What does Uber’s Taxi App say about Taxi Regulations?

Getting a taxi in many cities has now been dramatically changed.  Uber is the mobile app that allows people to order a taxi ride from their mobile phone.  Potential customers need to download the Uber app and open an account.  Then, it takes a few clicks to order a taxi ride.  No need for a phone call.  No need to go outside in the rain and hail a cab.  Quite an idea.

According to L. Gordon Crovitz in The Wall Street Journal, Uber is valued at about $18 Billion based on recent investments.  That’s a hefty valuation for a start-up launched in 2010.  It’s also more than the combined valuation of Hertz and Avis put together.  The service is now available in over 100 cities in 36 countries, a far cry from its modest start in San Francisco.

Note that this service is not regulated like traditional taxis and limousine services.  Those regulations had a tendency to limit competition and prevent new entrants to the taxi and limousine service marketplace, while limiting to some extent customer service, supply, and convenience.

The Wall Street Journal article suggests that the $18 Billion valuation of Uber might represent the market estimate of the waste (or economic cost) of taxi regulations around the world.  Of course, regulations are like taxes.  They place an additional cost on products and services, while oftentimes not adding economic value to producers or consumers.

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