The NZ Initiative's Jason Krupp points out that that the introduction of new technology is almost always irreversible

By Jason Krupp*

Rapid technological change is more often than not a painful thing, littered with the bodies of those firms and industries that failed to adapt - just ask Kodak, Betamax and former mobile phone giant Nokia.

That painful change is brewing again, this time in the form of next generation of transport technologies, such as the Uber. For those unfamiliar with the firm, it effectively lets anyone become a taxi driver using their own car through a proprietary mobile payment and passenger matching system.

It is a disruptive change that threatens taxi industries across the globe, and has been greeted by protests and anger from the incumbents. French taxi unions and drivers, for example, recently brought Paris and much of France to a standstill to demonstrate against Uber by blocking roads, tipping cars and burning tires.

To some degree, the rage is understandable when you consider that the protestors have made significant investments in taxi medallions, vehicles and businesses in the belief that the revenue model is stable and they could earn a profit. Readers might also feel inclined to topple cars in the streets of Paris if they had paid NZ$385,000 for a taxi licence only to have their lunch stolen by some uppity tech firm from California.

But equally understandable is the rage of customers, who have had to bear the brunt of ever rising taxi fares. New Zealand is not exception, and has the unenviable distinction of being the most expensive place in the world to catch a taxi, despite being deregulated in 1989. Indeed, Christchurch, Queenstown, Wellington and Auckland all rank in the top 10 for least affordable fares. These fares compare poorly with ridesharing according to an admittedly limited comparative test by Consumer NZ, which showed Uber rides in Wellington were significantly cheaper than taxis.

The price differential is explained to some degree by over-regulation, such as the one introduced by then-Transport Minister Steven Joyce that taxis must have a camera installed to prevent crime. Another is the requirement that metered taxi operators have 24-hours dispatches. The effect of both these rule and others has been to limit competition by tipping the market in favour of large well-capitalised taxi operators, and against smaller incumbents to the detriment of passengers.

This safety issue is an important one, because the industry is likely to argue it vociferously as the New Zealand Taxi Federation has done with the use of smart phones as a metering device. (Under New Zealand law, Uber has to offer a fixed price for a trip). Industry groups are likely to push the case that if taxis need to install cameras by law, then Uber drivers must do so too.

Yet this line of attack fails to consider the nature of the Uber service. Passengers have to pre-register to make use of the service, as do drivers since Uber is the financial intermediary between the two.

If a driver assaults a passenger, or vice versa, Uber knows who both of them are, and can pass this information on to the police as appropriate. And since all payments are electronic and no cash changes hands, it greatly diminishes the chance of drivers picking up passengers who plan to do a runner, or whose motivation is to rob the driver. As such, the requirement to install a camera is unlikely to significantly boost safety, but will raise the barrier to entry for Uber drivers.

The Cato Institute recently published a paper that looked into whether ridesharing apps like Uber and competitor Lyft are safe in the US. The paper found that while there were legitimate safety concerns for passengers, they applied to the industry as a whole, and the vetting procedures used by Uber and Lyft were superior to those of the taxi firms. Likewise, Uber and Lyft drivers enjoyed significant advantages over their taxi compatriots as far as crime was concerned because they operated on a cashless-basis.

Should the safety argument fail, the next line of attack against Uber is likely to focus on the nature of employment. Uber’s opponents and labour groups argue that the firm flouts labour laws and avoid paying employee entitlements by classing drivers as independent contractors. Political commentator Gordon Campbell recently made this exact point, citing a recent case where the Labor Commissioner of California ruled that Uber drivers were indeed employees. That the same decision would be reached here is less clear due to a broader test employed by the Employment Relations Authority, as was recently noted by employment lawyer Susan Hornsby-Geluk. Indeed, David Farrar has also made the point that if Uber were such a bad deal for drivers, why are most of them taxi drivers?

