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Let’s compare and contrast two viewpoints on Uber and see what that tells us about one’s trust of market forces vs. trust of government force.
1. From Steve Horwitz’s article in The Freeman “Uber Solves the Fundamental Problem of the Marketplace (Or, Turning Strangers into ‘Honorary Kin’)“:
As an economic innovation, Uber exemplifies the way creative entrepreneurs discover new methods of providing better, less expensive consumer products and services. It also demonstrates how such creativity helps people navigate around barriers to entry created by government regulations that, though designed to protect consumers, end up protecting incumbent firms.
The fundamental problem of markets is the need to establish trust among strangers. In a wonderful book called In the Company of Strangers, Paul Seabright explores this formulation in great depth. He argues that for markets to work more fully, we need various institutions that allow strangers to be less suspicious of one another. We need to turn them into “honorary friends,” or in my own preferred version, “honorary kin.”
After all, what makes us willing to get into the backseat of a stranger’s car? With taxis, there are the obvious markers that are designed to generate trust: yellow or green paint, a corporate name, and the name and picture of the driver, among others. Many of those markers are possible because of the corporate structure that puts all of the drivers in similar-looking vehicles with the same company’s name.
That is not how Uber works. Not only are you getting into the backseat of a stranger’s car; you are getting into the backseat of their personal vehicle, which has no obvious marking that it is intended to provide rides to strangers. But Uber overcomes this apparent problem in several ways that make clever use of technology. When you request your ride, you are immediately given identifying information about the driver and car, including a thumbnail picture of the driver, the color and make of the car, and its license plate.
An additional way in which Uber establishes trust is by using GPS technology to show you exactly where your car is and how long (and what path) it will take to get to you. Watching the car drive up on the Uber app as you see it in front of you is a major signal of trust. Uber also gives you a cell number for your driver, which is useful if the pickup location is ambiguous. It also makes retrieving anything you left in the car much easier. Have you ever tried to get a lost item back from a cab company?
Uber also establishes trust through its rating system, which works much like those of eBay and other online, anonymous exchange-based sites. Riders rate drivers, and the driver’s rating appears alongside the identifying information about the car. Drivers rate riders, too, so if you misbehave in a car, you are less likely to get picked up the next time you need a ride. After all, sellers also have to trust buyers!
Finally, Uber has the profit incentive. If drivers are not trustworthy, people will not use the service, and Uber will suffer. Notice that taxi companies with various forms of government protection from competition (e.g., the taxi medallions in New York City) do not face the same strong incentive effects here. They don’t have to please their customers in quite the same way. And that might explain why my recent Uber driver had a bottle of water waiting for me in a very clean, very comfortable, and relatively new car. That does not describe most taxi rides in most cities.
Living out beautiful anarchy by finding ways around the state and crony-capitalist providers like cab companies requires that the alternatives, such as Uber, solve the problem of turning strangers into honorary kin. Thankfully, modern technology, such as the combination of GPS, electronic payment, and smartphones that Uber and other services in the sharing economy are using, provides effective ways of doing so and makes us willing to get in the backseats of strangers’ cars as if they were the backseat of our parents’ minivan.
2. Now compare that to this critical and unappreciative report on Uber from Detroit Free Press columnist Mitch Albom:
I am from the generation whose mothers preached “Don’t ever get in a car with a stranger!” So right from the start, Uber had me nervous. Let’s see. You download an app onto your phone. You type in where you are. A driver you never met before suddenly appears, knows your name and has a loose connection to your credit card. The vehicle may be a Lincoln, an SUV or a six-year-old Kia, the same car the driver just took to the grocery store, or, for all you know, the drug pickup. You get in.
Well. You get in. I am standing on the sidewalk, still trying to get the iPhone turned on. Uber, based in California, is a techie-first phenomenon, belonging to the generation that believes nothing bad could happen from sharing every piece of personal information with the entire universe. My generation is more afraid. Actually terrified. And perhaps, in the end, more practical. We are also dinosaurs.
So while young people gleefully hail Uber cars on their way out of bars, and cities everywhere argue over whether Uber unfairly competes, avoids taxes or influences legislation, Baby Boomers are still mumbling, “Wait, you just get IN the car? And the driver could be ANYONE?” Well. Sort of. To be an Uber driver, you do have to sign up. And, according to Uber, you undergo some sort of background check, although the depth of that check seems in question.
