Catalyst: In Defense of Uber, Lyft, and Ridesharing

Imagine a hypothetical: you live in a city and don’t own a car, but have an urgent need to travel to a certain area quickly. What mode do you use?

Many people would avoid the public transit systems in their cities, because those often don’t feel reliable. Instead they might use one of the micro-transport modes I described in part 1 of this series: a shared bike, scooter or moped that they personally can control, and take directly to their destination.

But if they are dressed up and don’t feel like riding a mode that’s laborious and dangerous, they will likely hail what I view to be the next step up from micro-transport, and the subject for article 2 of this series. That is, they will hail a vehicle from Uber, Lyft, or some other rideshare company.

This speaks to the broad benefit that is rideshare: an industry providing cabs cheaply and ubiquitously at the tap of a phone has brought a new level of freedom and mobility to urbanites.

Before rideshare, many non-car-owning residents felt “stuck”, dependent on public transit or scarce and expensive taxis (more on that in a bit). Rideshare companies leveraged technology and the larger sharing economy to out-compete those services, and the result is that cities are now easier places in which to get around.

But rideshare has come under fire in the U.S. for the decade it has been available. Yellow taxi drivers oppose it for disrupting their industry. These drivers once thrived on a medallion system that artificially limited cab numbers. The system was designed to prevent congestion, but also amounted to protectionism for those who already owned permits.

The rideshare industry—led by rogue entrepreneurs like Travis Kalanick—effectively destroyed this model by flooding the streets with unlicensed, informal cabs. It was such a hard service to police, and grew so popular to the public, that city governments finally legalized it and now these rideshare cabs are everywhere. While taxi drivers—who purchased medallions, often for 6-figures, only to see them devalued—might have a case for reimbursement from city governments, the rideshare companies that replaced them are still objectively better for consumers. A cab industry that had long been overregulated was finally liberalized.

Another argument against rideshare comes from public transit interests, who also don’t like the competition. They argue that rideshare cannibalizes public transit, making it harder to form the critical mass of riders needed to justify service routes. Of course, the opposite line of argument is that rideshare actually bolsters transit by solving the first-mile last-mile problem. It’s hard to verify either argument, because different surveys and studies [here and here] come to different conclusions.

Either way, I find that argument ridiculous: there is nothing in the American legal and social contract stating that the public option should be the only one available. We don’t outlaw private schools and force everyone to go to public schools, nor do we outlaw private gyms so the only option is government rec centers. This is America, and people should be allowed to pay for the services they want.

But a third opposition comes from urbanists, who channel but also add to these previous arguments. In the Streetsblog article “All the Bad Things About Uber and Lyft In One Simple List”, Angie Schmitt notes how these services increase VMT and congest city streets. She writes:

“The promise of companies such as Uber and Lyft was that they would ‘free’ city dwellers to sell their cars or not acquire them in the first place….But a University of Chicago study found the presence of Uber and Lyft in cities actually increases new vehicle registrations. That’s because the companies encourage lower-income people to purchase cars, even advertising in some markets how people should put that new car to use — as an Uber.”

For this reason, some urbanists call for special fees or caps to rideshare, or outright bans. I share their concern about congestion, but don’t think rideshare companies should be isolated for blame. Instead I would advocate for general road pricing: if an area is congested, charge all the vehicles that enter it, based on how many miles they drive. Whether or not the vehicle is single-occupancy or a rideshare shouldn’t matter.

This would mitigate some of the externalities rideshare creates. There would be less “deadheading”, where empty cabs drive around searching for passengers. Instead road pricing would encourage cabbies to drive only when and where demand exists.

Another effect of road pricing would be to make rideshare trips more expensive, which would encourage riders to split costs by pooling together. Uber and Lyft already offer pooling services that account for a sizable portion of these companies’ overall trips (according to Uber it’s 20%).

Granted, many of these ride pool trips group just 2 or 3 passengers. But the more these companies scale, and the higher the road pricing is set, the more these carpool trips would likely evolve into a larger “flexbus” paradigm that moves 5, 10, or even more people. Then, what was before functioning as “rideshare” could more realistically be called “mass transit.”

As I will note in the next article, this rideshare-to-transit conversion is a natural outcome where open transport markets are allowed worldwide. It rebuts the urbanist critique that rideshare increases congestion and VMT; if the services are subject to road pricing and can scale into larger transit services, they will reduce such ills.

But even if that scaling never happens and rideshare remains a service primarily for moving 1 or 2 patrons at a time, it is still fundamentally useful, enhancing the flexibility of urban life. For that reason alone, rideshare should be celebrated by urbanists.

Rideshare case study: New York City carshare
One rideshare model that avoids some ingrained flaws of Uber and Lyft is carshare. Rather than hailing a driver, patrons rent cars on a short-term basis—even a few minutes—and drive the car themselves. Companies like Zipcar and Enterprise CarShare provide these fleets along city curbsides, and much like bikeshare, patrons find the nearest vehicle via app.

This prevents the deadheading of normal rideshare, because cars are used only when needed and remain parked the rest of the time. Because there is no driver to pay, it also makes provision cheaper, opening the benefits of shared automobility to a wider range of people.

New York City has a carshare pilot underway. In 2018, it designated 285 public parking spots along curbs and municipal lots to be used by carshare companies. Each company paid a one-time fee of $765, and agreed to provide discounted fares. This was done mostly in low-income outer-borough areas that were poorly-served. The idea was to make carshare so available that it reduced the need for car ownership.

With this pilot the city made a point—much as I have in several Catalyst articles—that curb space can be used for something besides free parking. That doesn’t mean the pilot has caused carshare to scale across all of New York City. For that to happen, the city needs a larger market-based system that allows carshare companies to lease as much curbside, in as many locations, as it sees fit.

Scott Beyer is the owner of Market Urbanism Report, a media company that advances free-market urban policy reform. He also writes columns for Catalyst, Governing Magazine, and HousingOnline.com. Follow him on twitter: @sbcrosscountry

Flexible Work for New York