Category: Business

Thanksgiving “Monopoly” Money!

That a California state legislator lacks a basic grasp of economics should come as no surprise. But, when that lack of knowledge is coupled with the absence of considering even the obvious likely consequences, well, that should always be shocking and soundly rejected.

The latest bill that shows this lack of knowledge is San Diego Assemblywoman, Lorena Gonzalez‘s proposal to force large retailers to pay workers double on Thanksgiving. Showing how out of touch she is with economic reality, Assemblywoman Gonzalez views California retailers who provide needed jobs and products as “egregious perpetrators of expanding this idea of working on the holidays.”

Why she feels the need to demonize the very companies providing jobs to people in California, including her constituents, is beyond me. And does she not understand that these stores are open because their customers demand it? If she really wanted to address this perceived “problem” she should try to shame the people of California into not shopping on Thanksgiving. Good luck with that. Continue reading

The “Truth” About Tech and Libertarians?

Yesterday, Salon published what amounts to a hit piece on Uber. Since I recently spent a weekend in Miami using Uber and taxis to get around, and I’m a libertarian, I noticed several things in the article that need a response.

The article begins by generally disparaging Uber for implementing “surge” pricing during the recent hostage situation in Sydney, Australia. According to the author, Uber should be faulted for not acting in a “civic” manner and provide rides free of charge to people looking to flee the area. To the author, this callous disregard for people’s safety is an example of Uber’s lack of altruism and mindless self-interest. Also, this is why Uber is like Ayn Rand, or something.

Following up this cliche invocation of Rand to accompany any critique of libertarianism (even though I’m not yet sure why libertarianism is being mentioned), the article continues with the example-free assertion that “[t]here was once a time when we might have read of “hero cabdrivers” or “hero bus drivers” placing themselves in harm’s way to rescue their fellow citizens.” For some reason it’s Uber’s fault that there weren’t cabdrivers or bus drivers selflessly hauling people out of the area. Is it also Uber’s fault that people who drive their own car for Uber, or some other service weren’t practicing pure altruism? What about random citizens? Did Uber prevent them from jumping in their own car to help?

Obviously, Uber has nothing to do with that. As much as taxis, buses, and private cars could get into the area, they were doing so. The issue is that because of the crush of demand, there was only so much supply of rides available on public transportation and in taxis. Therefore, to encourage (keep in mind that people who drive for Uber choose their hours) drivers to go to a dangerous area and haul people out, Uber raised prices. If you happened to be a person wanting to get out and couldn’t get a cab, bus, train, or walk, you had an additional option to pay extra to get a seat in someone’s private car. “Surging” prices did nothing to take away any other options people had. Why should Uber be faulted for charging more to create something where without the extra cost, nothing would exist? In other words, imagine Uber didn’t operate in Sydney on the day in question. People would have had to rely on fewer, traditional modes of travel to escape. Fortunately though, Uber did exist and because of it’s ability to entice drivers to the area by raising prices (until people complained), more people were able to get a ride than they otherwise would have. That is a good thing.

Next, the author claims that the above is merely an example of how the poor and middle class will get priced out of needed services. What that attitude is actually saying is that in order to properly value lives, services that increase the available options for rides during a crisis should at least be forced to charge the same as the existing options, or even better, make them available for free. Well, that attitude assumes that everyone will react to a dangerous situation with pure altruism and come rushing to assist their fellow citizens. I don’t know about you, but I’m not willing to risk that assumption. It is far safer to allow available options to materialize during needed times. Granted, doing that may require paying more. The horror!

Following that, I agree with the author that classifying services like Uber as part of the “sharing economy” is inaccurate. True, it’s a business, not just “sharing.” However, Uber is not an “under-regulated taxi company.” Uber is a technology company that provides a platform for people to find a ride and for drivers to find passengers.

At the heart of the article’s next line of argument is the underlying message that people, especially those not in the upper class, are entitled to transportation in other people’s cars at a rate the passenger believes to be affordable enough. Well, there is no “right” to transportation. Instead, businesses and individuals have a right to attract passengers by charging fares people are willing to pay to ride in vehicles the passenger is willing to ride in. If the passenger doesn’t like the available options and public transportation or cabs aren’t available, they are free to walk, bike, call a friend or family member, or ask for the kindness of a stranger.

