Should Cities Set Limits on Ride Sharing?

When New York City imposed a cap on ride-sharing licenses earlier this month, it became the first major American city to legislate the number of Uber and Lyft drivers cruising its streets. But the concerns driving New York’s regulation, including increased traffic congestion and low wages for drivers, aren’t exclusive to New York, and politicians from London to Chicago have expressed interest in establishing similar limits in their cities.

Critics of such legislation—including, naturally, Uber and Lyft themselves—warn that restricting the supply of ride-sharing services will hamper competition, raise prices, and lead to longer waits, particularly in areas that have historically been underserved by taxis.

Will limiting the number of ride-sharing vehicles in a city make the residents of that city better off? Is there a better way to achieve some of the objectives targeted by proponents of such limits? To find out, Chicago Booth’s Initiative on Global Markets polled its US Economic Experts Panel. Of the panelists who responded, 64 percent said they believed capping ride-sharing vehicles in a city would make residents worse off, while virtually all respondents agreed that traffic congestion could be better addressed via taxation.

“Individuals do not fully internalize the congestion cost to others of their own driving,” wrote Stanford’s Darrell Duffie. “That’s a clear argument for a congestion tax.”