Just imagine that you’re a big-city mayor. If taxi medallions — granting the right to run a taxi to a limited number of people — sell for six figures, the people who own them are heavily invested. They’ll offer lots in the way of money, political support and votes to a politician who will protect their investment from competition. Thus, even though services like Uber (which requires no medallions) are cheaper and offer service in poor neighborhoods where taxis won’t go, for a politician, it’s a no-brainer: Support your supporters. The result is a host of regulations and taxes designed to protect old businesses from new competition.
Sometimes the new competition wins anyway. Uber has been good at generating a large base of mobile customers, then using them to pressure politicians: When New York City Mayor Bill de Blasio went after Uber, Uber used its app to let its users pressure de Blasio.
Happy Uber customer Kate Upton weighed in, producing more pushback than de Blasio could withstand — especially when it turned out he’d gotten over $550,000 in donations from taxicab interests.
Other services aren’t so lucky, and the ability to do an end run around regulators, though welcome, isn’t universal. And if, on top of setting up your lemonade stand, you need licenses, permits, lobbyists and subsidies to make it, not many new lemonade stands will get started. That’s good news for existing lemonade stands, and for the politicians they support, but it’s bad news for everyone else.