Expanding the argument to focus on Uber’s hiring and pay practices, the article then asserts that Uber underpays drivers and fails to provide benefits because there are government programs that drivers can take advantage of. My first response is to inquire into taxi driver’s pay and benefits. It appears that taxi drivers would like to be paid more and the vast majority also lack benefits. So why does the author only target Uber?

Nevertheless, even assuming that Uber does as accused, the natural response to that is “OF COURSE!” Companies provide benefits as a means of attracting talented candidates because they know if they don’t, their competitors will, and other things being equal, they’ll lose the potential hire. Well, this general rule supposes that employers are competing for talent. What the lack of benefits and lower wages suggest is that Uber has a glut of people wanting to drive, so they don’t need to offer them because enough people are willing to drive without having higher wages or benefits provided.

Further, since when has it been the role of businesses, that can’t exist without profiting, to provide people who CHOOSE to work there with a wage that is “adequate” (whatever that means) and with benefits? The author seems to think that people are just inherently entitled to have these things given to them. Richly, the author then complains that taxpayers have to provide these entitlements to people other than the companies that they work for. So what you’re saying is you want people to have them except when you have to pay for them? What seems to get missed is that the more a business will have to give its employees, the fewer employees businesses will hire, thus resulting in the government having to provide more.

Next, the article makes a tragic assumption about regulations. Ignoring the realities of public choice theory and regulatory capture, the author states that “[r]egulations were created because they serve a social purpose, ensuring the free and fair exchange of services and resources among all segments of society.” Having actually studied legislation and the forces behind it, that is a naive statement at best. The reality is that frequently, regulations actually function to benefit a well-connected organized industry at the expense of the public and consumers.

And, to then add on another layer of dangerous assumptions about regulations, the article assumes that “we” can somehow “streamline sclerotic city regulators, upgrade taxi fleets and even provide users with fancy apps that make it easier to call a cab.” What the author wants is Uber, only worse.

Essentially, the author holds Uber to an impossible standard. Where taxi companies are excused for mistakes because they are subject to government regulations, Uber is villified. An Uber driver misbehaving is somehow worse than a taxi driver misbehaving just because the taxi company played by the rules. That’s just “because the law says so!” stated a different way.

No, whether an Uber driver or a taxi driver misbehaves is equally bad. Both drivers should be held accountable. If Uber’s system of protecting passengers isn’t working, then Uber should be accountable for that. Same goes for taxi companies. Just because taxis operate under older laws doesn’t mean they are sacrosanct. What is good is that we are seeing alternatives created so that we will actually know which system best accomplishes what passengers want. Competitive approaches will actually benefit us instead of just assuming that what taxi companies use is better because its the law.

Next, the author, and the cite used, mischaracterize Uber’s auto loan referral program. Advertising an additional source for obtaining an auto loan is a far cry from “pushing” drivers into sub-prime loans. Additionally, it’s quite a leap to imply that the mere advertising of the lending option means that relatively many drivers are getting involved with economy-crashing sub-prime loans rather than acquiring auto loans through the numerous other traditional means.

Nonetheless, the author is correct to point out troublesome activities that Uber does engage in regarding passenger information, espionage, and deceptive practices. While I use Uber whenever I can because, in my experience, it is FAR superior to the regular taxi experience that I am forced to use if I want to hire a driver in New Orleans, I am not blindly going to defend Uber. However, the proper way of dealing with bad business practices is for members of the public or the press to make the public aware. If Uber doesn’t respond and their customers or drivers are sufficiently displeased, Uber will eventually pay for their ways in decreased profit or even business failure. Unfortunately, this mechanism isn’t as neatly available to punish taxi companies for engaging in bad behavior because governments support them through existing regulation. Therefore, what should be called for is deregulation of the taxi industry so that the public can hold all companies responsible for bad business practices.