That change is painful, particularly when it is a forced from disruptive competition, is indisputable. The Cato paper notes that there are legitimate issues with the ridesharing business model, notably around privacy and insurance coverage. However, it concludes that these are relatively minor, and “[t]he appropriate response is to modernise and rationalise the outdated and heavy-handed [taxi] restrictions, not extend restrictions to the ride sharing industry”.

The challenge, according to Cato, is that many lawmakers and regulators have not adapted their thinking to include the sharing economy, which “fits awkwardly into existing regulatory frameworks governing taxis”.

Luckily in New Zealand we are not overly burdened with this problem. Speaking at the International Transport Forum in Germany recently, Transport Minister Simon Bridges promised that his government would apply the lightest regulatory burden possible on ridesharing operators. The light touch approach has also been endorsed by David Seymour, Act Party MP and Parliamentary Under-Secretary to the Minister for Regulatory Reform.

Both should be praised for correctly reading the direction of technological change, judging that it benefits consumers, and supporting it. To do otherwise would be Luddite-ism, a term that takes its name from 19th century workers who fought the introduction of productivity-enhancing technologies in the textile industry by destroying them.

The problem the Luddites failed to recognise at the time is that the introduction of new technology is almost always irreversible, and that is as true now as it was in the industrial revolution. Yes the change can be painful, but fighting the inevitable only prolongs the suffering.

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*Jason Krupp is a research fellow at the New Zealand Initiative. This is this week's NZ Initiative weekly column for interest.co.nz.

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20 Comments

Just like Labour in the last election the Taxi Federation is going on about things other people do not care about. People like the convenience and price of UBER, this is what customers care about.

Of course, sadly we have no real breakdown of why the swing voters didnt / dont like Labour. What I do see is both Labour and the Greens self-convincing themselves it wasnt their left stance or policies.
I'm not sure what it will take for them to finally get it, 2 more election losses?

Think you'll find that swing voters don't trust Labour or Greens and/or see them as having ineffective or incorrect economic policies, and/or that they are merely the B-side of the National party record. They and National just "tennis-lobby" the issues backwards and forwards, playing of each others return for their own advantage, and the only ones losing out are all of New Zealand.
National stuff up the social support, and sell stuff off to "cover damage Labour did". Labour get in, declare that National stuffed up the social support, and spend like mad and put in place all number of business and social interference, until people realise we can't afford to keep going that way. National ends up in, sells everything off, rips the guts out of the "unaffordable" changes "the other guys" put in place, sews up a bunch of deals selling off NZ property and big loans crashing those on low wage and small business. and backwards and forwards.
Every time the party members get wealthy, and New Zealand as a whole suffers. And no matter which side you vote for the government gets in. With the removal of the FPP voting system it was supposed to end such "flipside" politics by getting minor parties to change the balance and introduce actual important issues so NZers could actually egt representation into government....but Green Watermelons have proven where they stand on that, as has Act and Constipated party. Instead of two parties, we ended up with two parties and their lapdogs, and only a few other possibilities

In such a scenario . why would a swing voter go for labour or green, it's just a "flipside" vote for National ... and vice versa

Just like a two year old's tantrum, they will kick and squeal while the customers walk off and they will capitulate only when they realize they are wasting their energy. It will all be over soon enough.

On this, I agree with Jason Krupp.
The major taxi players will likely have to adapt their pricing, or other elements of their service, such as some fixed fares, some prepayment, more economic for them and their passengers card payments systems, and other possible adaptations. Does the camera requirement stay? Do the airports have to adjust their taxi pricing model, where they sting the taxi customer, but the Uber customer can avoid the airport tax/surcharge?
Pretending the technology does not exist would be head in the sand.

Many things can be bought and sold, leased, rented on the net between individuals and firms. Ridesharing is a new concept but has taken off very well and quickly, because of its convenience and reasonable cost. Especially in advanced countries where such technology is adopted more easily. With billions of iPhones and smartphones being sold every year, such app based activities are bound to increase and disrupt the established order in many spheres of living, as they are today.

