Question

Taxi Dancing around the Question of Regulation

Uber is a ridesharing service introduced in San Francisco in 2009 and quickly expanded to 140 U.S. cities and 40 foreign countries. Customers “e-hail” a ride through an app on their smartphone and a ride is there within minutes. The service is cheaper than a typical taxi and there is no cash involved as the charges come straight from the customer’s credit card. The service has its detractors, including cab services and some dissatisfied customers.

Management Update: Add drivers to the list of possible Uber detractors. In September 2015, a California judge granted class-action status to an employee status lawsuit filed against the company. The suit is open to all Uber drivers in California. The lawsuit claims Uber misclassified its employees as contract workers. It alleges Uber treats drivers like employees without providing the requisite benefits. Uber plans to appeal the decision saying there really is no “typical” driver, the key question at issue. If the suit is successful, it could mean the end of Uber

“Innovation and regulation simply don’t work together.” So says Larry Downes, the victim of the cab ride described at the outset of the case and formerly of the Northwestern University School of Law and the University of California-Berkeley’s Haas School of Business. Assuming that he’s right, why is this so? Why is regulation often incompatible with innovation? Why do we regulate most industries in the first place? In your opinion, what sort of tradeoffs should we seek when we try to balance the opposing advantages of regulation and innovation?

Answer 1

answer-

Regulations often incompatible with innovation because Regulations are like burden to companies like Uber who try to innovate but regulations restrict thier innovative activities and they have to conform to those regulations. Regulations can be viewed as a inhibitor of innovation which fossilize practices of companies to innovate by setting traditional requirements. Innovation is all about being open, creative and free so that companies can find new designs, technology and processes but if they are restricted by regulations then it discourge them to innovate otherwise violation of regulation will lead to penalties and loss.

We regulate most industries in the first place due to their type of operations and impact on other stakeholders. certain industries like automobile industry, drug industry, tobacco industry, airline industry etc requires regulation because their business operations not only affect the company but other stakeholders like customers, suppliers, employees, government, society etc.

for example- Automobile industry regulated by EPA to produce vehicles that meet EPA standards and not pollute environment. Uber was regulated so that its employees and customers are not affected by its misconducts.

In my opinion, The trade off should combine the advantages of both regulation and innovation. Companies should be regulated to stop activities that are unethical and illegal like polluting environment, discriminating employees, sexual harrasment etc and promote activities that leads to innovation like R&D, provide subsidies by government to industries for research etc.