Tuesday, July 28, 2015

Krugman and Friends Don't Get Uber

Krugman's recent blog post on Uber and progressive politics is revealing. Progressives like Krugman want Uber and other players in the sharing economy under the control of bureaucratic regulation that ostensibly solves the problems of unfair employee treatment. The problem is that Krugman and other progressives seem unable or unwilling to explain what problems exist and how centralized, bureaucratic regulation will help. Krugman is in block quotes, I'm not.
You might not have thought that a taxi service would move onto center stage in our great political debates. But Uber actually is looking like a surprisingly important political issue. Why?
Well, Uber actually brings two things to the taxi market. One is the smartphone revolution, letting you tap a screen instead of standing out in the rain waving your arm, and cursing the guy who darts out half a block from you and snags the cab you were trying to hail.
The other is the company whose workers supposedly are free contractors, not employees, exempting the company from most of the regulations designed to protect employee interests. And it’s the second aspect that brings us into divisive politics.
Krugman clearly sees the advantages Uber provides its customers but goes straight for the regulatory playbook when it comes to the benefits employees reap from the sharing economy.
On one side, Republicans are eager to dismantle as many worker protections as they can. So from their point of view Uber’s not-our-problem approach to workers would be desirable independent of the technology.
On the other side, we’re recently seen the emergence of the “new liberal consensus“, which argues (based on a lot of evidence) that wages are much less rigidly determined by supply and demand than previously thought, and that public policy can and should nudge employers into paying more. If that’s your policy plan, you really don’t want to see employers undermine it by declaring that they aren’t really employers.
The link Krugrman provides says very little about evidence, relying instead on the supposed "superior" rhetoric of progressives. If people don't want to join unions, should they be forced to? If price floors create excess supply in other markets, why not in labor markets? Keep in mind, if labor markets are characterized by monopoly, an exploitable profit opportunity exists. What is keeping entrepreneurs from making money hiring underpaid workers?
It’s surely possible to separate these two issues, to promote the use of new technology without prejudicing the interests of workers. But progressives need to work on doing that, and not let themselves get painted as enemies of innovation.
 Krugman doesn't let us in on how this separation of the two issues can be accomplished. If firms like Uber are treated as traditional employers, rather than facilitators of mutually beneficial trade, the inefficiencies plaguing traditional providers of transportation and lodging services will rear their ugly heads. Air BnB will just be a cell-phone-enabled hotel service. Uber will be taxi service with an app.

The reality is that the firms that make up the sharing economy are successful precisely because they avoid the inefficiencies of progressives' pet regulations and provide a platform for mutually beneficial exchange between parties. These incredibly efficient electronic middle men allow providers of services to decide when, where, and how they work on a minute-by-minute basis. Krugman and other progressives need to spell out precisely how the regulations of yesteryear can improve this situation.

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