≡ Menu

Uber-Excellent Economist Liya Palagashvili Gives Ride-Hailing a Lyft

GMU Econ alum – and a co-author and former student of mine – Liya Palagashvili today in the New York Times busts a myth connecting ride-hailing services with greater traffic congestion. A slice:

A ban on new ride-hailing drivers will not solve the problem of road congestion since it is being primarily caused by other factors. The City Council should look to more effective proposals to address road congestion. One is congestion pricing: charging higher prices during high-traffic times, such as imposing higher fees on bridges and tunnels during peak hours. The idea is to discourage people from driving during those times, and the revenue generated should be used to invest in improving public transit as a viable alternative. According to some studies and trials by cities around the world, congestion-pricing schemes have been effective at reducing traffic and raising revenues. In past discussions with Gov. Andrew Cuomo, Mayor Bill de Blasio has not been open to this solution.

Yet the proposal Mr. de Blasio does support will harm an already existing congestion-pricing scheme. Ride-hailing companies have a built-in congestion-pricing mechanism — “surge pricing” or “peak pricing.” These higher prices deter riders from frivolously using ride hailing during busy times because prime-time fares are higher. Higher prices encourage many potential customers to opt for the subways. For comparison, taxis have a fixed $1 surcharge only between 4 p.m. and 8 p.m. on weekdays, which is too small an amount to effectively deter many riders.

Before the City Council chooses to limit ride-hailing services to New Yorkers, especially those in the boroughs outside Manhattan, it should test whether claims about those services are well-founded. As it stands today, there is no compelling evidence that ride hailing has been a primary or significant cause of New York’s traffic problems.