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Hurrah! Uber does work (in the broadest sense of the word) after all

Will we see a return of the Medallion Man?

Worstall on Wednesday There's a certain, perhaps too cynical strain in economics, best exemplified by Mancur Olson, who was prone to pointing out that all governments are just bandits living off the population they oppress.

It's better to be ruled by stationary bandits rather than nomadic ones, to be sure, for they will at least farm you rather than just steal everything.

But they're all bandits all the same. I tend to describe this as “realistic” political theory rather than cynical, but acknowledge that some people could indeed believe that governments are nice things. Even those people studiously gazing at their navels.

Where Olson was rather less out there was in his description of democracy as really being the cockpit of the fight between special interests. Sure, we might think that arguments over the taxation of dividends and or wages are about some sense of justice or righteousness, but they're really just the playing out of those special interests of capital and labour.

Which brings us to an interesting little bit about technological development which is a corollary of his thoughts. The longer the system has been running, any system that is, the more entrenched the positions of those special interests will become.

The power of any one of them to make sure that another doesn't run off with the goodies will increase. People will start to accept the current disposition as being part of the natural order of things. Taboos and habits will grow up which make the thought of changing matters something that society just will not countenance.

We also have another name for that current disposition of things: rents. Economic rents that is: income that is earned simply by being able to control some scarce resource.

We usually insist that it is also that one can control that resource as a matter of legal privilege: so, this brings us full circle to rent being how the goodies get shared out as a result of that interplay of those special interests.

Milton Friedman's PhD thesis was on this point: how doctors' incomes are higher as a result of the American Medical Association controlling who is and who is not a doctor than they would be in absence of the AMA. St Maggie started the process by which barristers' incomes were no longer supported by their monopoly of representation in the courts.

Which brings us to the sense in which Uber is working. Not the company itself, I'm using that word rather in the way that Hans Roslin and Ha Joon Chang use “washing machine”. As a simple description for all of the domestic technology that has so cut the household workload over the past couple of centuries.

And Uber to me here is that revolution in the taxi business which is the smartphone booking system, so we're including Lyft, Sidecar, Le Cab and all the rest. For there were most certainly rents being earned in this business and they're shrinking.

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