s drivers received livery permits, they could not drive around town for passengers, pick up passengers without existing agreements, or charge distance-based fares. Lyft’s business model would be impossible. Lyft’s drivers actually act more like taxis than livery vehicles, aside from the fact that they don’t use a taxi meter.

Unfortunately, taxicab regulations in Kansas City prohibit ridesharing companies’ drivers, such as Lyft’s, from obtaining taxi permits. These regulations include (but are not limited to):

  • Permits are only given to cab companies with a minimum of 10 cars, not individuals with one car.
  • The city has reached its 500 taxi permit limit, and will not issue more.
  • Taxis must use meters with prices that the city sets.

The bottom line is that if Lyft drivers receive livery permits, they cannot operate as Lyft drivers, and if they are to be considered taxis, they cannot get permits, period. Telling Lyft that it can operate if its drivers just apply for licenses is like telling someone he or she can join a football game as long as he or she doesn’t step on the field. I’ll leave it to the reader to decide whether the rules of the game are designed to protect public safety, or whether they are meant to keep newcomers out.

May 13, 2014

Op-ed: Excessive Regulation, Not Lyft, Needs To Stop Operating in Kansas City

Last Friday, my op-ed about Lyft and Kansas City’s absurd taxicab ordinances appeared in the Kansas City Business Journal. For many years, Kansas City’s livery and cab industry has been needlessly regulated for the benefit of large taxi companies at the expense of residents and entrepreneurs. As the op-ed pointed out:

City ordinances set fares, require potential cab owners to start with a fleet of 10 cabs, limit cabs to less than 600 city-wide, and require cab companies to provide 24-hour service.

Market controls such as these and others are not justified and Kansas City should lift these ordinances so that new business models can thrive in the city. Read the entire op-ed here.

May 12, 2014

Tesla, Car Dealers and Milton Friedman: The Problem of Protectionism and Cronyism

Last week at Forbes, I wrote about an attempt by Missouri car dealers to prevent electric car manufacturer Tesla from selling its cars directly to customers. Although the amendment in question quietly passed the state Senate, I do expect that free market advocates in the House will loudly reject this attempted protectionism and cronyism.

That said, it must be noted that although Tesla is being wronged by the proposed amendment, policymakers would do well not to proclaim the heavily-subsidized company to be some spirit animal of the free market. Indeed, many businesses are quick to proclaim their love of the market while simultaneously marshaling special protections and subsidies to themselves. Tesla fits that description to a T; hit up that last link for a list of examples.

The Tesla episode reminds me of an old video featuring famed economist Milton Friedman. Asked some decades ago about who can save the free market, Friedman framed his response this way:

You talk about preserving the free market system. Who has been destroying it? The business community must take a large share of the responsibility. … You must separate out being pro-free enterprise from being pro-business.

The short video, which I commend to all of our readers, is below:

There is a difference between being pro-business and being pro-market. Clearly the proposed legislation would be pro-dealers; it would not, however, be pro-Tesla or pro-consumer.

April 24, 2014

Lyft, The Taxicab Commission, And The Level Playing Field

Lyft, a ride share app, has caused quite the stir in Saint Louis. Because Lyft passengers make donations, not set payments, to drivers, the company does not believe the Metropolitan Taxicab Commission (MTC) has the authority to regulate its operations the same way it regulates cab service. MTC and the City of Saint Louis think differently. The MTC has filed and won an injunction against Lyft to halt its Saint Louis operations.

MTC officials claim Lyft is not competing with cabs on a level playing field and that its unregulated drivers endanger public safety. However, Lyft drivers have to pass background checks, have vehicle inspections, and carry insurance (MTC requires cabs to have $200,000 of insurance while Lyft requires $1,000,000). If it is true that cabs are disadvantaged when competing with Lyft, it may have something to do with the competition stifling regulations that the MTC itself imposes. Just a few of these include:

