Company-owned marketplaces are wonderful for the 95% of people who never run into problems, and some people such as Blake Ross may wonder why we don’t just retire the publicly regulated markets. What he is missing is that there is no due process on company marketplaces. If you happen to have a streak of bad luck, or you are targeted or discriminated against and you get too many bad ratings, you are kicked off with no appeal process. Uber does not care whether the complaints are legitimate. Similar problems happen to a small fraction of users on Google Adwords, eBay, and other company-owned marketplaces who ultimately care about their own profit instead of justice. As public markets are replaced with private marketplaces, I think the loss of due process is not something that we should give up without some forethought.
Perfect is the enemy of good. What you're describing happens just as frequently in regulated markets (the police works fine for a certain sector of this country and not so great for another...), its just that regulated markets offer the false promise of perfection. At the end of the day there's no magic, its people at the end of all these services. So what's important, as Milton Friedman used to like to say, is not finding the right people, but getting the wrong people to do the right things.
The people that visit Las Vegas don't vote in Las Vegas, so what incentive is there AT ALL for the government to protect the customer? This is basically the worst edge case for a regulation: the regulators only receive votes from one side of the arrangement, so who do you think they'll bias? Unless taxi abuse got so bad that it actually affected tourism, then I assure you it will always slip between the cracks. On the other hand, a business that cares about solely this problem will actually figure out a way to solve it.
As a customer, I want an easy button to affect my contractors' businesses based on their performance. But when I am on the receiving end, I want to know that the negative reviews are legitimate (not subject to discrimination or gaming) and that the punishment is proportional to the crime. These goals are at odds, and I hope the latter is not sacrificed in the app economy.
You're right that the tourism industry is probably the worst case for democracy to ensure accountability of regulators to the people. But at least all punishments imposed by the government are subject to the court system; the government does not take away your license to make an income without evidence that you actually violated a law. Furthermore, government is subject to other mechanisms to be accountable to the people e.g. FOIA requests (vs Uber, who keeps their data exclusively for themselves). I worry that industries will be controlled by companies that care only about the aggregate revenues and are not accountable to the people,
"without evidence that you actually violated a law" - oh, you mean the laws/regulations written by politicians who do so at the behest of entrenched, crony corps to control markets, suppress innovation, and defend their stagnant products/services?
"But at least all punishments imposed by the government are subject to the court system" - Guess what? There's this nifty thing called civil court, and if we just made filing legitimate small claims easier, faster, and more effective, people could use this outlet to organically push back on bad behavior without the need for centralized regulation.
"its just that regulated markets offer the false promise of perfection"
No: it is just that regulated (I prefer the name public but anyway) markets offer the possibility of legal defense by definition. Thus, the customer is not left defenseless.
However, this applies possibly much more to Roman-law derivative States than to the US.
Who cares what you have by definition? What matters is whether you're on average better off in practice.
It's cold comfort to have legal recourse technically available, if it's never worth the time and money to pursue it. If you have to seek recourse at all you've already "lost" --- the recourse never really makes you whole, given your broken expectations, time to pursue, etc.
Consumers have a defense with private markets -- use the competition. The problem with regulated public markets, such as taxis in NYC, is that a consumer has little choice, thus, unless they want to spend hours of their time dealing with an inherited embedded and political bureaucracy, there's little alternative. It's like restaurants, the bad ones tend to go out of business eventually. But imagine if restaurants all sucked and they were enabled in their suck by a government imposed "medallion" system and a supply of those medallions not controlled by market demand but by the restaurant mafia themselves, then there isn't any alternative, so your stuck with inferior quality and impossible barriers to entry controlled by your competition. Removing barriers to competition is the absolute best way to improve a market. Prices drop, service has to also improve. Those that perform a bad service at a high price quickly die because, if I don't like it, I can easily choose a substitute. Restaurants are a great example. You certainly want some level of regulation, but only the minimum amount to protect the health of the public. So in the public transport area, background checks should be required, insurance should be required, safety inspections should be required, but silliness like taxi medallions ought to be eliminated. To be clear, I am not against regulations, but I am against market regulation. There is a subtle but important difference.
"It is just that regulated (I prefer the name public but anyway) markets offer the possibility of legal defense by definition." - I think you may be forgetting an entire area of the judicial branch: Civil Court. You can, in fact, sue a business for: representing their product incorrectly, providing service other than described, not sticking to the contract you signed, etc, etc.
We could just as easily simplify, streamline, and reform the civil tort system to allow people to file and address legitimate issues quickly through organic, judicial means. But instead, people, for god knows why, believe it is easier and more effective to have politicians appoint a bunch of crony farts to pass hundreds of thousands of pages of regulation that make the 95% case of good business operation harder, while most often failing to catch/fix the 5% of time things go wrong.
Civil court is a venue in which action based on existing laws and regulations are pursued. It does not substitute for actually having the laws and regulations which provide the bases for actions.
"[...]regulated [...] markets offer the possibility of legal defense by definition. Thus, the customer is not left defenseless."
I don't know about the US but in Germany and Austria this could not be more wrong. Your ability to object through legal procedures is highly dependent on the regulatory field you are working in.
Is is most awful in fields with state monopolies like work permits or licensing.
It also happens in highly regulated markets. For example, due primarily to my outward appearance (I'm not a member of the majority race), I'm often asked for 2x the normal fare in auto rickshaws. If my girlfriend (a different non-majority race than me) is with me, 3-4x [1].
I'm mostly denied access to banking (except for some legacy accounts) due explicitly to regulation.
