Thanksgiving is a time to reflect on trust and to be grateful for its presence in our lives. Originally, Thanksgiving was a celebration of trust between two different peoples, the indigenous Indians and the Pilgrim settlers. Despite their different cultures and religions, they were able to trust one another enough to contribute food to a feast and sit down to dine with one another.
Today Thanksgiving is quintessentially a family celebration. At its best, it is suffused with trust because the family is a locus of trust. Because of the bonds among kin, for most of human history much commerce took place among extended families. And most of the rest of it took place between people who were known to one another. Being a repeat player who must live in a community inspires trust in others, particularly past eras when being ostracized was very costly.
But as civilization developed, communities became larger and the opportunities for gains from trade extended beyond those that could be easily satisfied by family, new institutions had to arise to police trust.
Many people, particularly on the left, argue that the modern economy is increasing inequality. But, as I have discussed before, important trends in innovation increase equality. One example of these equalizers is the sharing economy. The ideas of a law and economics theorist of the developing world show how this new economy generates a greater return on the assets that people of modest means are most likely to own.
Economist Hernando De Soto recognized that much of the capital in developing nations was locked up. For instance, squatters lacked property rights in their houses even after decades of living there and improving the land. But legal reforms providing capital can greatly enliven previously dead capital in those nations. When a squatter becomes a property owner, he can mortgage his property and use the proceeds to start a small business.
The advantages of these legal reforms go almost entirely to people of modest means. Not only did the rich generally always have formal title to their real property, even more importantly real property is a much smaller proportion of their total assets, which are mostly financial securities.
Similarly, the sharing economy enlivens important capital assets in the developed world. As Daniel Rothschild suggests, this unlocking creates prosperity. But it also boosts equality because the assets it enlivens are those which make up most of the wealth of people of modest means.
Google and our elite universities appear to inhabit the same ideological bubble and intone the same diversity mantras. And that is not surprising, because almost everyone at Google is a product of the modern university and those at its HR department the likely product of its more PC inflected half—the humanities or soft social sciences. And Google must live within the world of mainstream media and government regulation, and these two sectors are also dominated by elite university graduates of the last quarter century.
But nevertheless the institutions and their employees operate under different constraints. Google is the elite university without tenure and the elite university is Google without market discipline. You might think that tenure is the more important obstacle to enforcing an orthodoxy like modern diversity policy. After all, a professor at an elite university would not be fired for making the largely accurate factual claims about the average differences in temperament between women and men that the Googler did in the memo that got him sacked.
Uber is a company under attack by politicians and the media. Many politicians, like Bill De Blasio, want to restrain its growth to protect incumbent cab companies. Others want to undermine its business model by requiring that its drivers using its devices be employees rather than independent contractors. The New York Times recently ran a story clearly suggesting that the company is using unfair psychological tricks to keep drivers picking up customers.
These complaints lack merit. Protecting incumbents against new forms of competition is a classic harm to consumers. Uber drivers do not meet the traditional criteria for employees because, among other factors, the company does not control their hours or place of doing business. And as Geoffrey Manne shows, the management innovations Uber introduces through the understanding the psychology of workers have benefits to consumers and drivers alike.
But the assault on Uber also ignores a hugely important effect of company and similar services: they reduce inequality— which these same politicians and mainstream media argue is the most important issue of our time. Uber improves both the material condition of the middle-class consumer and the lower-middle-class driver. First, the consumer gets a service that starts looking more like having a chauffeur than a taxicab driver. For instance, he can summon a driver without previous notice and within minutes by pushing a button on his phone in the comfort of home rather than hail a taxi in a storm.
Regulating cyber-commerce is controversial. The advent of smart phones and web-based interfaces has facilitated many new consumer services. Customers using these digital platforms often insist that existing regulatory models are outmoded and simply shouldn’t apply to new technologies.
As do the companies. When residents of Austin, Texas recently rejected Proposition 1—an ordinance proposed by Uber and Lyft—it generated national attention around this important question: How should a free society deal with innovative new technologies? Should existing regulations apply, should exceptions be made, or should the collision between existing rules and innovation cause us to re-examine the existing rules altogether?
One of the great pleasures of using Uber is talking to drivers about why they have chosen to use the service. Almost to a man (and so far all my drivers have been men) they celebrate being their own boss. They decide when and where they would like to drive and even what model of car they will use.
Their ebullience about Uber is also informed by their previous experiences as employees. Quite a few previously worked for limousine companies and had difficulty getting along with management. One was summarily fired to make way for a nephew of the owner.
Their independence has social and political as well as personal benefits. It is striking in my conversations how aware they are of regulatory threats to their business and of the price of inputs, like insurance. Their knowledge translates into a healthy skepticism of government intervention generally. The political sensibility that comes from being in small business is one of the greatest bulwarks of liberty.
In a blog dedicated to formulating and promoting classical liberalism, it is useful at year’s end to evaluate the state of these ideas in the politics and culture of our nation. And sad to report, classical liberalism is now weaker than it has been for decades.
Last weekend I was in NYC visiting family and friends, and I had the chance to use Uber for the first time. In fact, I used it 6 or 7 times during the weekend, since I needed to visit various people. As compared to the normal yellow cabs, it was a glorious experience.
I had, of course, heard about Uber – see this great Econtalk interview with Mike Munger – but had not had the chance to use it out in San Diego, where I drive my own car everywhere. It turned out to be as good as everyone says it is.
First, the app gets you a car quickly. You don’t have to call a service far in advance and you don’t have to go out on the street and hail a cab. It simply comes – usually within a couple of minutes – to where you are. What is more, the app is reliable. When it tells you 3 minutes, it usually is. Further, it shows you a little map, and you can follow your cab as it approaches from a distance.
I cannot remember a time when New York’s Governor and New York City’s Mayor taken together pose a greater threat to liberty and prosperity. Last week each proposed a dreadful policy. Governor Andrew Cuomo succeeded and Mayor Bill de Blasio failed. The different outcomes tell us a lot about what makes some statist proposals more likely to take effect and how to resist them.
Cuomo got his Labor Board to hike the minimum wage to $15 an hour for fast food workers throughout the state. I will not repeat my general arguments against substantial minimum wage hikes. But even minimum wage advocates concede that such sector specific wages will distort the labor market and create a less efficient mix of businesses. Moreover, any law that requires paying someone at McDonald’s in Troy, New York $15 an hour while someone working at Home Depot in New York City $9 an hour is patently irrational given the much higher cost of living in the city.
For his part, de Blasio proposed capping the growth of Uber in New York City ostensibly because the extra cars on the road were causing congestion, but in large measure because the taxi companies are some of his biggest supporters. Even if city streets were becoming more congested it is not economically rational to single out Uber. There is no reason to believe that the customers it serves are getting less benefit from driving around New York than those who take taxis or drive themselves.
What is interesting, however, is that the city council shelved this proposal.