All Commentary
Monday, January 11, 2016

Uber Revolutionizes Common Sense

Customers Make the Best Regulators

The Uber revolution has created a surge of support for free markets, although not every Uber advocate realizes what he or she is supporting. Those who use the ride-sharing service know the difference it has made in their lives, and they resent attempts to maintain (or resurrect) the taxi cartels’ political privilege.

What’s most surprising is the quality of the arguments Uber’s defenders make on social networks and elsewhere. Not only do they condemn legal barriers to entry; they even talk of the inherently coercive nature of a state-licensed system.

Customers know that it’s not from the driver’s benevolence that the bottled water, candies, and kindness come.

Many appeal to freedom of choice: Why should they be limited to one service when it should be possible to choose from many different options? Some criticize the low quality of government-protected taxi services compared to the new entrants, pointing out that competition leads to a general improvement of the service and consumer’s well-being. Others even claim that if it were up to the legislators, we’d still be using horse-drawn carriages and manual typewriters.

To this wave of supporters — I think of them as “lubertarians” — Uber is already sufficiently regulated by its customers.

All these arguments, typically defended by libertarians and classical liberals for centuries, are being made spontaneously by people who, whether through ignorance or choice, probably wrinkle their noses when hear the term libertarian.

The App Economy Promotes Common Sense

There’s a reason that people’s common-sense notions about Uber, ride sharing, and the app economy in general line up so well with free-market ideas. As economist Donald Boudreaux points out, we are now so used to the fluidity of markets in our daily lives that we never question how the exchanges made by billions of strangers can work so well.

But when most people think about the market economy in the abstract, they feel overwhelmed and alienated by this vast and complex system. Intimidated by their understanding of “capitalism,” they tend to demand that the state somehow control the economy through legislation and governmental regulations.

Uber, on the other hand, makes the functioning of the exchange system and the concept of consumer sovereignty clear to its most casual users through a simple app that allows them to choose and evaluate the services they seek.

Customers know that it’s not from the driver’s benevolence that the bottled water, candies, and kindness come, but from his effort to promote his self-interest — the five little stars that assure his future with the company.

The law of supply and demand, so misunderstood on paper, is obvious in Uber’s dynamic pricing. Users watch prices rise and fall with the real-time waxing and waning of demand for rides, and they decide whether it is worth using the service in that moment or if it is better to wait for prices to come down again. In this way, Uber allows its customers to participate directly in the self-regulatory power of markets.

Selective Vision

We should celebrate this occasional lubertarianism, defended even by otherwise anti-market people. Our next step is to show that arguments in favor of openness and competition are valid not just for the sharing economy, but for all forms of voluntary exchange.

Private buses and vans make “public” transportation cheaper and more efficient, assuring better service to the poorest riders.

Uber allows its customers to participate directly in the self-regulatory power of markets. 

In telecommunications, it was market competition that put mobile phones in everyone’s hands and gave ever-greater Internet access to those in developing countries.

In India, where barriers to entry are low, prices are among the lowest in the world.

In the new sharing economy, platforms such as Airbnb, Udemy, and Indiegogo are spurring a revolution in prices, quality, and choices.

A Modest Proposal

With those who fear the specter of “unregulated capitalism,” let’s try a new approach. Instead of promoting freedom in the market, perhaps we should talk of “Uberizing” the economy.

Imagine an Uber for accountants, lawyers, doctors, or professors. Imagine an Uber for buying cars, household appliances, or food.

Imagine that there is an app that connects buyers and sellers for any good or service.

Now imagine that this decentralized platform gives its users real power to evaluate and direct the prices, quantities, and qualities of these goods and services.

That platform already exists, and it’s called the free market. It just needs a bit of rebranding to help its critics see that they are really its biggest fans.

  • Adriano Gianturco is a professor of political science at Brazil’s Instituto Brasileiro de Mercado de Capitais (IBMEC).

  • Luciana Lopes Nominato Braga is a legislative consultant and public finance expert at the House of Representatives of Minas Gerais, Brazil.