  • To receive a license, a person or company requires a Certificate of Convenience and Necessity (CCN). This means the MTC (where existing cab companies are represented) can decide whether the demands of the public require the additional cab service. They also can decide that more cabs will increase traffic congestion or parking demand too much to grant a CCN.
  • A CCN holder must have and maintain a non-residential office address, telephone, and email. The phones must be answered at all times of the day. (Obviously, this essentially prohibits most individuals from obtaining a CCN.)
  • If someone meets the first two hurdles, it does not matter because the MTC has issued a moratorium on applications for CCNs for airport taxis, on-call taxis, and premium sedans until a study on demand is completed.
  • Drivers have to pass MTC-approved courses, in addition to obtaining a state chauffeur license.
  • A for-hire car either can be an airport cab, an on-call cab, a handicap-accessible vehicle, a non-emergency medical transport vehicle, or premium sedan. A car cannot receive more than one type of registration or perform the activities allowed by more than one type.
  • Cabs must use taxi meters with set fare maximums.
  • Cabs can be no older than nine years and will not receive a permit if they are older than six model years.
  • Drivers must wear a uniform (black baseball caps, no writing on it, bill forward).

If Lyft is allowed to operate in the Saint Louis area, traditional cab drivers may find it difficult to compete. But the answer to that problem is to eliminate the ability of the MTC to control entry, restrict how cabs operate, and set prices. That would put Lyft and traditional cab companies on a level playing field and provide more options to Saint Louis residents, if that is truly what the MTC wishes to accomplish. But we all know that the taxi commission, which is dominated by the larger taxi companies, is far more about limiting competition than actually protecting consumers.

April 22, 2014

Missouri Needs The Sunrise Act

Missouri Rep. Eric Burlison (R-Dist. 133) has proposed legislation tightening the requirements for licensing new occupations in Missouri. It is called the Sunrise Act, and I think it would be an important public policy change for our state. (The legislation has been added to another bill at this point.)

This legislation is not radical. It does not ban new licenses. It does not implement extraordinary new requirements for a new license law, such as a greater than 51 percent vote like some tax increases have. It simply requires that attempts to institute a new statewide occupational license actually provide some evidence for the need and benefit of the license. Right now, there is none. The state legislature could wake up tomorrow, agree that every dog walker in the state needs a license to walk dogs for a fee, and pass that law without any supporting evidence. That is not an exaggeration (leaving aside the fact that the bill introductory period has passed).

The legislation further requires that if a license is proposed, the lowest level of licensing necessary to accomplish the public good will be applied. In other words, if you successfully demonstrate that the public will benefit from some level of licensing of dog walkers, you can’t impose heart surgeon-type standards to accomplish that goal. If the necessary public good is served by simply requiring dog walkers to register with the local government and undergo a background check, then you cannot add educational requirements, training hour minimums, continuing education rules, insurance or bond mandates, uniforms, and a host of other rules, all of which are common in licensing laws. For more strict licensing requirements, the Sunrise Act would require some level of additional evidence that those tighter laws are needed.

This issue happens regularly. For example, why are lawyers more stringently regulated than accountants? If you practice law without a license (except representing yourself), that is a crime. But accountants can do many things without a particular license, they just cannot hold themselves out as a CPA (certified public accountant) unless they have met those requirements. People without the CPA license still can be paid to keep company books, prepare tax returns, and much more. They can still do a job they want to do without calling themselves a CPA, and that is what is important.

The point is not to debate lawyers versus accountants. The point is that imposing burdens on people’s jobs and occupations should be more difficult than it is. That is all the Sunrise Act really does. Instead of imposing new burdens on someone’s job, it actually imposes a burden on the person who wants to license that job. That is where the burden should be.

April 20, 2014

But Tomorrow Will Rain, So I’ll License The Sun

Saint Louis County officials are considering licensing landlords who are within the county’s jurisdiction (Bill No. 73). You read that right. If you want to rent out apartments, duplexes, your own home, whatever, you’ll need a county license to do that within the unincorporated parts, which includes 320,000 residents. This is completely unnecessary. Why someone would try to further restrict the housing market anywhere in Saint Louis in 2014 is beyond me.

This will drive up rental unit costs within the county. Not because of the license fee itself, which is very low ($15), but because anything that limits supply will drive up prices. Now, some prospective landlords will not invest within the county because of this new fee and, more importantly, the accompanying regulations. Is that what the county wants? If landlords are allowing renters to do criminal activity within their homes, the county police simply should use existing law to hold people responsible. A general new license on every landlord in the county will do nothing but increase government interference with property rights and decrease the overall supply of housing.

Landlords are to modern politicians what Christians were to Roman Emperors; a quick and easy group to place blame on and abuse whenever they wanted. A study of a very similar proposal in Milwaukee found no evidence for benefits from these programs. You know why? Because there aren’t any. This is another terrible licensing idea from Saint Louis County.

