Who's Afraid of Uber

Abstract

Ride sharing has disrupted the transportation-for-hire industry, breaking down barriers to entry that have protected incumbents in the industry for decades. The disruption has led to calls for increased regulation, along with criticisms about the effect of innovation on consumer safety, market stability, rule of law, and others. And yet, that disruption has also led to tremendous benefits to consumers, as they are freed from a regulatory regime that limited their transportation choices and forced them to pay higher prices for lower quality service. The same type of disruptive innovation is upon us in almost every area of our economy, and how we deal with it will determine whether the law will finally free consumers from the grasp of entrenched and privileged incumbents, or whether the combined forces of those incumbents and their erstwhile allies in academia will lead to a regulatory retrenchment. The article concludes that opposition to innovation rests on a Galbraithian foundation that holds a dim view of human nature, and that greater reliance on Smithian assumptions would serve us better as we decide how to deal with innovation and its disruption. The article also concludes that innovation is inevitable; if the law seeks to inhibit it, it merely guarantees a greater disruption when it finally arrives.

JEL Classification: D02, D11, D18, D21, D23, D43, D62, D72, D73, D82, K23, K42, O31, O33, O38, P16, Z18