This also happens in private markets without a company marketplace. For example:
> It also happens in highly regulated markets. For example, due primarily to my outward appearance (I'm not a member of the majority race), I'm often asked for 2x the normal fare in auto rickshaws. If my girlfriend (a different non-majority race than me) is with me, 3-4x [1].
Uh, that sounds like it's due to nonregulation. In my city that simply couldn't happen - licensed taxis all have to use the same meters (and display their license number prominently, making it easy to report one that's violating the rules).
In my city, licensed autos all use the same meters and display their number prominently. And if I want to wait on line for a day to complain (Marathi only, no Hindi, no English, from what I'm told), maybe something will eventually be done. Sounds as effective as the Vegas regulatory system.
In theory a perfectly enforced set of perfect regulations might fix these issues. In practice the industries that regulators are deeply involved in controlling still seem to have these issues.
> In theory a perfectly enforced set of perfect regulations might fix these issues. In practice the industries that regulators are deeply involved in controlling still seem to have these issues.
In practice regulation as it's actually practised in e.g. Germany manages perfectly well. Sounds like your regulatory system has issues. Doesn't mean all regulation is fundamentally broken.
You have obviously never spoken to a cab driver about the "due process" and fairness they are treated with by cab companies. There is a reason cab drivers are abandoning their corrupt, inefficient, and oppressive employers for Uber and Lyft.
The appeal process in a private market is called competition.
It doesn't always work, certainly. Then again, it would be foolish to say the State-owned alternatives always do. Or that "justice" is what motivates public administration. They're just people, no more or less self-interested than private actors.
Due to network effects, it is very difficult to compete with incumbent networks. Google AdWords and Uber do not need the people that they wrongfully kicked out. Facebook does not need the people who find their privacy policy untenable. Unless the grievances affect a large fraction of people, competition is not a strong enough force to correct major problems that affect few people.
Why not? I don't use Facebook, yet I still communicate with everyone I care about. Many people earn their living through ads without using AdWords.
Does their preponderance in the marketplace make it more difficult to avoid? No doubt. But have you ever tried to appeal a procedure of a calcified administration?
Is your question why competition isn't strong enough against market-dominating incumbents to effect change, or why the named companies don't need the customers or service providers they expunge?
I see. The parent's "effect change" was that the banned or disaffected customers, even if they use other services, will not damage the market position of the service they were banned from or left.
I.e., Facebook doesn't have to care that you send emails and make phone calls instead of Facebook messages, because your individual contribution to their income is negligible, and, I suppose, you don't represent a pervasive or effective force in their target demographics.
What parent's effect change? You were the first to use that expression in this thread.
will not damage the market position of the service they were banned from or left.
We weren't talking about their market position, but whether customers had recourse, and I said they have in the form of competing services.
But if we're going to discuss the effects that an individual can have in changing overall practices of an organization, I'm not sure if public institutions will come out very well in the picture.
That may be true, but I don't see how that is different with publicly run marketplaces. Regulators and civil servants also tend to only care about the majority rather than protecting the minority.
The article has nothing to do with company-vs-regulated marketplace. It has to do with how horrible the government ideas were so far. If the city of Nevada wrote an iPhone app for rating cabs and the cabs had to display their stars, it would be better any of the other hilarious ideas they've come up with. Of course, the article implies they could have let Uber compete with the taxis like in so many other places, but the point is that 'due process' failed in this case, so even imperfect company would be better than that.
>> If the city of Nevada wrote an iPhone app for rating cabs and the cabs had to display their stars
I don't think consumer ratings are that great a plan. I can see from the article that all of those ideas are pretty awful. But making a cabbie display ratings from consumers rather than a ratings agency is open to all sorts of abuse.
Here in the UK a restaurant has to display its food hygiene rating on the door. This is a the result of a real assessment by an expert and as such is useful information. Unlike, say, a tripadvisor rating, which is more or less useless (5 stars! So much fun! I really enjoyed the baked rat and whatever that crunchy brown thing was in my lasagne!)
It's horrifying how you think government regulators are inherently smarter and more knowledgable than ordinary customers, who you apparently think are idiots.
It's horrifying to me that my food safety might be left up to what is effectively a popularity contest, when there are objective criteria that can be used.
I'm not really sure how this maps on to cabs, mind.
I suppose so. The commonality was the idea of forcing display, which I can really only see being a good idea for objective measures.
The article is talking about objective measures too - the problem it's trying to address is naive customers being taken the long way round. I don't think satisfaction ratings will actually help there.
In the example of the hygiene rating, the government regulators at least have the possibility of being fair and using objective standards for evaluating and measuring a large number of restaurants against each other.
If it's left up to customers, it's completely subjective, all the time. It's not that customers are idiots, it's that the wisdom of the crowds is often wrong.
By similar token government-regulated marketplaces have a long-term problem with corruption.
We already observe the cases where teacher unions sponsor political candidates who will negotiate with teacher unions, police unions approving or disapproving of mayoral candidates who will sit on the opposite side of negotiating table when police contract is being discussed, insurance companies (ahem, industry) supporting (or not) state insurance commissioner candidates, or financial companies paying a bonus to a manager who departs for a government job.
How do you prevent corruption and align incentives properly in a government-run marketplace?
Very well said! I have seen livelihoods completely devastated by these sorts of things. Google Adwords, getting banned from there, can destroy a content producer who has structured his entire life upon it.
If your real estate business is heavily built around advertising in a local newspaper, and you get kicked off that by a competitor locking up an exclusivity deal, or the newspaper goes out of business - then what? Then you have to change your business.
There's absolutely nothing unique or new to Google Adwords when it comes to resting your fate with a platform. There is no such thing as a world without platforms, such that you can never be dependent on one; the only choice you have is what platform you're going to depend on.