April 18, 2014

Saint Louis Taxi Commission Takes Consumers For A Ride

The only nice thing I can say about the St. Louis Metropolitan Taxicab Commission (MTC) is that at least there is only one taxi licensing agency doing a terrible job for Saint Louis. We used to have two (city and county), and they did a really terrible job.

Short of that, the MTC has made it plain for all to see that its role is to protect incumbent cab companies from competition. Who cares what changes technology brings? They are going to operate the same way no matter what. Mobile phones, GPS, Internet maps, new phone apps, who cares? They have a job to do, and limiting new entrants into the market is job No. 1.

Why does the new technology matter? It matters because it has dramatically evened out the information advantage that taxi drivers used to have over customers. Now, even a first-time visitor to Saint Louis arriving at Lambert-St. Louis International Airport can check out in just a few minutes on their phone: 1) online reviews of cab companies, 2) the clearest route to the destination, 3) estimated fares for the trip, and more information if needed. Consumers are ready and able to negotiate for themselves, and most cab or mobile app-based drivers know that.

We do not need the MTC protecting us. Just as important, by restricting competition, the MTC is actively hurting taxi consumers in Saint Louis (and Kansas City as well).

Bring back the crooked assessor.

March 11, 2014

Lust For Licensure

I honestly think that one of these days someone is going to propose requiring a Missouri license to hypnotize chickens. During this year’s legislative session in Jefferson City, the quest to unnecessarily license new occupations continues. Next up: home health care agencies, electricians statewide, and expanded licensing rules for landscape workers. None of these new or expanded regulations are justified.

Did you know that areas with stricter electrician licensing actually have higher rates of electrocution? It’s true. Licensing increases costs, increased costs lead to more do-it-yourself work, and that leads to more accidents. Similarly, is there a current crisis in Missouri regarding landscaping that I am oblivious to?

Missouri has fewer licensed occupations than other states. We should be proud of that. Simply put, all of the occupations that have some sort of legitimate role for licensing are already licensed at the state or local level. We need to be removing unnecessary licenses and making it more difficult to implement new ones. When it comes to licensing rules in Missouri, we need to pass rules setting demonstrated needs and benefits before new occupations can be licensed. We don’t need to add new occupations to an already too-long list.

January 16, 2014

Taxicab Reforms In Missouri

Kansas City officials are considering changes to the taxicab licensing ordinance that would make it easier for non-profits and churches to offer rides around the city. Tony’s Kansas City has the story here. I support the changes, even though I understand the concerns about treating non-profits differently than regular cab companies. It is a difficult call. If you support treating all companies the same (I do), but the treatment, a.k.a. the local regulations, is awful, do you force everyone to suffer from the same awful rules? In this case, I do not, and I hope loosening up the regulations for some will lead to less restrictive rules for all.

It is the same story of awful taxicab regulations in Saint Louis. Here is Uber, the nationwide, web-based private car service, explaining why they won’t enter the Saint Louis market. The same basic explanation applies to Kansas City, which means they are not giving consumers more choice in Missouri, while they do in many other parts of the nation. Are the safety and regulatory concerns in Missouri substantially greater than all those other cities? Of course not.

I know a little about taxicab licensing. I once opened a bribe for a county councilman from a taxicab operator looking for stricter regulations to protect his company from competition. That councilman and I reported the bribe to police instantly, but another councilman who had been taking bribes went to prison.

Taxicab licensing is there to protect the interests of the cab companies, not the public. Consumers now are more empowered by knowledge when dealing with cabs, like your cell phone and GPS telling you if a cabbie is taking you on a long route. Old rules such as uniforms, regulated fares, limits on cab licenses, and restricted areas (i.e., the airport) are no longer necessary. All that is needed is a basic cab registration with the city or county (for the protection of both the driver and passengers), driving record checks on the drivers, and inspecting meters (but not rates) to make sure they are accurate and properly posted. That’s all.

With these changes, maybe people in Saint Louis would be able to get a cab on New Year’s Eve.

January 9, 2014

There Is No Jury Better Than The Hat

I recently heard a story on NPR about government officials in Madrid, Spain, requiring street performers, mostly singers and musicians, to audition for permission to play on public streets. These new regulations also require that those approved acts remain a certain distance from one another and change locations every few hours. The piece offered:

And with more than a quarter of Spaniards out of work, more people than ever before have been crisscrossing the city with their violins and voices, for extra cash. People squeeze giant accordions onto the metro, and roll amplifiers on carts across cobblestones.

