Caps and Supports Make Markets Gum Up

This is dumb.  New York just capped the amount of licenses that Uber and Lyft can have.  It will cause the rates that NYC people pay for Uber and Lyft to go higher and it will help the cab companies compete.

Here is what a price ceiling does to a market:

The demand for licenses will outstrip the supply.  There will be dead weight loss in the market and fewer drivers and passengers will get served.  This is an example of regulation that shouldn’t be.  Regulation like this encourages bad behavior, not curb it.

Now, crony capitalists will find ways to favor their best politician and get a leg up on licenses.  Bootleg cab companies will startup and work under ground.

It doesn’t surprise me that some drivers wanted the regulations.  Of course, if you already have a license you want to limit competition so you can drive your price higher.

Of course, the reason the apps were invented in the first place was so anyone at anytime could be a driver, and anyone at anytime could be a passenger.  They were solving a problem because the city regulations across the country when it came to cabs were protectionist and heavily favored the taxi company, not the consumer.

If NYC was worried that there were too many cars looking for customers on the street clogging traffic there are better ways to solve it.  London has a congestion tax and NYC could implement the same thing.

It cracks me up when mayors of cities say they are startup friendly and then enact all kinds of legislation to limit competition. Basically, they hurt their citizens.