Finally, the article also says “[p]eople who work hard deserve to make a decent living. Society at large deserves access to safe and affordable transportation.” While I won’t repeat myself about the harmful attitude of entitlement, I will add important clarifications to these sentences:

People who work hard deserve to make the living that reflects the value they created or added through their hard work. All hard work is not equal.

Society at large deserves access to transportation options they are willing to pay for. That access does not entitle one person or group of persons (i.e. government) to require another person to provide that access for less than they could get from a voluntary exchange.

While I certainly cannot speak for all libertarians, after reading the article I’m not sure the author has ever really talked with any of us. At a minimum, the author seems to misunderstand what we stand for. Hopefully I have been helpful in clarifying what the “truth” is.

Louisiana Means Licensing

Received this email from the Institute for Justice yesterday. This shouldn’t come as a surprise to regular readers.

Louisiana Means Licensing

Friends,

Louisiana is ground zero for one of the greatest threats to economic liberty in America: occupational licensing. An occupational license is just what it sounds like—a government permission slip to work in a particular field.

Licensing Fail: Map of states which license florists
In our groundbreaking study of the nationwide licensing of 102 low-to-moderate income jobs, License to Work, we found that Louisiana licenses more occupations than any other state in the country: 71! For example, Louisiana is the only state in the country to license florists. Many of these laws have nothing to do with protecting the public’s health and safety, and instead provide protection to industry insiders.

We’re looking for entrepreneurs struggling to escape unconstitutional licensure. If you or a loved one are fighting for your right to earn an honest living, let us know today by visiting ij.org/action/report. 

Airbnb or Not2b?

Renting out space in your home to travelers provides an easy means to make ends meet, and offers greater options to visitors to your city. But the Big Easy does not want to make this easy. The New Orleans City Council has voted to outlaw residential rentals for periods of less than 30 days. This effectively bans the use of popular websites like Airbnb. Show your support for property rights, economic liberty and southern hospitality by visiting this petition to legalize short-term rentals in New Orleans. Read more…

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Potential Uber Vote Coming

Tomorrow, August 14, could see a vote from the New Orleans City Council on the pending ordinance updates to the luxury, for-hire vehicle (sedans and limos) code. Of course, Uber’s luxury sedan service, Uber Black will be impacted by the result of the Council’s decision.

I have previously written at length about the issues at play here and here. To briefly sum up the main points:

1) Removing the 3 hour reservation requirement is good.

2) Leaving in place the requirement that luxury vehicle companies own at least 2 vehicles serves as a barrier to entry for entrepreneurs who can only afford to break into the market with one vehicle. This requirement should be repealed.

3) In spite of Council President Head and advisor to the Mayor, Ryan Berni’s fun with words, adjusting the minimum fare formula is still price fixing. Creating an arbitrary, artificial difference, by law, between fares that taxis and luxury vehicles can charge only accomplishes economic protectionism. The existing vehicle companies, especially taxis, are using the government to force people to pay more than they otherwise might.

In short, it is not the job of the government to protect an entrenched, traditional industry from competition. Whether taxi owners like it or not, technology will eventually force them to truly compete with newcomers like Uber and Lyft, or go out of business fighting it.

Rather than trying to use the government to prolong the status quo, they should instead focus their energy on lobbying for fewer government mandated restrictions on their operations. Services like Uber show that the public can still be protected without the current burdensome regulations imposed on for-hire vehicles.

While it is a welcome sight that the city is taking a fresh look at the current laws, a more basic overhaul is what is truly needed for the New Orleans transportation industry to truly thrive and become something we can be proud of in a city that prides itself on creativity and innovation.

The City Council meeting is scheduled for 10AM at City Hall.

*UPDATE* According to multiple reports on Twitter, the Council voted to table a vote on this issue until the September 4th meeting.

A Man’s Home Is His Licensed, Regulated, and Taxed Castle

If you have ever rented out a room in your home for the weekend to earn a little extra cash and make a new friend, you may be a criminal.  If you have taken the effort to fix up an investment home and believe you can make a higher profit renting it to people on a short-term basis instead of in traditional, six month or year-long leases, you may be a criminal.

