Driverless Cars: Ready or Not, Here They Come

The taxi industry has been very vocal in their opposition to ride-sharing companies such as Uber. And now, the US tech start-up NuTonomy is set to introduce a fleet of autonomous taxis to Singapore this year. It’s not a great time to be in the taxi industry, is it?

Boffa: In the next ten years, if not earlier, most taxi drivers will probably lose their current jobs. But a great analogy I heard recently made reference to the former job of elevator lift attendants. When autonomous elevator lifts were introduced in the 1900s many lift attendants lost their jobs. But for a while, some countries (and some states in the US) maintained mandatory lift operators. It was a form of welfare. I wouldn’t be surprised if, for five or ten years following the introduction of autonomous taxis, we will have a ‘driver’ present in the vehicle. He won’t do anything, but people will feel safer, and it will allow taxi drivers a buffer period to either retire or find another occupation.

In May 2015, the Italian court ruled to ban unlicensed companies such as Uber from operating its ride-sharing service in Italy. Considering the inevitability of technological reforms, is legislation like this anti- progressive?

Boffa: If a country consistently opposes all forms of innovation, then yes, in the long run it will be a problem: companies like Uber will invest their technology money in a country where the regulations are more favorable. Technological innovation should instead encourage legal innovation. But in the case of Uber and its ride-sharing alternative to taxis, we have to try to put ourselves in the shoes of the taxi drivers. At some point in the past they made an upfront payment to the State of maybe 100,000 euros or more to purchase a medallion that gave them the right to run a taxi service in a quasi-monopolistic setting, that is, without competition from closely substitute services. So the issue becomes more philosophical than economic: is it fair to renege on implicit promises? And how much can you trust a government if they create a law that allows you to pay for a quasi-monopoly right, but that law proves not to be perennial?

What’s the answer then?

Boffa: Ideally, we should look for new solutions to compensate taxi drivers, instead of banning the entrance of new operators that offer valuable services to consumers. It’s what the independent Italian transportation regulator, the Autorità di regolazione dei trasporti, has suggested be put in place. One solution could be to determine how much those people paid for their medallions and then compensate them for a portion of it through the public purse. Of course, there is a clear drawback, in that it puts a strain on budgets. Another option would be to require companies such as Uber and Lyft to contribute a share of the costs, or to hire some of the taxi drivers (at least before the fleet becomes autonomous).

Isn’t it possible that aggregators like Uber could themselves be out of business some day? For example, what stops us from sharing an autonomous vehicle with friends on Facebook and foregoing the ‘middleman’?

Boffa: That is debatable. Some observers argue that peer-to-peer will indeed replace Internet platforms such as Uber and Lyft, but it seems to me that these platforms are actually efficient ways to match demand with supply. In addition, one could argue that it is much better to have some sort of aggregator to centralise the traffic flows of autonomous cars: by knowing exactly where the traffic is at any point in time, and by having accurate short-term forecasts of traffic flows, jams can be avoided and routes scheduled much more efficiently. It is interesting to note that both car manufacturers and technology companies are actively involved in the development of autonomous vehicles. All these different industries are heading in the same direction, and it is not clear who will prevail over the other and become the market aggregator. We’ll have to wait and see. And it’s going to be exciting to figure out.