Innovative Business Models? Edwards Says, “Not in Rhode Island.”


Ride sharing network companies Uber and Lyft have suspended operations in Austin, Texas, because government regulations stomp on their business models.  Facilitating a transaction between somebody who would like to make some money driving people around and people who need rides is apparently too convenient for established taxi companies to compete with it.  Naturally, rather than reevaluate the costs and benefits of regulations and ease them on taxis, government officials are inclined to impose regulations on new business models — adult Americans’ being incapable, it seems, of living their own lives.

In Rhode Island, Democrat Representative John “Jay” Edwards (Tiverton, Portsmouth) has put Rhode Island on the protectionist, anti-innovation map with H8044.  The bill is long and looks to contain at least one substantial error, but here are some highlights:

  • The company providing the networking service (e.g., Uber) would have to pay the state $150 every year for every driver, with a minimum payment of $15,000.
  • The bill sets up requirements for insurance to tilt liability strongly toward the networking companies, creating a big barrier to entry.  For example, drivers’ individual insurance companies could refuse to cover incidents occurring while the driver is providing service, with no liability, which would be fine from a free-market perspective, but the network company would be required to cover insurance, ultimately.  This differs dramatically from usual Rhode Island legislation, which typically seeks to make all companies (especially insurance companies) liable for as much as possible.
  • Edwards’s bill would also compromise drivers’ ability to protect themselves by requiring the network company to ban them from carrying firearms (or using the job as the rationale for a concealed carry permit), with mandated suspension and internal investigation based on any complaint and a requirement that the information be reported to the state for its own investigation.

People’s rationale to justify government regulations will vary, and not every reason is objectionable.  Of course, established organizations like regulations because they create barriers to entry for competition.  Government operatives like them because they expand government power (and revenue).  Some people really do believe (based on what evidence, I don’t know) that government is well positioned to figure out how to keep people safe and to balance that safety with others’ freedom.

Rhode Island government takes a very narrow view of economic freedom.  Basically, any time money changes hands, the government believes it deserves a cut and has final oversight rights.  Even when politicians decline to take a piece of somebody’s pie — as when they exempt certain kinds of retirement income from taxes — the attitude is clearly that the politicians are giving that benefit to the targeted special interest.

So, when the governor talks about sparking innovation in the state, she means giving government a role right at the start, filtering which companies deserve special deals to overcome Rhode Island’s huge artificial hurdles.  And when some company, like Uber or Lyft, comes up with a way for Rhode Islanders to make some money on their own initiative while providing a popular service that improves consumers’ lives, some politician like John Edwards is close at hand to stand in the way.

Some big company or government agency may discover a way to exploit Rhode Island and its people sufficiently to make it look like this government-first approach actually has a chance of working, but in the long term, it doesn’t.  We’re never going to find that niche to which our region and our neighbors are uniquely suited if narrow-minded politicians have to be convinced, first, and given the opportunity to deal themselves in for rewards and power.

  • Rhett Hardwick

    To see the truth of Justin’s assertions, it is only necessary to review donations to Mayor Cianci. Towing companies, with “Police Tow” contracts donated as much as $100,000 to Cianci. As I recall, “Police Tows” are $100 minimum. Doesn’t compare well to the $28.00 AAA pays.