Uber cannot be punished because the taxi industry is incapable of successfully competing with it.
We expect everyone to hate Uber. Bernie Sanders hates Uber. Hillary Clinton hates Uber. A judge in California rules against Uber. So when you hear that a judge in New York City has ruled on Uber, there is not much reason to be optimistic.
But the court’s ruling was shockingly good!
Crain’s New York Business reports, “Judge rules on taxi industry lawsuit: Compete with Uber or die.”
A state judge has slammed the door on a legal challenge by opponents of Uber, clearing the way for the rideshare giant to run traditional taxis off the road.
In a decision unveiled Wednesday, Queens Supreme Court Justice Allan Weiss ruled that for-hire vehicles could use electronic hails to compete with yellow cabs—something they have been doing well enough to threaten the existence of the iconic 80-year-old industry.
If that means yellow-cab medallions worth a collective $10 billion or so just two years ago become worthless, the judge suggested, so be it.
“Any expectation that the medallion would function as a shield against the rapid technological advances of the modern world would not have been reasonable,” he wrote. “In this day and age, even with public utilities, investors must always be wary of new forms of competition arising from technological developments.”
This ruling is doubly beautiful. First, it expects Uber and the Taxi industry to freely compete. Secondly, it points out that investors get rewards because they assume risk. Thus, it is illegitimate to expect the government to cancel that risk.
Sadly, the ruling will be appealed and I don’t know what chance we have of there being more than one rational judge in New York. (I’m shocked that there was even one!) The representatives of the Taxi industry are basically saying that we must have bailouts and interventions forever or else the economy will collapse.
“In the meantime, however, a catastrophe is unfolding, as an entire industry continues to be illegally destroyed, while elected officials allow it to happen on their watch,” their lawyer Todd Higgins said in a statement that apparently referred to defendants Mayor Bill de Blasio and Attorney General Eric Schneiderman. “It is a stunning abdication of leadership and responsibility that will haunt New York City for years to come.”
The “catastrophe” he cited is the possible slew of loan defaults in the coming months if owners stop making payments on medallions that have plunged in value since peaking at more than $1 million and don’t generate enough income for the borrowers to repay their debts. No medallions have been sold since February, when two went for $700,000 each. A wave of foreclosure auctions could reveal that the market now considers medallions to be worth substantially less, which could trigger more defaults and auctions—a so-called death spiral.
Judge Weiss made clear that that’s not his concern. “It is not the court’s function to adjust the competing political and economic interests disturbed by the introduction of Uber-type apps,” he wrote.
If we had more people in power like Judge Weiss back in 2008, we would never have had to suffer through the national crime that was the TARP bailout. Soon, I fear, we will hear such cries for bailouts again. I doubt most of our rulers will share Judge Weiss’ sense of fairness and commitment to a limited role for government.