Better for the government/regulators to get in on the act with reasonable rules and try to make some on the side for the country too.

for once we are now getting proper competiton in the taxi market. We are still operationg taxis under old models with high upfront costs so the driver has to earn a fair amount before he can break even let alone make a profit.
Uber does away with that and creates a new model where you can reduce overheads with technology and hence the driver can make a decent return for there time
Taxi companies should have embaced new technology way before now and used it to lower costs in there business so they could put up a fight.
as an old trucking boss once told me its the drivers and trucks on the road that make me money not the guys in the office they are overheads

"To do otherwise would be Luddite-ism, a term that takes its name from 19th century workers who fought the introduction of productivity-enhancing technologies in the textile industry by destroying them.

The problem the Luddites failed to recognise at the time is that the introduction of new technology is almost always irreversible, and that is as true now as it was in the industrial revolution..."

I don't understand this remark.
I would state the opposite....they protested because they knew that once it was introduced it would be irreversible..

Maybe this is just badly worded? Maybe the author meant to say that the Luddites' protest was futile...

Yet another example of a privileged middle class intellectual misrepresenting the Luddites to sell the illusion that technological progress alone is the ultimate panacea to solve all social ills.

The Luddite labour movement didn't oppose technological change in principle nor did they believe it was purely technology which was the cause for their distress, but rather they were fighting against the actions of the owners of the newly introduced industrial machinery who were changing the work process, which would enable anyone, including children to replace them at the simplified manufacturing tasks. The activity's of the Luddites were highly targeted and symbolic, they smashed only the machinery of the employers who were implementing these new practices which were throwing them out of work and into penury. They lacked any other recourse to make their concerns felt, because they were forbidden by the Combination Acts to form Labour Unions to allow them to bargain collectively with their employers and had no representation in Parliament, because of the Forty Shilling Freehold property qualification which excluded them from voting for Members of Parliament.

"But here’s the curious thing about the actual, historical, frame-breaking Luddites. In Nottinghamshire’s textiles industry, the heartland of the Luddite rebellion, there wasn’t actually any new technology extant to displace workers. So as Hobsbawm asserts in a 1952 essay on the ‘machine breakers’: ‘The great East Midland movements of 1811-12 were not… directed against new machinery at all.’ (1) Indeed, what prompted Nottingham’s frame-knitters to embark on a targeted machine-breaking spree was the attempt by certain hosiers and independent property owners to cut costs. This involved two related practices. The first was to replace the art of frame-knitting with the far simpler practice of cutting up bits of cloth in the desired shape and sewing them together. And secondly, because there was so little skill involved, it meant frame-owners could employ virtually anybody to do this, and at low rates, too.

Not that every textiles employer did this, which is why only the frames of those owners that did practice ‘cutups’ and ‘colting’ were targeted. In the words of the radical paper, the Nottingham Review (6 December 1811): ‘There is no new machinery in Nottingham, or its neighbourhood, against which the workmen direct their vengeance. The machines, or frames… are not broken for being upon any new construction… but in consequence of goods being wrought upon them which are of little worth, are deceptive to the eye, are disreputable to the trade, and therefore pregnant with the seeds of its destruction.’ (2)"
http://www.spiked-online.com/newsite/article/12195#.VZs0u-YcFhE

With regards to, the muddled misconstruing of the Taxi drivers' opposition to Uber with Luddism, if it were purely a matter of opposition to technology, then one would have to argue that Taxi drivers would also oppose the sophisticated technologies of paper and pen, because city bureaucracies and their captive taxi industry representative bodies have been engaged in a battle against independent, informal transportation services for a hundred years who were equipped with little more than a pen and paper to post flyers at regular stops patronized by their clientele.

