Broward County recently joined Gainesville and Sarasota by allowing ridesharing companies like Uber and Lyft to operate without fear of reprisal. This is a remarkable turnaround less than three months after Uber left the county in response to overly restrictive regulations. Now Miami-Dade County faces a similar choice.
Miami-Dade has been one of the most antagonistic environments for Uber and Lyft. County officials — using sting operations — have issued over 3,300 citations and impounded dozens of cars. This isn’t to say that Uber and Lyft are entirely blameless — each company has encouraged their drivers to continue breaking the law by paying for their tickets and impound fees.
Regardless, the rest of us should be asking why what Uber and Lyft are doing is against the law to begin with. The laws regulating for-hire drivers originated during the jitney phenomenon in 1914. The jitneys were the original version of ridesharing — ad-hoc transportation services with non-professional drivers. The problem was that their popularity took business away from the streetcar monopolies, which were the favored darlings of municipal governments because of the tax revenue they provided. At their peak, there were 62,000 jitneys operating in 175 cities, but they were swiftly regulated out of existence.
This form of favored-firm protectionism is called “regulatory capture.” Nobel laureate George Stigler coined the term to describe the counter-intuitive condition where regulated industries are sometimes able to influence regulators for their own benefit. In the most extreme circumstances the regulators are “captured” — consciously or unconsciously—and end up serving the special interests they are supposed to control.
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Miami-Dade knows taxi regulatory capture all too well. In fact, the very reason why taxis are regulated by the county, as opposed to individual cities, is because of lobbying efforts 35 years ago by local taxi mogul Sigmund “Ziggy” Zibler.
In the 1970s, each municipality issued its own limited number of taxi permits, and it was illegal to pick up passengers without one. Through Zibler’s efforts, the state passed a law in 1975 which prevented counties from overriding city taxi regulations. This raised the price that taxi owners could sell their licenses for, and Zibler cashed in, selling his many city taxi licenses and buying up cheap county taxi licenses. Six years later, Zibler’s subsequent lobbying helped ensure that this law was not renewed, and then he convinced county officials to step in and take over taxi regulation from the cities. This meant that not only were the city licenses he previously sold now worthless, but he was also able to sell his stock of county permits at top-shelf prices.
Economists call this “unproductive entrepreneurship.” If government allows itself to be manipulated, some intelligent people will use that to their advantage. In many ways the current taxi industry is engaged in this behavior.
In fact, when Melbourne, Florida city commissioners suggested deregulating the taxi and limo industry, industry representatives surprised lawmakers by requesting that the regulations be maintained. Such regulations often make it difficult for new companies to enter the market, providing monopolistic-style power to existing business. Miami-Dade Mayor Carlos Gimenez indicated a clear understanding of this situation, promising to end excessive taxi regulations and stating “I’m not going to drag Uber and Lyft back into the 20th century — I think the taxi industry has to move into the 21st.”
The best path forward for Miami-Dade is to join Broward in setting an example for all of Florida. Barriers to entry represent an unfair government-granted privilege; instead, cities should embrace smarter regulations that will allow for even more innovations in the future.
Michael Farren is a research fellow with the Mercatus Center at George Mason University in its Project for the Study of American Capitalism.