Home > economics, regulation > Should Government Regulate the Car Sharing Industry?

Should Government Regulate the Car Sharing Industry?

With Washington DC recently announcing a new policy of auctioning off on-street parking spaces to the highest bidding car sharing companies – such as Zipcar – some, like Lydia DePillis, are calling on the government to turn car sharing into a regulated monopoly along the lines of public utilities, so that they “…are subject to price restrictions and have an obligation to provide equal access to services.”

Ms. DePillis’ argument against the policy is a finite amount of parking spaces exist, and auctioning off spaces to the highest bidder restricts consumers’ ability to select from different options with comparable access to resources.  Over at Forbes, Stephen Smith weighs this line of reasoning and is unconvinced:

How does car sharing differ from, say, ATMs in this regard? Sure, it can sometimes be a pain when you’re in a strange neighborhood and can’t find your bank’s ATM, but I don’t think anyone would argue that we should regulate ATMs like public utilities, restricting prices and mandating that they put up machines in poor neighborhoods. Decades of off-street parking minimums have made potential car sharing spaces plentiful throughout the District, and if these spaces aren’t enough, the city should raise the price of on-street parking to market-clearing levels, do away with the time limits, and work out a procedure for billing car share companies for the use of these spaces.

This gets right at it – market based approaches that ensure enough parking for car sharing service users is far preferable than creating a new government regulated monopoly.

Moreover, Smith also has serious concerns with Ms. DePillis’ willingness to rely on the DC government to regulate the car sharing market as well as controlling the rate for car sharing:

How is the District of Columbia supposed to have any clue how to set car sharing rates? The industry is in its infancy, and as far as I know, no government on the face of the planet has ever attempted to regulate car sharing rates, much less been successful at it.

Let’s not forget what happened the last time American municipal governments tried to regulate complex private transportation businesses as public utilities: They quite literally regulated the private streetcar and rapid transit businesses out of existence. The artificially low fares (five cents, at the time) and mandates that the companies continue to operate unprofitable lines are both things that Lydia wants to see applied to car sharing services. What’s to stop this from happening with car sharing, where there’s far less history for regulators to drawn upon for inspiration? How long until the city is using Zipcar’s government-granted monopoly as an excuse to demand that cars be manufactured in America, adhere to stricter emissions rules, etc., like American cities did with profit-sapping labor rules a hundred years ago?

Image via flickr user Kaliya

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