Sadiq Khan Wants To Offer Uber Monopoly Profits In London

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Sadiq Khan is suggesting that he should enact monopoly profits for Uber in London. This isn’t quite what he’s saying publicly but it is what he means – whether or not he knows it himself. If he does know it then he’s obviously not the sort we want running the city, if he doesn’t then he’s too damn stupid to be the one running the city. That idea of donating monopoly profits to a supplier being one of those things we don’t want our rulers doing of course.

What he says he wants to do is limit the number of drivers that Uber may employ:

The mayor of London has asked for powers to cap the number of private hire drivers, which have proliferated since 2011 with the rise of Uber and its competitors.

In a letter to transport secretary Chris Grayling, Sadiq Khan wrote: “The huge increase in private hire drivers on London’s roads in recent years is causing increased congestion, polluting our air and leaving many drivers struggling to make enough money to support themselves and their families.”

Mr Khan, who chairs Transport for London, said the number of private hire drivers had increased from 60,000 in 2011 to more than 110,000 today.

It all sounds so very sensible, doesn’t it? But then it’s an idea that started with Bill de Blasio in New York City, so obviously it’s foolish:

Khan urged the government to grant him powers to limit the “unsustainable rise” in drivers to “enable Londoners, like New Yorkers, to breathe better air and live in a less congested city”.

On Tuesday, New York City – Uber’s largest American market – signed into law a one-year moratorium on new licences for vehicles used for ride-hailing services, effectively capping the number of Uber drivers in the city, and also setting a minimum wage for app-based drivers.

The problem is this pesky economics stuff. Which is no respecter of why you do something, it cares only what it is that you do:

A spokesman for City Hall said the mayor’s office has been raising the proposal for a limit over several years as part of an on-going conversation.

The New York decision, he added, shows it was something that “can definitely be done”.

Sure it can. The question is whether it’s a damn fool thing to do or not. Which it is, yes, as we’ve pointed out before:

Well, no, not really. Firstly, the companies now control entry into the marketplace. People who control market entry gain all the money. Even Marx got this right. When there’s a reserve army of the unemployed then the capitalists don’t have to raise the workers’ wages, do they? Which is a pretty good example of how damn stupid an idea this is, that it even manages to get Marx wrong. To limit the number of drivers who may ply for hire is an insistence that there are people out there who would like to ply for hire but aren’t as yet. If there isn’t you don’t need the limit, do you? And if there is then we’ve our reserve army. The ride share companies get to pick and choose among them and the choice will be those who demand the least wages for whatever level of performance is necessary.

Doubt that this will happen? It did under the earlier taxi licensing system, didn’t it? All the money went to the people who owned the medallions, the right to put a cab on the road. The drivers got to shuffle along on $11 an hour as the capitalist speculators gained all the cash from those restrictive practices.

Seriously, why does anyone think that limiting Uber numbers will turn out any different than limiting taxi numbers did? It’s the owners not the drivers who will gain the money. The reason being that if you’re a monopolist then you have the power to increase your profits by limiting your output. You want the technical description it’s here. A monopolist maximises profits by limiting output, to the detriment of consumers. So, if we forcibly limit output – to that detriment of consumers – then we’re offering the producer the opportunity to create monopoly profits.

And do note that interesting little difference between London and New York. In NYC you must have a medallion to gain a taxi permit. The money from the restriction on the number of cabs flowed to those who owned the medallions, to those who controlled access. London Black Cabs were not so restricted – so it was the drivers who gained the higher incomes from the customers being screwed. But if we restrict the number of drivers with a middleman like Uber controlling the access then it’s going to be Uber – as with the medallions – who gains, not the drivers.

Seriously, this is nuts, Sadiq Khan really is proposing that Uber should have monopoly profits thrust upon it. And why the Hell is a Mayor of London proposing that? Evil or ignorant, your choice.