The drivers, who, as Uber advertises, work only when they want to (lest Uber have to pay them salaries, benefits and all that yucky old-fashioned stuff) and supposedly have to pass a driving test. But you don’t have to look far (like a Forbes magazine article) to read stories of applicants who were given an Uber cell phone with no driving training and told to get out there and start making money.
So, dinosaurs like me (you know, anyone over 26) wonder how this is much different than trusting your life to the car that just pulled up when you had a flat tire. After all, Uber bills itself as “the world’s safest, most reliable ride,” but that’s pretty hard to believe when someone like me could be driving for them in a matter of days. Just ask my family. They see me pull up, they turn the other way and stick out their thumbs.
But then, we are a generation that likes its cabs yellow and its hands free. I guess it’s archaic to believe that uniform cars, a state or city licensed organization, regulation and full-time drivers make for a more reliable transportation system. Maybe we’re too nostalgic. But at least cabbies used to get their information through a radio dispatch. Uber drivers are like musical chairs — closest one wins. And their customers come through cell phones. When your business depends on how quickly you read an app while behind the wheel, I get nervous.
This is not to say Uber is a bad idea. It isn’t. But like most tech-based ideas, it turns muddy when human beings get involved. There have already been several alleged assaults between Uber drivers and passengers. And Uber drivers complain there are too many of them now to make the promised money.
Maybe you trust Uber, maybe you don’t. To me, this is about a larger notion, that everybody is a specialist as soon as they start doing something. You blog, you’re a journalist. You sell an eBay item, you’re a retailer. It’s an egalitarian approach to life, we can all do anything, have anything, share everything, someone else’s music, someone else’s movie, someone else’s car.
MP: It seems like those most skeptical and critical of Uber and the sharing economy are those of the progressive and liberal political persuasion – like Mitch Albom. Reason? Progressives seem to trust the heavy hand of government force more than they trust the invisible hand of market, they have more faith in regulated monopolies/cartels (e.g. Big Taxi, public schools) than market competition (Uber, charter schools), and in general favor government solutions and government force over market solutions and voluntary exchange. Or put differently, progressives don’t believe in the magic or miracle of the marketplace, they don’t trust the market and have instead learned to subjugate themselves to the power of the state, with its volumes of liberty-crushing regulations and armies of regulators.
One’s position on Uber tells us a lot about their economic and political views and their relative trust of the market to regulate itself through vigorous market competition versus their trust in the power of the state to regulate, but so often, stifle the market to the detriment of consumers. In the end, it’s another opportunity to invoke Bastiat’s words of wisdom from 1850: “Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.” When it comes to transportation, there’s no question that Uber is doing a much better job of serving the interests of the consumer and the human race than Big Taxi by offering lower prices and faster and better service. As the world progresses forward and consumers increasingly choose Uber and Lyft over Big Taxi when they have a choice, the “progressives” aren’t being very “progressive” in their thinking.
Steve Horwitz 1, Mitch Albom 0.
The new era of the $400 college textbook, which is part of the unsustainable higher education bubble
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A new milestone must have been established recently – we’re now officially in a new era of the $400 new college textbook and the $300 used college textbook, see graphic above showing the top 15 most expensive textbooks at the University of Michigan-Flint based on a new unpublished report by Matthew Wolverton, an electronic resource management librarian at the Thompson Library (UM-Flint’s library). The graphic below shows the most expensive college textbooks by discipline at UM-Flint, based on the average price of new textbooks for each discipline in winter 2015 semester.
For business students taking five classes per semester and paying an average of $250 per textbook, their textbook bill would be $2,500 per year and $10,000 over four years! Of course, those students would be taking courses in non-business disciplines where the average textbook price is lower, but even at an average price of $200 per new textbook, students could be facing costs as high as $8,000 over four years. And even though renting textbooks is a less expensive option compared to purchasing books, rental costs per semester are running above $200 per new book and well above $100 per used textbook (and as high as $180), see top graphic above. Even if students could rent used textbooks for all of their college classes at $100 per course (which is probably on the low side), that would still amount to $1,000 per year (for ten classes) and $4,000 over four years (for 40 classes).
The graph below shows the historical increase in college textbooks (981%) between 1978 and 2014 in comparison to increases in the overall CPI (262%), the CPI for medical care (604%), and the median sales price for new homes (408%) over that 37-year period. Textbook prices seem like they are clearly on an unsustainable trajectory, especially in the face of new low-cost alternatives as discussed below.
