Rent Seeking in the Car Service Industry

Wednesday, December 7th, 2011

My intern Jessica Greene just wrote her first published article, and it’s the top story at Huffington Post this morning. Not a bad way to kick off a journalism career.

Snippet:

In June 2010 the Nashville Metropolitan City Council passed legislation raising the city’s minimum fee for limo and sedan rentals, bumping it from $25 to $45. Drivers were prohibited by law from charging less. Other new regulations forbid limo companies from using leased vehicles, require cars to be dispatched only from the place of business, compel companies to wait 15 minutes before picking up a client, and ban parking in front of hotels and bars to wait for customers. More laws that take effect in January 2012 would also require companies to replace all sedans and SUVs over seven-years-old, and all limos 10-years-old and older. Vehicles older than five years cannot enter into service.

Passed under the guise of consumer protection, the net effect is to give large, existing car companies (also known as livery services) a huge advantage over smaller companies, and to effectively prevent any new companies from entering the market. Prior to the new laws, Tennesseans could purchase transportation from downtown Nashville to the airport in a limo or sedan for the same price as an average taxi ride. Nashville residents and visitors will now pay almost double for the same service . . .

A transportation battle currently playing out across the country pits large, established car service companies against their smaller and independent competitors. State or local governments in Arkansas, Florida, Georgia, Louisiana, Texas and Oregon, have all passed minimum fare regulations. The fight over new laws in Nashville, where a group of smaller car service owners have filed suit in federal court, belies the black-and-white approach the both Democrats and Republicans take to regulation.

Wesley Hottot, an attorney for the Texas Chapter of Institute for Justice, a non-profit libertarian law firm, says the Tennessee Livery Association (TLA), a coalition of expensive limousine companies, pushed the bill through with a number of provisions that benefit only its members. “There is no point in this regulation. It has nothing to do with public safety. It has everything to do with economic protectionism,” Hottot says. Hottot and his team have litigated similar cases involving economic liberty and property rights in federal and state courts across the country.

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29 Responses to “Rent Seeking in the Car Service Industry”

  1. #1 |  Andrew S. | 

    Excellent article.

    Meanwhile, I really need to learn to stop reading comments on HuffPo.

  2. #2 |  perlhaqr | 

    And yet, in my experience, even if someone of a lefty bent saw this and was outraged, they would tend to express outrage at the “large corporate limousine companies” for buying this law, and call for sanctions against corporations, rather than objecting to the government having the power to sell the law to them in the first place.

    As long as the source of power exists, people will seek to control it, most often through the application of large sums of money, making the rich powerful in this regard. If the source of power is gone, it doesn’t matter how much money the rich have, because the political authority simply isn’t there to be had at any price.

  3. #3 |  Andrew S. | 

    perlhaqr: That’s pretty much the content of the majority of the comments to that article.

  4. #4 |  Mark R. | 

    It’s sad, because this law pretty obviously wasn’t bought, it was lazed into existence. “Oh hey dude I know you’ve got a law you’d like passed, can you give me a bird’s eye view? Oh, that sounds good, sure, let’s get it done. Just write it up and I’ll take it to committee and we’ll go from there, don’t really see a problem.”

    It’s funny, I’d like to see some numbers on the amount of laws passed pre and post campaign finance reform being enacted in states and municipalities. If anything, I would think it would the number of pieces of legislation would go up, since you’re putting a cap on how high prices can go, and you’re ensuring that those lawmakers are going to need many more donations to effectively run for office.

  5. #5 |  Marty | 

    good job- congrats Jessica!

  6. #6 |  shg | 

    You have an intern? Dang.

  7. #7 |  Bob | 

    Where’s my intern? How come I don’t get an intern?

  8. #8 |  FloO | 

    Last time I was in Edinburgh we wanted a taxi. They are designed to hold 6 with cool fold down seats and stuff. Except they passed a law, a taxi cannot hold more than three, knowing most people don’t “go out” in threes, but a least four, you know 2 couples, or a family with kids. So they figured we would need 2 taxis…the taxi drivers win! Except I’d rather walk, and I did, so they lost that time.

  9. #9 |  derfel cadarn | 

    Crony capitalism at it finest, it has permeated ALL levels of our government. That situation concludes our problems will not be solved by the vote.

  10. #10 |  Chris Rhodes | 

    The comments there are unreal.

    Clearly, this intervention into the market by the government on behalf of the rich and powerful is a shining example of why we need the government to intervene in the free market. The left’s hatred of free enterprise is like a religion; they have set it up as unfalsifiable position.

  11. #11 |  Marty | 

    #8- I’ve never heard of a maximum number of passengers! crazy… I’m glad you stuck it to them by walking.

  12. #12 |  Boyd Durkin | 

    The left’s hatred of free enterprise is like a religion; they have set it up as unfalsifiable position.

    Free Enterprise challenges their dogma…and that cannot be allowed.

    “The great non sequitur committed by defenders of the State is to leap from the necessity of society to the necessity of the State.”
    –Murray Rothbard

  13. #13 |  Anthony | 

    @10
    But if the government doesn’t intervene in the free market then we’d have Somalia. SOMALIA.

  14. #14 |  Franklin Harris | 

    “Actually, the story is about Free Market regulating itself through buying legislatio­n. If it is Free, it has the Right to buy anything, including legislatio­n.”

    “You make my point. It is exactly an unregulate­d marketplac­e that can “buy” the votes of elected officials that result in such skewed situations­.”

    Tell your intern congratulations. She has elicited the two dumbest comments I have ever seen on any website anywhere, and that’s including Yahoo! News comments about creationism, conspiracies and UFOs.

    Also: You have an intern???

