Virginia DMV survey on ride-sharing regulations

The Virginia DMV currently has a survey available asking for feedback on for-profit ridesharing services like Uber, Lyft, etc. I doubt it will do much good, but it only takes a few minutes. I’m posting the questions (in bold) and my answers here.


1. Insurance requirements protect injured customers and third parties. Current insurance requirements are based on the nature of the transportation service and the number of passengers in the vehicle. Insurance companies generally distinguish commercial and personal insurance policies—all passenger carriers licensed in Virginia must have a commercial policy.

What are your views on TNCs and other for-hire passenger transportation companies being required to maintain certain levels of insurance?

There is no reason why this will not emerge as a standard absent state direction, and at more market-appropriate rates than those set by diktat. It’s hard for me to believe that VA DMV thinks riders are not concerned about safety and responsibility enough to make the companies respond to market pressure. The first lawsuit would fix this overnight, and knowing this in advance, the services will get in shape without having to learn the hard way.

2. Under current law, DMV reviews company owners applying for authority to operate a for-hire transportation service in Virginia. Local governments have authority to conduct background checks for companies and drivers within their jurisdiction. These checks serve two goals. First, they insure that company owners have a record of providing honest and reliable service. Second, it ensures that taxi drivers have not been convicted of certain crimes or driving offenses.

What are your views on companies and/or drivers being subject to criminal history and background checks? Do you believe this is something best performed by a government entity or by the individual companies?

I think it’s a good thing, but it’s best performed by individual companies. An equilibrium will emerge privately, as dangerous drivers are bad for business unless enabled by a government-supported cartel system. On top of this, there are plenty of offenses one could have committed in the past that have no bearing on present capacity to drive safely, quickly, and conveniently that would almost certainly be a bar to employment if DMV is running the show.

This model makes little economic sense in an age when smartphones can let riders provide instant feedback both to the services and to other potential riders.

3. Local governments can set standards for vehicles used for hire in their jurisdictions. Some localities have age and mileage restrictions for taxis, which further limit the vehicles that can be used. Together, these requirements are designed to ensure that all vehicles, including those carrying passengers for-hire, are in sound working order and do not pose a risk to public safety.

What are your views on for-hire vehicles being subject to higher standards than other vehicles registered in Virginia; what should those standards be?

As if poorly-working vehicles were not bad for business in a very immediate way? Not only would the riders themselves be angry, but it would be bad advertising. If anything, standards could very feasibly be lower for these vehicles than for ordinary vehicles, as regular Joes like me do not see their business reputations suffer if their vehicles break down in traffic. For me and the people around me in traffic it’s an inconvenience; for Uber et al. it’s a huge business problem.

As far as what the standards should be, the more minimally-specified, the better. Consumers face quality vs. price tradeoffs every day, and there’s not one answer that satisfies everybody. If all cars were held to the standards of brand new Cadillacs, quality would be very high but few could afford it. Fortunately, there is a large enough market for consumer automobiles that lets some people drive brand new Cadillacs but doesn’t ban me from driving an old but affordable Kia.

4. State laws require that certain carriers publish their fares. Localities have authority to regulate fares within their jurisdiction.

What are your views on governments setting requirements relating to fares; what should those requirements be, if any?

Though I’ve met a great many very smart people working in government positions, they have no more wisdom or appreciation for the vast array of consumer preferences in this area of the economy than they do in any other area of the economy. By what logic does not make sense to regulate fares for carriers but not for restaurants or clothing stores? If fares are too high, potential riders will find other means of transportation, pushing fares back down. Fare regulation makes perfect sense in the context of enforcing cartels, but it does not make sense in a competitive market the likes of which we’re going to see eventually, regulations or not, due to technological progress.

5. Certain passenger carriers must show that the service is necessary in the community in which they seek to operate and localities have authority to control the number of taxis in the community. This local authority stems from the community’s interest in controlling traffic and pollution that may result from roaming or idling taxis.

What are your views on standards relating to public necessity for transportation services and on potential limits to the number of operators allowed in an area?

As these services are substitutes for traditional taxi services, more of them on the road means fewer taxis on the road, and indeed a vehicle that is only in operation when asked for seems like it should cause less traffic and pollution than a taxi driving around in circles. If regulatory agencies had to pick winners and losers, it seems that they would do better to mandate the newer style of organization than to allow idling taxis in high-traffic areas. Of course, there is probably room for both models of organization, as not everybody has or uses smartphones for the transportation purposes. It’s simply not credible to think that allowing more vehicles from Uber et al. will simply add to the current total. Traffic is already nightmarish in Northern Virginia, but it should in the long run get better instead of worse by allowing ride-sharing services.

The “necessary in the community” clause is the most transparently cartel-serving requirement there is. If it were obvious that a service is necessary in the community, why wouldn’t the regulatory agencies have issued more permits in the first place? Nobody knows in advance what services the community demands; they have to try and see. Services are organized and offered on a guess that there is an unfulfilled demand out there. Most of the time they are wrong, which is why most businesses fail. But the successes of ride-sharing services in the places where they have been offered is a demonstration that sufficient demand exists.

6. Licenses and permits show the traveling public that the companies, drivers, and vehicles meet minimum standards. Customers and the public can contact the licensing authorities with complaints and concerns; and the authority can follow up by investigating and, if needed, suspending the passenger carrier.

What verification methods would you design to confirm that standards are being met?

The standard mandated vehicle inspections that all Virginia drivers must pass are probably sufficient as a legal minimum. Firms with reputations to uphold and no cartel protections have incentives to have internal controls to make sure their vehicles exceed the standards.


I don’t know how seriously anybody will take these comments—not very seriously is my guess—but it works for a post.

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Author: rfmcelroyiii

Student and instructor of economics.

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