And just in case the rise in college textbook prices could be blamed on the increasing costs of publishing books in general, the chart below clearly shows that that’s not the case – the CPI for recreational books has been falling relative to the overall CPI since 1998, while the CPI for college textbooks has risen 3.5 times more than the overall CPI.
Bottom Line: The astronomical rise in the price of college textbooks is part of the unsustainable “higher education bubble,” which now even has its own Wikipedia listing here, and which Glenn Reynolds writes about in his 2012 book “The Higher Education Bubble,” summarized below:
America is facing a higher education bubble. Like the housing bubble, it is the product of cheap credit coupled with popular expectations of ever-increasing returns on investment, and as with housing prices, the cheap credit has caused college tuition to vastly outpace inflation and family incomes. College tuition payments have rapidly risen far faster (tuition and fees up 440+% from 1982 – 2007), vs. cost of living increases of 106% and family income growth of 147% during the same period, while the rate of return for a college degree is decreasing. Now this bubble is bursting.
Glenn Harlan Reynolds explains the causes and effects of this bubble and the steps colleges and universities must take to ensure their survival. Many graduates are unable to secure employment sufficient to pay off their loans. Already we have about $1 trillion in outstanding student loans, many in default (payments are being made on just 38% of the balances, down from 46% five years ago), and they can’t be discharged through bankruptcy. As students become less willing to incur debt for education, colleges and universities will have to adapt to a new world of cost pressures and declining public support.
As far as college textbooks, the new era of $400 textbooks seems to be clearly unsustainable in the face of a growing number of competitive, low-cost alternatives like free online textbooks from Open Stax College (about $40 for a printed version) and Boundless ($30 online textbooks in 25 subjects). Here’s my economic forecast for the college textbook market: Expect continued and very strong hurricane-strength gales of Schumpeterian forces, with a high likelihood of creative destruction and market disruption for traditional textbook publishers selling $300-400 college textbooks, accompanied by huge tsunami-level tidal waves of increased consumer surplus for college students in the future.
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…. is from Mark Thornton’s article “Doomsayers Doomed in Washington State Marijuana Debate,” based on this new study from the Drug Policy Alliance “Marijuana Legalization in Washington After 1 Year of Retail Sales and 2.5 Years of Legal Possession“:
In contrast to the prohibitionist propaganda messages, legalization [of weeds in Washington] has resulted in fewer arrests, convictions, and criminal records. More resources were made available for enforcing property and violent crime. The number of fatalities and serious injuries attributed to alcohol and drugs declined noticeably. As the statistics are clearly proving, the prohibitionist propagandists were wrong and the advocates of legalization were correct.
Baby Bou Bou update, the toddler disfigured in a SWAT drug raid based on a warrant obtained with false information
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About a year ago, I reported on the tragic story of Baby Bou Bou, the 2-year old victim of a botched SWAT drug raid in Georgia that was conducted based on a search and arrest warrants obtained with false information. See CD posts: 1) America, here’s your Drug War: SWAT team throws stun grenade into toddler’s crib, he’s now in coma w/severe burns and 2) A mother’s tragic story: ‘A drug SWAT team blew a hole in my 2-year-old son’s chest with a flashbang grenade.‘ A stun grenade was thrown into Baby Bou Bou’s crib, and it blew a hole in his chest, burned his face, and left him permanently disfigured and scarred. Finally, some of the drug warriors behind the botched SWAT raid may be facing justice, here are some updates on the Baby Bou Bou case:
1. From MyFoxAtlanta: “Ex-deputy charged in Habersham raid that injured toddler.”
2. From Jacob Sullum, writing for Reason: “Federal Grand Jury Charges Georgia Cop With Lying to Justify Drug Raid That Multilated a Toddler.
3. From Jacob Sullum, writing for Forbes: “When Drug Warriors Burn A Baby, Who’s To Blame?”
MP: As I wrote last year, the nephew who the police were looking for didn’t even live in the house that was raided, and his alleged victimless crime that motivated the paramilitary SWAT raid? A single $50 meth sale. I’m confident that in a future, more enlightened, advanced, open-minded and tolerant America, we’ll look back on America’s immoral, senseless and expensive War on
Drugs Otherwise Peaceful Americans Who Chose to Ingest or Smoke Plants, Weeds and Recreational Substances Currently Proscribed by Arbitrary Government Regulations — and the paramilitary SWAT raids like the one that blew a hole in Bou Bou’s chest — with shame, contempt, and embarrassment for such cruel, intolerant and inhumane treatment of our fellow man (children).