If you have ever left town for Mardi Gras or Jazz Fest to avoid the crowds and rented your house to someone for the festivities, you are a criminal.

While 84% of Americans disagree, that is the attitude of some hotel and bed and breakfast (B&B) owners and a few disgruntled neighbors of short-term rental properties in New Orleans.

On July 10, 2014, the New Orleans City Council voted to clarify the law making all residential rentals of less than 30 days (60 days in the French Quarter) illegal. This certainly isn’t the first time the City Council has found itself in the middle of a debate between supporters of newer, disruptive businesses and technologies that shake up the status quo, and those who argue that the newcomers are scofflaws who unfairly threaten the bottom line of existing businesses. In 2013 it was food trucks, earlier this summer Uber entered the conversation, and now it is short-term rentals like those found on websites Airbnb and VRBO.

This time around, prohibitionists are displeased that owners of these “illegal” short-term rentals are able to avoid inspections by the city and are not paying occupancy taxes on their rentals. Some neighbors complain that weekend renters make too much noise, litter, take up parking, and ruin the character of their neighborhoods.

This story should come as no surprise to regular readers of the Liberty in Action blog. San Francisco, “the city with the highest median rent rate” in the country, has banned short-term rentals despite having a problematic housing shortage. Issues have also come up in Grand Rapids, Michigan and New York City.

Nonetheless, in New Orleans, an outright ban is counterproductive and unnecessary to address the chief complaints because there are pre-existing legal mechanisms in place to handle problems perceived to arise from short-term rentals.

First, for those concerned with the safety of a property that isn’t subject to the same inspections as licensed hotels and B&Bs, the New Orleans Department of Code Enforcement is authorized to enforce code compliance on all buildings in the city. Second, neighbors worried about loud renters or litter can already use nuisance laws to address these issues through the District Attorney’s office.

Third, those worried about bed and breakfasts suffering from unfair competition because “illegal” property owners don’t pay taxes should remember that only larger businesses with three or more units pay occupancy taxes, not all licensed B&Bs. In any event, these properties are still subject to regular property taxes. Fourth, street parking on public streets is just that, public. Therefore, a permanent resident of the neighborhood has no more of a claim to a spot than anyone else does.

Finally, attempting to define the character of a neighborhood and debating whether short-term rentals negatively impact it are certainly not immune to significant subjectivity. What to some are transient outsiders, are to others an opportunity to make new friends and leave a good impression about the city to encourage future visits and spending in the community.

Nevertheless, the City Council seems to be open to future legalization and regulation measures. To that end, a group of property owners who rent property on a short-term basis have organized to draft an ordinance and have commissioned a study by the University of New Orleans to analyze the economic impact of short-term rentals. This is a better approach.

Leaving arguments aside as to what additional regulations, if any, are necessary, legalization of short-term rentals is the best decision for three reasons. Short-term rentals help fill properties that may otherwise sit empty, providing an additional incentive for property owners to renovate their property and return it to the housing stock, and lessening opportunities for crime carried out against or within vacant homes. Entrepreneurs are able to create an additional stream of income whenever they need it by renting out rooms in their home. And an additional option is made available for visitors to New Orleans who prefer arrangements that aren’t provided by hotels and traditional B&Bs.

As shown above, the law already provides solutions to safety issues and unruly renters. Instead of a blanket ban to appease a vocal minority, New Orleans should legalize short-term rentals and allow residents and visitors alike to reap the many benefits while focusing enforcement efforts on the few bad apples by using already existing nuisance laws.

By taking this approach, instead of uniformly branding entrepreneurs as criminals, negatively impacted neighbors can have potential problems addressed while still allowing entrepreneurial New Orleanians the ability to create a more robust housing market. Who wouldn’t enjoy more housing options, fewer vacant and blighted properties, and an additional income stream whenever you need it?

You can show your support for legalization by visiting this petition.

*This post originally appeared at the Institute for Justice, Liberty in Action blog.