Uber and Reading

Apparently the taxi company Uber has been denied a licence to operate in Reading. Uber is a mobile-phone based taxi company: potential users are matched to a taxi via an app on their phone. As a result, it operates differently to conventional taxi firms. Conventional taxi drivers have been opposed to Uber’s presence in London, supposedly on the grounds of consumer safety, and there are controversies about how much tax the company pays (although it should be said, not to anything like the same level as much larger, more developed multinational companies), and the contractual arrangement it has with drivers.

Alternatively, Uber provides a model that enables greater supply of taxi drivers, and even a surge price algorithm in peak times that encourages an increase in supply of taxis. It breaks into an industry that is heavily regulated and seemingly well protected (resulting in, in places, very high fares).

What’s probably most interesting is that some the objections Reading Borough Council put up reflect a lack of understanding about mobile phones and apps. The council suggests that evidence of 20,000 people in the Reading area having the Uber app on their phones does not constitute sufficient evidence of demand for the service, with one councillor saying Uber might be “trawled by phone app junkies who if they don’t have their phone in their hand they think they have had an amputation”.

In addition, given that Uber operates via the mobile phone app, it doesn’t need a traditional taxi rank like existing taxi companies, something else the Borough Council appear to have failed to grasp.

This highlights a problem with regulation when market innovations arrive – regulators are often the least well equipped to make judgements, and will often stifle innovation. Undoubtedly some concerns are legitimate about Uber, and the weaknesses in its business model will be refined in time. But it presents the kind of innovation to the taxi industry, for example, that Skype presented to telecommunications providers. The usual reaction of existing providers is to try and restrict the competition, and arguably that is what has happened here.

Monday’s Conversation: Greece, EMU and Austerity

Every Monday during term time we meet in less formal circumstances to talk about economics: these are our Conversations in Economics, in which we usually reflect on some pertinent real world event, and attempt to apply some economics to it.

Last week we talked about Corbynomics in light of the Labour Party conference, and on Monday of next week we meet in HumSS 125
at 1pm to talk about Greece, EMU and Austerity.

While Greece may have fallen off our news radars in recent months, at least in terms of its economic situation (as opposed to one of the first places refugees have been arriving in the EU), it remains a place with deep economic problems, as the chart below shows:

Greek GDP since 1995

Since 2006 Greek GDP has fallen by a third in real terms. To try and make some sense of that, if a road had 9 factories on it, 3 would have by now shut down and not be producing anything (with subsequent unemployment that that would entail).

So, it’s still as important a time as ever to be talking about Greece, its situation within the EU, and the austerity it has had forced upon itself.

See you all on Monday!