Its a truly bizarre world where primarily black or brown jitney drivers who serve mainly poorly served disadvantaged communities routinely endure police harassment, car impoundment, and heavy fines, but when a group of priviledged white people develop a fancy app, which essentially allows people to provide a similar service, suddenly they're celebrated as making a social breakthrough that will transform the economy.

"The first recorded jitney cab ride was in Los Angeles in July 1914 when L.P. Draper picked up a passenger in his Ford Model T and drove him a short distance. He accepted a nickel (known then as a "jitney nickel") for payment, because that was the streetcar fare at the time. Like a hybrid between a bus and a taxi, jitneys followed semi-fixed routes, but they were willing to veer from their routes to pick up passengers and to drop them off wherever they wanted.

In less than a year, the spontaneous entrepreneurial movement had spread from Los Angeles to Maine, with an estimated 62,000 jitneys operating in 175 U.S. cities. Traveling by jitney was generally an improvement over the crowded streetcar: Jitneys were faster, more convenient and often more comfortable. And the jitneys served their operators too, allowing people — particularly those who were unemployed — to use their existing resources to earn income.
The sharing economy isn't 'collaborative consumption,' it's 'disaster capitalism'
The sharing economy isn't 'collaborative consumption,' it's 'disaster capitalism'

But the new services soon met a wall of opposition — from powerful business interests that opposed the increased street traffic, from streetcar operators who saw the entrepreneurs as a threat to their very existence and from municipalities that relied on tax revenue from private streetcar companies. This newspaper, then firmly allied with L.A.'s civic elite, ran frequent articles critical of the jitneys, often referring to them as "pestiferous" and highlighting accidents in which they were involved.
cComments

In 1974, RTD conducted a small experiment allowing a few jitneys to operate on Wilshire Blvd. This coincided with a months long RTD Bus drivers strike. I was a regular rider of the Wilshire Blvd. Jitney during the summer of 1974. It was an interesting experience and I rode with a lot of...
boyleheights
at 10:53 PM August 10, 2014

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Cities responded with a wave of regulations that swept the jitney movement out of existence. Jitney operators were required to drive a minimum amount of time — up to 12 or 16 hours a day — and weren't allowed to deviate from their routes to take people directly to their destinations. Some cities barred them from operating along major urban corridors or along roads served by streetcars. And just about everywhere, jitney drivers had to pay for expensive licenses and bonding.

Los Angeles was one of the most aggressive cities. An outspoken leader in the crusade to crush the jitney, Mayor Henry Rose advocated a litany of regulations to undermine the jitney's advantages of flexibility, convenience and speed. Soon, it became virtually impossible for the jitney operators to operate profitably, pushing the population toward private car ownership by discouraging carpooling."
http://www.latimes.com/opinion/op-ed/la-oe-mitchell-jitneys-uber-ride-sh...

"Today, dollar vans and other unofficial shuttles make up a thriving shadow transportation system that operates where subways and buses don’t—mostly in peripheral, low-income neighborhoods that contain large immigrant communities and lack robust public transit. The informal transportation networks fill that void with frequent departures and dependable schedules, but they lack service maps, posted timetables, and official stations or stops. There is no Web site or kiosk to help you navigate them. Instead, riders come to know these networks through conversations with friends and neighbors, or from happening upon the vans in the street.

Vans have had a long and tumultuous regulatory history, with oversight changing hands several times in the past thirty or so years and drivers—who are largely immigrants themselves—facing police harassment. Since 1994, the New York City Taxi and Limousine Commission has been issuing van licenses, allowing vehicles to serve parts of the city with sufficient public need. Still, the number of illegal, unlicensed vans continues to outstrip by far the four hundred and eighty-one licensed ones. The licensed vans operate under highly restrictive rules, which forbid them from picking up along New York City’s innumerable bus routes and require all pick-ups to be prearranged and documented in a passenger manifest."
http://projects.newyorker.com/story/nyc-dollar-vans/

And this is why we need unions, and strong labour movements.
Corporations and business are generally only out for profit.
It's no wonder items like child labour, and short working weeks and paid leave had to be legislated for....no business would ever do this voluntarily, no matter what the Libertarians would have us believe....

yeah the strong unions and labour movements worked out real well for Greece eh?
not..

and Greece has what to do with NZ? Otherwise the classic balance to capital's power is unions....

