Why Americans Love the Sharing Economy

Editor’s Note: The following is an adapted excerpt from the author’s monograph Uber-Positive: Why Americans Love the Sharing Economy.

The widespread benefits of ride-sharing companies such as Uber and Lyft make it difficult for policymakers to claim that the industry’s growth needs to be curtailed in order to, for example, lower traffic congestion or protect the profits of taxi moguls. However, if ride-sharing put the public in danger, that could be a legitimate reason to impose further regulations.

But when it comes to ride-sharing’s effect on drunk driving, the technology’s contribution to public safety is clear — it reduces the rates of DUIs and fatal alcohol-related accidents. These are some of the findings of a new paper by economists Angela Dills of Providence College and Sean Mulholland of Stonehill College.

The paper looked at 150 cities and countries from 2010 through 2013 and found that “for each additional year of operation, Uber’s continued presence is associated with a 16.6 percent decline in vehicular fatalities.” This is in addition to the 18 percent decline in fatal nighttime crashes after Uber entered a new market. For DUIs, Uber’s introduction led to a one-time 33 percent decline that was followed by an annual average decline of 51 percent in the following years.

These findings echo those from a January 2015 report issued by Uber and Mothers against Drunk Driving (MADD), which found that ride-sharing saves lives because people use the service as a designated driver instead of trying to drive themselves home after they have had too much to drink. As the report states, in an obvious conclusion, “When people have more options, they make better, safer choices.”

In a survey of 807 individuals conducted by the Benenson Strategy Group, 88 percent of respondents agreed with the statement “Uber has made it easier for me to avoid driving home when I’ve had too much to drink,” and 78 percent said Uber has made it less likely that their friends will drive after drinking.

The survey results are also supported by other data. Uber’s entry into Seattle was associated with a 10 percent decrease in drunk-driving arrests. Controlling for outside factors, after UberX launched in cities across California, monthly alcohol-related crashes decreased by 6.5 percent among drivers under 30 (amounting to 59 fewer crashes per month). This decline was not observed in California markets without UberX. When drunk driving decreases, it benefits all motorists, not just ride-sharing passengers.

The MADD report shows that demand for Uber rides peaks between 9:30 p.m. and 1:30 a.m., when alcohol-related accidents are at their highest levels. UberX ride data from New York City that I examined support this finding, showing that hourly Uber ride totals from 8:00 p.m. to midnight were higher than those during the morning rush (7:00 a.m.–10:00 a.m.).

The times when demand for rides is the highest — such as when bars close — are precisely when taxis are the most difficult to find. In Austin, Texas (one of the few cities besides New York that keep public taxi records), the number of taxis available after midnight declines due to limited supply resulting from government-imposed barriers to entry. With Uber and Lyft recently leaving the city due to onerous regulatory requirements, it is unfortunate that alcohol-related accidents will likely increase.

The times when demand for rides is the highest — such as when bars close — are precisely when taxis are the most difficult to find.

People often forget that driving a taxi is dangerous because its business model is conducive to crime and violence. For one thing, taxi trips are anonymous. Drivers also carry cash. The average cash fare for New York City taxi trips in 2014 was around $12. With a typical driver shift of 9.5 hours and around 45 percent of trips paid for in cash, it is safe to assume that, on average, taxi drivers are carrying at least $100 in cash, which makes them attractive targets for robberies. This is one reason why the homicide rate for taxi drivers is 20 times higher than the U.S. civilian average and more than double the rate for police officers.

These dangers are corrected with ride-sharing. The identities of passengers and drivers are both verified, and safety is reinforced through the feedback system. Ride-sharing companies also track both parties’ locations throughout the trip. Additionally, no cash ever changes hands, since all payments are taken care of electronically.

The safety benefits of ride-sharing do not end there. All major ride-sharing companies already require background checks, insurance coverage, zero-tolerance policies on drugs and alcohol, and vehicle-safety inspections for their drivers. In New York City, criminal-background checks for ride-sharing drivers are conducted by the Taxi & Limousine Commission (TLC), the city’s taxi regulator, and they are required to meet its licensing standards. This means that, in New York City especially, there is no reason to argue that ride-share drivers pose a greater threat to passengers than taxi drivers.

Additionally, Uber offers more-comprehensive insurance coverage for its drivers and riders than the TLC requires. These offerings include $100,000 of liability insurance when a driver is logged into the Uber application; $1,000,000 of liability insurance when a driver is en route to pick up a customer and on a trip; and vehicle-collision insurance for the entire value of the vehicle. The TLC, on the other hand, only requires liability insurance of $100,000 per passenger and $300,000 per incident.

The main (or at least stated) justification behind local, state, and federal regulation is consumer protection. A few decades ago, before ubiquitous Internet access, this reasoning may have made some sense. But in today’s economy, information is controlled by customers thanks to the Web’s user-generated content.

This means that regulators do not have to play as large of a role in protecting consumers. As the power dynamic continues to shift in favor of the customers, the need for an expansive regulatory framework further diminishes. The sharing economy is the natural extension of this consumer-friendly environment, with its embrace of robust feedback systems.

Along with many other sharing-economy companies, Uber and Lyft use post-service, dual-feedback systems where riders and drivers both leave reviews. This process reinforces positive behavior and weeds out those who make trips difficult or unenjoyable. Customers learn that they can trust these reviews, and feedback allows companies to cut ties with those drivers who put riders at risk.

The level of faith in reviews has greatly increased. Ten years ago, who would have thought that someone would willingly enter an unlicensed stranger’s car or stay at a stranger’s home? Today, these actions are taken by millions of people around the world.

Concerns over public safety are a valid reason to establish a rigorous regulatory framework for an industry. However, there is no need to issue regulations that stifle ride-sharing’s growth for the sake of consumer or driver safety, both of which are enhanced through ride-sharing. This holds especially true when ride-sharing clearly helps to reduce drunk driving — a result that truly benefits everyone.