As Morganovich wrote today in an email, “The Drug War has become a hysterical abomination based on rights violations and piracy, and for what? To take away the recreational choices of peaceful people? The War on Drugs is unquestionably the biggest social problem in America today.” And I would add that in its essence, the War on Drugs is a crime against humanity.
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The Institute for Justice’s latest legal case involves one of the most blatant violations of economic liberty in America — governments passing anti-competitive laws to financially benefit politically-connected industry insiders like the Monument Builders Association of New Jersey at the expense of the public. Here’s some background (and more here) on a landmark constitutional challenge filed today in federal court by the Roman Catholic Archdiocese of Newark, two of its parishioners and the Institute for Justice against the state of New Jersey and the Monument Builders Association of New Jersey, the lobbying arm of the headstone-dealers industry:
The Roman Catholic Archdiocese of Newark, along with parishioners Emilio Mazza and Dennis Flynn, Sr., and the Institute for Justice have filed suit in federal court to challenge the constitutionality of an outrageous new law that makes it a crime to sell monuments, such as headstones, to parishioners. This law targets the Archdiocese, which is the only religious cemetery in the state selling headstones. The New Jersey Legislature passed the law in February 2015, and Governor Christie signed it on March 23, 2015.
The Monument Builders Association of New Jersey—the lobbying arm of the headstone-dealer industry—convinced the state legislature to pass this law after losing a lawsuit last spring against the Archdiocese. In 2013, the Monument Builders sued the Archdiocese in state court, arguing that it was “unfair” for private religious cemeteries to sell headstones, but lost because it was not illegal for the Archdiocese to sell headstones to people being buried in its cemeteries. After that ruling, the Monument Builders ran to the legislature begging for the self-serving new law.
The Monument Builders lobbied for this law to protect their own revenue at the expense of the Archdiocese and its parishioners. There is no public health or safety reason to limit who can sell headstones. There is no evidence that the Archdiocese harms its parishioners by selling them headstones. A headstone is just a rock (a beautiful rock with great symbolic value, but still just a rock). This law is simply about protecting the financial interests of the Monument Builders. It represents an abuse of public power for private gain.
On July 21, 2015, the Institute for Justice, the Archdiocese of Newark, Emilio Mazza, and Dennis Flynn, Sr., filed a federal constitutional lawsuit in the U.S. District Court for the District of New Jersey to defend economic liberty. The objectives of this case are to vindicate the rights of the Archdiocese and its parishioners, and to establish the principle that the government cannot pass a law solely for the private financial benefit of politically connected insiders. The legal precedent from this case will protect entrepreneurs and consumers everywhere.
MP: Let me again recognize the Institute for Justice for its ongoing and tenacious legal advocacy on behalf of hundreds of politically-unconnected entrepreneurs and small business owners across the US, and for its ongoing efforts:
a) to advance the human rights of organizations like the Archdiocese of Newark who are struggling to survive against oppressive city, state, and federal government regulations including New Jersey’s government-enforced headstone dealer cartels;
b) to defend the economic liberty of organizations like the Archdiocese of Newark and their right to serve their parishioners;
c) to bring legal challenges against anti-competitive industry cartels like New Jersey’s headstone dealers that use state-sanctioned government force, often to enrich politically-connected industry insiders at the expense of organizations like the Archdiocese of Newark, their parishioners and the general public;
d) to protect the rights of consumers to have access to the greatest amount of market competition and the greatest number of companies selling headstones and monuments at the lowest possible prices; and
e) to challenge the many cases of economic protectionism across the country like the New Jersey law that makes it a crime for religious cemeteries to sell monuments, such as headstones, to parishioners, which stifles competition, drives up headstone prices for consumers, and limits access to affordable grave monuments.
Bottom Line: America is now a freer country and each of us is a little bit better off and more free because of the Institute for Justice’s ongoing legal advocacy and its courageous legal battles challenging industry cartels, defending the economic liberty of buyers and sellers, and now legally challenging the unconscionable and unconstitutional New Jersey law that makes it a crime to for religious cemeteries in the state to sell monuments, such as headstones, to parishioners.