On top of that much of Geece's problems was to do with the silly amounts of German military hardware it purchased, with EU/German loans. Compounded by the likes of Goldman sucks financial wizardry "helping".

They would if enough of their customers were willing to pay more for, or willing to pay only for, products provided by businesses which didn't use child labour, which allowed their employees short working weeks and paid leave etc. If this was something that customers cared about and were willing to pay for, companies could differentiate themselves and base their marketing on advertising how well they treated their employees.

If their customers aren't willing voluntarily to pay more for the products of companies that provide better benefits to their employees, then yes companies won't voluntarily provide them, any more than they will carry on producing anything else that customers don't want to buy.

If Government intervenes to force them to treat their employees better, then by extension customers are made to pay for something they don't want to pay for. It's not immediately clear why employees are a more deserving class of citizen than consumers, that a Government which is supposed to govern on behalf of all of us should use its power so to promote the interests of the former over the interests of the latter.

Are you so cold hearted and lacking in sympathy that you don't realize how horrendously calculating your argument sounds? Easy for you to say from your comfortably middle class social position, that people can entrust their welfare to the beneficence of consumers who maybe prepared to pay more for the goods that you produce or the service you may provide, but tough luck if they don't.

I don't know who you are, but I know what you are, a free market cultist, someone devoted to a social system that has never, and can never exist. If there is a corporate body which holds monopoly power over a territory, there will always be people who will take advantage of the institution to serve their own ends and exploit those around them. They will expropriate the property inhabited by others, drive them away to fend for themselves, secure control of the social mechanism for allocating resources, and exploit those who have no option, but work for those who possess one or other. Its a fact that Alfred Marshall, the father of neoclassical economics addressed at the end of the 19 th Century.

"In the long run the earnings of each agent (of production) are, as a rule, sufficient only to recompense the sum total of the efforts and sacrifices required to produce them . . . with a partial exception in the case of land . . . especially much land in old countries, if we could trace its record back to their earliest origins. But the attempt would raise controversial questions in history and ethics as well as in economics; and the aims of our present inquiry are prospective rather than retrospective." [Principles of Economics, p. 832]

"When a workman is in fear of hunger, his need of money is very great; and, if at starting he gets the worst of the bargaining, it remains great . . . That is all the more probably because, while the advantage in bargaining is likely to be pretty well distributed between the two sides of a market for commodities, it is more often on the side of the buyers than on that of the sellers in a market for labour." [Op. Cit., pp. 335-6]"

http://www.infoshop.org/AnarchistFAQSectionC1#sthash.57PMndGV.dpuf"

totally agree.

Actually were I am aware that companies pay a NZ living wage for instance I support them by buying their produce and avoid buying min labour outlets like McDonalds.

No, there should be a balance.

Uber is operating illegally. NZ law states that all private hire cars must have a preset pre-agreed price before the transport is made. But the cost given at the beginning of an Uber trip is only an estimate. The actual price is not given until the end of the trip which also adds waiting time. This means it is a meter just like a taxi and should be subject to the same rules and regulations that apply to taxis. The only difference is in a taxi you can see the meter running.

Politicians are purposefully ignorant. I wonder why? What could politicians possibly have to gain from allowing a multi billion dollar company to operate illegally? Hmmmm

There are many reasons why Uber is taking off, but it isn't really all that much to do with price. I feel more secure with a record of who the driver is than the idea that I am being filmed. Also, Uber users can use the app to track where the car is, so no leaving the pub early to stand in the Wellington rain until the ride arrives. These are both functions that the mainstream taxi providers can replicate, and should.