Uber/Taxi Green Paper not too bad, but needs more economic analysis and evidence

In the Green Paper on Queensland’s Personalised Transport Industry released by the Queensland Government yesterday, I was hoping to see a cost-benefit analysis of the different reform options, an analysis which would reveal the large benefits to consumers coming from deregulation of the taxi industry and the legalisation of Uber, laying a clear path to necessary reform. But, alas, in the Green Paper we do not see the level of analysis that would be desirable to properly inform public consideration and debate. Instead, the Green Paper talks in general terms about the net benefits of the different reform options, with no attempt at quantifying those net benefits and how the magnitudes of net benefits differ among the options.

The Green Paper notes that its “scenarios have been informed by economic and social analysis of the personalised transport industry.” That may be so, but that analysis is not well demonstrated in the Paper. It would have been really good for the Green Paper to have estimated the net benefit to the community of scenario 4, which is pretty much full deregulation except for safety accreditation and a nominal annual administration fee, my preferred scenario. The Queensland Department of Premier and Cabinet has previously estimated that current restrictions on taxi licences cost Brisbane consumers $40 million per annum in higher fares (see this ABC News Report). But I cannot see evidence of this type cited in the Green Paper, which is very light on economic analysis.

Regarding its maximum deregulation Scenario 4, the Green Paper notes:

“The removal of entry restrictions creates a highly competitive environment with more diversity and choice for customers. Competition drives a reduction in wait times and fares as a result of market driven supply-demand matching and reduced regulatory burden on service providers.”

That this would be the case was obvious to many of us already. The important work to do is to quantify those gains and inject them into the public debate to help win the case for maximum deregulation, showing how much better this option is than partial deregulation options (e.g. maintaining the taxi industry’s control of the “rank and hail” market). For too long, Queensland consumers have been ripped off by the taxi industry which has been protected by a regulatory restriction on the number of taxi licences. The Green Paper should have made a stronger case for maximum deregulation, backed by solid economic analysis and evidence. So the Green Paper gets a C+ grade at best.

On the issue of whether taxi licence holders should be compensated, see Rod Bogaard’s excellent guest post from early February:

Should Qld taxi plate owners be compensated for the recent disruption to the taxi industry?

Rod’s guest post has apparently become a prescribed reading for an economics subject at QUT, based on traffic data for my blog, which is recording a high number of hits from the QUT Blackboard site. Well done, Rod!

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Green Paper not too bad, but needs some solid economic analysis

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2 Responses to Uber/Taxi Green Paper not too bad, but needs more economic analysis and evidence

  1. Glen says:

    Gene, I could not comprehend how one of the options was to not allow Uber in the regional areas. This would be a tragic outcome and one that would clearly define regional Qld as an economic backwater, the regions are crying out for jobs, not Govt restrictions that prohibit jobs, have they not learnt anything from the mess that is now our electricity market. Whilst there is no dividing line on a map the division between SEQ and the rest of the state seems to be one that many in govt seem happy to embrace, let’s hope this rediculous option is not the one taken and Uber is allowed to operate throughout the state.

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