Uber’s Greyball Shows How The Regulatory State Limits Economic Growth – Forbes

There’s an outbreak of pearl clutching as it is revealed that Uber used a “secret” tool called Greyball to sidestep the authorities trying to close down some of the company’s operations. It’s a neat little example of how the regulation of the economy limits, puts a brake upon, economic growth. Think through what is happening here. A new service provider would like to provide a service. This is the way that markets work–people think up some new thing and then go out and offer it to the passing public in return for what they hope will be money. Those things which the public want to have get snapped up. Those things which the public does not want die a quick and painless death through bankruptcy. This is the very method by which the economy advances. And yet this particular offering found that there were regulators trying to frustrate it, to ban it from making that offering. Regulation thus limits economic growth:

Friday?s twist came from a story in the New York Times about how Uber worked to identify and defeat government officials in a years-long game of cat and mouse that spanned several nations. Uber mined customer geolocation data, credit-card information, app-usage habits and even social-media profiles to identify those working for city governments or driving for rival ride-hailing services.

The city government part is that those workers were, sometimes and often enough, trying to hail a ride so that they could fine those who offered them the ride. That is, to simply stop this new economic activity happening:

The tool allowed Uber to show images of “ghost” Uber cars on the app or show that no cars were available, according to the newspaper, in order to deceive authorities. Officials in certain cities without a legal framework for ride services have aimed to ticket, tow and impound the cars.

It’s important to understand how markets produce economic growth. We really do not know what it is that people want–if we did then we could plan our economy. We also don’t know what it is possible to do with new technologies as they become available. There’s an entire universe of new combinations every time a new technology does appear and somehow we’ve got to sort through them to find out which combinations those consumers would actually like to pay money for. That anyone and everyone can go test out their ideas means that we sort through, in a market system, these possible combinations faster than under any other method. We thus identify what consumers would like faster in this manner–that is, we get more economic growth more quickly.

And yet here are the regulators insisting that this new service must not be offered:

At the time, Uber had just started its ride-hailing service in Portland without seeking permission from the city, which later declared the service illegal. To build a case against the company, officers like Mr. England posed as riders, opening the Uber app to hail a car and watching as miniature vehicles on the screen made their way toward the potential fares.

Regulation reduces economic growth that is. And Uber really is economic growth too. More people are taking more rides as a result of the company’s existence. And utilisation is up as well–Ubers spend more of their time with a ride than taxis do, taxis spend more time cruising looking for a ride than Ubers do. This is a pure gain in economic efficiency and is always to be welcomed as it is one of the things which make us richer. Fewer scarce resources are needed to produce the output as a result of such efficiency increases.

This is not to say that there should never be any regulation. I’m just copacetic over the regulations which keep personal nuclear arms out of the hands of the general public. Regulation in some manner of negative externalities also meets with approval. But there’s much too much regulation in the economy which produces economic protectionism. In the taxi market it is the price of those medallions in many places which is the proof. In New York City for example such a medallion used to cost some $1 million. That was just the licence to allow one cab to be driven on the city’s streets. That’s a pure economic rent, there is no useful reason for its existence. Other than being a form of economic protectionism. Uber has caused such prices to crash which is again evidence that the company is an addition to economic wealth.

In order to operate Uber dodged public officials and regulations, entirely true. But given that Uber is also an increase in economic wealth that’s all the proof we need that regulation limits, slows down, economic growth.

Uber’s Greyball Shows How The Regulatory State Limits Economic Growth – Forbes