Pedicabs, tricked-out golf carts and even Volkswagen Things are a hot form of transportation for tourists and others. You’ve seen them around Sarasota and the local Keys. They are increasingly popular in tourist-friendly cities all over the nation.
Even a Wall Street Journal article praised these “chariots for hire,” joining a chorus of reports that such micro-transit services go beyond serving tourists and provide transportation that buses and standard taxis don’t. They also provide economic opportunities for entrepreneurs that don’t require special training, and they even provide an exciting green business model.
They are certainly popular on Siesta Key. On almost any night, you can see charming bright and colorful pedicabs and golf cart shuttles hauling quiet couples, rowdy partiers or entire families from the beaches to restaurants and bars and to homes.
As Michael Shay, president of the Siesta Key Association, told The Observer, “We need the pedicabs and golf cart guys.”
But lately there has been discussion of the need to regulate pedicabs and similar services on Siesta Key. Which begs the questions: Why? What we are trying to fix? What market failure is occurring that we need regulations to solve?
The answer appears to be: none.
Siesta Key, and the rest of unincorporated Sarasota County, has had a free market in pedicab and tourist shuttle services for years without mounting complaints or frequent problems or anything to indicate the free market isn’t working just fine.
The calls for regulation concern me because for 20 years I have been an economist working on regulatory issues, including helping design some new ones and helping figure out how to deregulate others. Plus I read a lot of empirical studies on what does and does not work in regulation.
There are significant downsides to regulations – which is why they are normally only considered a good thing when there is a significant problem the market cannot solve. We often are much too quick to regulate markets in response to minor problems because we don’t know about or don’t think about the failures that also occur in regulated markets.
We rarely even consider if regulations improve things compared with the alternative. Pedicabs are a great example.
The city of Sarasota heavily regulates pedicab services, yet there is no evidence that they enjoy a safer pedicab market than Siesta Key or the rest of the county. The utter lack of problems in the laissez-faire free market parts of the county is essentially proof that the regulations in the city of Sarasota don’t benefit the public in any significant way. What is less often considered is how regulations in general can hamper markets and consumer benefits.
Regulations stifle innovation. When entrepreneurs come up with a new idea that doesn’t fit into the regulatory definitions or rules, it is often not possible even to try the new idea to see if it works, or for a new and better idea to replace an outdated one.
The kerfuffle going on these days over ride-sharing companies such as Uber and Lyft is a good example. Ride-sharing apps are enormously popular and a huge innovation to the taxi market that dramatically improves service and reduces costs of getting a ride.
But it wasn’t the regulated taxi companies that came up with the idea. And ride-sharing services don’t fit in current regulations, so all over the country cities and states are trying to cram these new services into old regulatory models or just trying to prevent them from operating at all.
In fact, the ride-sharing apps solve the original problem used to justify regulating taxi markets – customers not having enough information about taxis and drivers and not enough accountability for bad service. But no city I know of is talking about deregulating the market now that the problem has been solved.
Regulations also inevitably limit entry and reduce competition. Even modest requirements and costs to get a license to operate, when added to a market that was free and open and not experiencing problems, pushes some operators out or prevents some new ones from getting into the business.
Pedicabs and golf-cart shuttles are not usually full-time jobs; they are a way to have fun, meet people and make a little money on the side. If it is a hassle, requiring trips to the county offices and fees and waiting for a license to come through, some people just won’t do it.
At the same time, there are stacks of books written about the problem of businesses in regulated industries having too much influence with regulators and using that influence to steer the rules to keep competition out. Those calling for new rules insist they just want to protect the public. But regulations tend to grow.
Once a market is regulated, when new problems occur, no one looks to the market to solve it, but to the regulators, bringing about yet more regulations. And the regulators themselves often get proactive, thinking up potential future problems and creating new rules to prevent what they imagine from coming to pass. It is rare to see a lightly regulated market stay that way.
For the growing Siesta Key pedicab market, putting on the brakes would likely mean less competition, less service, less opportunity for entrepreneurs and less innovation, making it harder for visitors to enjoy all of the island’s amenities and businesses.
It is not as though the existing pedicab and golf cart shuttle companies on Siesta Key don’t have standards. Some do background checks on drivers or check their driving records, require commercial insurance or put extra safety features on their vehicles.
Which suggests a better alternative to new regulations. Rather than fixing what isn’t broken, it would be helpful to try to improve the market for pedicab services.
The Siesta Key Association, or some other interested group, could develop some simple voluntary standards that, if met, earn a pedicab a seal of approval in the form of a highly visible sticker or the like. Then educate visitors and residents encouraging them to make sensible decisions about using pedicabs, like they would any service, and to look for the seal of approval.
This would add valuable new information to the current pedicab market on Siesta Key and help improve and expand the market.
That would be far better than unnecessary new regulations.
Adrian Moore vice president of policy at Reason Foundation. This article originally appeared in the Sarasota Observer.