The street performers are a tourist attraction. But Madrid’s mayor, Ana Botella, says the clamor has reached its limit.

If this sounds like an idea that could only gain traction in a country known for fascist leadership, consider that Saint Louis did the exact same thing until recently. The Show-Me Institute has highlighted efforts to reform occupational licensing for things such as performers and valet parking.

It might be in the city’s best interest to regulate the activity to provide for passable sidewalks and streets, and to protect Madrid’s tourism industry. However, one such group of performers, called the Potato Omelette Band, objected to the requirement and secretly videotaped its audition, which contained lyrics critical of the city effort:

“Oh, my poor Madrid, my city. They are kicking out musicians and artists, and replacing them with police,” the song goes. “There is no jury better than the hat — the hat you put on the floor to collect donations.”

Indeed. While Americans debate whether government ought to act on an issue or whether it even has the power to act, musicians in Madrid remind us of the simple truth that nothing is better suited to solve problems than free people operating in a free market.

December 13, 2013

Using Questionable Data To Back City Planning

A recent report from the Pew Charitable Trust called for increased affordable housing in cities across America. As the Atlantic reports, the authors suggested:

Solutions like requiring developers to include affordable housing units in new projects and developing metropolitan-wide transportation are politically unpopular. But they are a necessary part of any effort to restore economic mobility and the American Dream.

While everyone supports economic mobility and the American Dream, there is not adequate evidence to back the authors’ call for more regulation and transportation subsidies.

According to the report, “Mobility and the Metropolis: How Communities Factor Into Economic Mobility,” income segregation in a city leads to low economic mobility. This is important for Missouri cities such as Saint Louis, where income segregation is high and income mobility is low. The authors of the study would have Saint Louis expand transit and entice developers to build mixed-income housing. However, the track record of Saint Louis-area transit-oriented development has been less than ideal, as exemplified by a subsidized apartment complex near the Richmond Heights Metrolink station. A closer look at statistical models of the report calls their entire conclusion into question.

Without getting into too much detail, the problem with the report is that their model only finds an effect from income segregation when they don’t include other relevant explanatory factors. For instance, analyze New York City, which has among the highest income segregation (A) and lowest economic mobility (B) ratings. The report would have you believe that A contributes to/causes B, so improving A improves B. But what if (C), the dominance of financial services or legal professions, causes both A and B in New York City? Then fixing A will have no practical impact on B. In the complicated areas of income segregation, we must account for many possible factors like C.

However, the report promotes a simplified model that only shows a relationship between income segregation and economic mobility without including enough alternative variables. The report did not even mention that their model demographic variables did not show that income segregation was associated with economic immobility. Despite this shortcoming, both the report and media coverage have used the report to make irresponsibly expansive policy recommendations.

This over-hyping of statistical data can be all too common in the social sciences, so Missouri policymakers and citizens have to be vigilant. It is easy to twist data to justify government intervention if no one challenges the strength of the result.

November 28, 2013

We Are Thankful For Data

Debate over public policy is rife with stories about individuals who will benefit or suffer from proposed legislation. It can be a difficult thing with which to wrestle. And because much of what is offered is anecdotal, it could be true and yet not at all representative of the impact of the regulation at hand.

Debate in Missouri about Medicaid, education, and taxation is filled with anecdotes that give an either incomplete or misleading picture of policy proposals. That is why we here at the Show-Me Institute love data. Spreadsheets may not make for an impressive photo opportunity, but data analysis is necessary if we are going to improve the lives of Missourians.

To that end, our colleague Michael Rathbone has been shepherding our new website: ShowMeData.org. This new interactive tool allows you to generate all sorts of data on property taxes, population, Gross State Product, labor force, employment, unemployment, and more over the years. And not just in Missouri but the entire country. For example, is it true when Missouri politicians complain that Texas Gov. Rick Perry is poaching people and  jobs? This chart shows that Texas’ population has been growing for decades while Missouri’s remains stagnant. Want to research cigarette tax rates in Missouri and neighboring states? That’s here.

Should you be locked in a political discussion this holiday with that irascible brother-in-law, visit Show-Me Data for some valuable context. We’re all grateful for the stories of America’s greatness, now we have the data to back it up.

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