  15. #15 |  Boyd Durkin | 

    Franklin,
    Those really make the point, eh?

    The definitions for capitalism, free market, anarchism, inflation, and dozens of other pretty important concepts seem to escape the folks with the strongest opinions.

  16. #16 |  Chris Rhodes | 

    #14

    Those responses to my comments were mind blowing. I spent awhile just staring at my monitor with my mouth open, trying to figure out how to respond.

    “Free markets don’t work because corporations buy regulators!”

  17. #17 |  Big A | 

    “You make my point. It is exactly an unregulate­d marketplac­e that can “buy” the votes of elected officials that result in such skewed situations­.”

    Wow. I like the use of ‘skewed situations’ instead of ‘more regulations’ so that one at least has to read the sentence rather than just look at it to see the conflict.

  18. #18 |  Mike | 

    Congrats Jessica – great article. As they say, “You pissed off all the right people.”

  19. #19 |  Sean | 

    The comments at HuffPost are fascinating.

  20. #20 |  CTD | 

    Yes, yes, yes.

    But more more importantly, is she hot?

  21. #21 |  Helmut O' Hooligan | 

    “Passed under the guise of consumer protection, the net effect is to give large, existing car companies (also known as livery services) a huge advantage over smaller companies, and to effectively prevent any new companies from entering the market.”

    A job well done by Jessica the intern! The above quote explains in a nutshell why progressives need to stop their often blind worship of regulatory power. If small businesses have to comply with a huge number of complicated and COSTLY regulations, there won’t be many small businesses. But as perlhaqr and others allude to, this lesson will be lost on the orthodox Left.

    Frustrating as it can be, libertarians–especially Left-libertarians like me who have a democratic socialist background–need to continue hammering these points home. Recently I was talking with a few OWS protesters at Occupy Peoria (IL). I told them that I understood their anger at bailouts, and their distaste for corporate power (like the Chase bank they were standing across from). But I also told them to keep in mind that corporations are creatures of the state, and would not exist in their current form without the state, its legal system or its financial aid (direct or indirect). The protesters expressed some agreement with my statements, though I don’t know if they quite knew where I was coming from. I suppose this was because they couldn’t quite categorize my statements, ideologically speaking. And that is the main problem we have to overcome.

  22. #22 |  Freedonian | 

    I see that very same thing here in Jackson, Mississippi when conversing with those of our local ‘Occupy’ group. They seem open to Left-Libertarianism, particularly when it is illustrated how the state very often aids in stifling competition from start-up ventures.

    I suppose there is a certain amount of confusion on their part, there is a world of difference between my idea of ‘free market capitalism’, and what the ‘conservative movement’ has been selling as ‘free market capitalism’ to the American public for the last 30 years or so.

    Maybe we need a pamphlet?!? Comic book format?

  23. #23 |  JOR | 

    Calling it crony capitalism is a bit like calling the USSR “dictator communism”. It’s just capitalism, working as it always has. Yes, you can create an alternate definition of “capitalism” that means “market free of state intervention”, as libertarians have been trying to do for about a century, but that’s never been the overwhelming common usage of the term. All that’s been accomplished by libertarians associating “capitalism” with “free market” is that dumbass leftists started doing it too, resulting in more confusion for everyone.

    Note that #2′s point is exactly equivalent to blaming guns for shootings, or drugs for addiction. The state and all its corruption isn’t magically self-creating and self-sustaining. It exists because there is demand.

  24. #24 |  JOR | 

    “Actually, the story is about Free Market regulating itself through buying legislatio­n. If it is Free, it has the Right to buy anything, including legislatio­n.”

    Why is everyone jumping over this as if it is unalloyed stupidity? This is exactly the point made by a lot of libertarian corporate apologists when they’re defending the practices of lobbyists. But if a lefty says the same thing, disapprovingly, it must be completely ridiculous.

  25. #25 |  Pi Guy | 

    PS (b/c I’d written it last then realized that it should prolly be the first thing mentioned!) to Jessica: Congrats on having such an impact your first time out. Gonna make the teacher proud forcing people to think like this!

    The comments there are unreal.

    No matter how many times I try to resist the urge when one of you say “OMD – the comments are unreal”, I go anyway. I can’t help myself. It’s like a trainwreck I know is going to happen. And I keep F#*&ing doing it!!! What the hell is wrong with me??

    (actually, tho, user named Saro is a pretty calm, solid libertarian in the debate; I like his Last-Person-on-Earth Rule for determing whether a right’s fundamental or not)

    Damn you, Radley, on succeeding to the point where my brain melts a little every time I follow you to HuffPo.

  26. #26 |  Boyd Durkin | 

    JOR,

    Why is everyone jumping over this as if it is unalloyed stupidity?

    In a free market, buying a legislature is worthless.

  27. #27 |  Mattocracy | 

    “This is exactly the point made by a lot of libertarian corporate apologists when they’re defending the practices of lobbyists.”

    Really? I have never heard of such thing being said by a libertarian.

  28. #28 |  Michael Magnus | 

    Great article. One suggestion though, she blamed the GOP “job creators” for the absurd regulations, but never really got around to saying how the GOP was responsible. It’s hard for me to get riled up if she never gives me the hard facts.
    Accusation was great. Proof, no where to be found. Otherwise a great article.

  29. #29 |  Chris Rhodes | 

    (actually, tho, user named Saro is a pretty calm, solid libertarian in the debate; I like his Last-Person-on-Earth Rule for determing whether a right’s fundamental or not)

    Thanks! In echo chambers like HuffPo, attempting to sling mud against prevailing opinion is often counterproductive, so I’m really trying to keep my cool and just lay it all out.

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