Uber: Who’s Afraid of a Little Creative Destruction?

By Samuel Kirsh 


A frequent topic of conversation among my friends in Halifax is the unreliable taxi service experienced on Friday or Saturday evenings. When it’s time to head home from the bar, game, or dinner, the phone lines of Halifax’s bigger taxi services are clogged with calls, often unrelenting until well past 2am. While this is certainly lucrative for the taxi companies at play, the clear outstripping of demand over supply is starkly illustrated on a weekly basis. Coupled with a transit system that stops at midnight, there needs to be some prescription to reduce this gap. Thus, I firmly believe there could be a market and social benefit from the introduction of ride sharing services such as Uber or Lyft.

To begin with, there is an intuitive economic driver behind introducing ridesharing apps: the demand currently appears to exceed supply. Given that this demand is not met by public transit, this may lead to higher instances of drunk driving. Drunk driving in Nova Scotia is already higher than the national average and is a globally recognized as a detriment to public health. Analytically, great strides have been made to reduce the incidence of drunk driving, but the anecdotal examples of its tragic consequences mean that more must be done to combat this phenomenon. Another incentive for these apps is to provide more flexible employment for newcomers, or to provide a means of employment for the 7.5% unemployed. The other incentive is what is called “creative destruction.” This concept explains how the advent of new technology disrupts existing industries. While in the short run existing industries suffer, this represents a short run cost towards a long-run net gain. With ridesharing apps, this could be seen through increased labor-force participation, innovative carpooling (Uber Pool), and increasing competition in the space. Further, it opens Halifax as a center for technology and growth.

There are conditions of introducing this technology that would make it more palatable and sustainable for its potential employees, as well as the general public. If a ridesharing service was introduced in Halifax, it would thus be the responsibility of the municipality to ensure that contractors received benefits through the parent company they work for. Haligonians would not be the first to demand these types of rights as recent strikes in the UK have shown. Ensuring that individuals are compensated fairly and earn proper benefits commensurate with their employment. Too often, workers in the gig economy are short-changed economically at the cost of their health and well-being, but the next phase of this technological progress should be regulation adapting to this technology. The next aim of local regulators would be to ensure that there is adequate competition, as currently Uber has a virtual stranglehold on the ridesharing app market. Uber, Lyft, and other smaller firms should be allowed entry to promote competition, eventually lowering costs and maintaining stable levels of employment. In other countries limiting the market power of Uber has allowed smaller operators to carve out niches and promoted competition. While this may marginally reduce wages, it provides a wider benefit by limiting the power of an individual firm.

Considering the options available to travelers in other cities makes one inclined to accept the inevitability of ridesharing apps in Halifax. I would not say it is the destiny of Halifax to have Uber nor its familiars, as I could not suggest that allowing Uber to operate here would be without problems. But if one looks at the transportation dilemmas that face Halifax as a growing city, ridesharing is attractive in its low public cost, its ability to reduce drunk driving, and deliver a service found across North America. It could be a signal to firms and individuals that Halifax is moving forward as a city and mark it is as a place to settle.



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