The phenomenon of internet taxis from an economic point of view

It is said that the number of customers of one of these systems in Tehran is more than any other city in the world in the Uber system. These are all the positive and outstanding points of these products of the digital economy world, and at first glance, everyone pays attention to these phenomena. But if we look at this issue from an economic angle, we may reach dimensions that are not clear at first glance and we may have different judgments.

From an economic point of view, Snap offers a luxury service and at the same time very cheap. For a person to order a car and sit alone in it and go from anywhere in the city to another place is comparable only to the taxi service in Europe. In Europe, public transportation such as metro, bus and tram are cheap and taxis are very expensive (a ticket costs one and a half or two euros compared to a fare of about 40 euros).

In terms of urban management, we can talk about improvement when the masses of people are led to use public transportation and Uber and taxi are reserved only for the rich or people who have urgent work. Unfortunately, these systems do not have such a function in Iran; This means that the existence of such a cheap service will not increase the number of public transport customers and may decrease. Perhaps the acceptable justification is that the capacity of public transport has not attracted more passengers and internet taxis have compensated for the lack of capacity of public transport.

Even if this statement is true, it should not be forgotten that firstly, the low price of these services has increased the demand for travel within the city. In addition, it has increased the intensity of traffic and air pollution. In evaluating the effects of such digital innovations, these things must be taken into account.

Has the existence of online taxis increased the efficiency of the economy? That is, has information technology made the resources available in the economy to be used better? If internet taxis created the habit of people taking passengers with them while going to work or coming back, then it could be said with confidence that the efficiency in the economy would have increased; Because the number of passengers per car increased; But currently, most of the drivers of this service are only engaged in this work.

Of course, it must be acknowledged that now that passenger search is possible through online requests, the distance traveled to find a passenger has decreased, and as before, it is not necessary for the agency’s vehicles to return to the origin to find a new passenger, or for the passenger carriers to go long distances to find a passenger. The economy has increased; But this is different from what we expected the digital economy to provide.

According to Rakem, the root of the cheap price of internet taxis is very cheap gasoline and hidden subsidies. This has caused the market of such a service to become very widespread and set a record in the world. Human nature is drawn towards the high use of a product or service that has a subsidy, and because the demand has increased, the number of drivers working in it has increased.

It is said that 4.5 million people are somehow working in this market. When a wrong policy, such as the stabilization of gasoline prices in inflationary conditions, is implemented for several years, as a result, related businesses flourish and employment is created, which is basically based on hidden subsidies. Now, whenever the policy maker wants to revise the energy pricing policy, he faces the opposition of most of the society. 4.5 million people as drivers will be directly affected by the higher price of gasoline.

Also, the mass of people who were used to using this luxury service can hardly change their habit. This case is an example of what is called path dependence in economics; This means that once you have gone forward in one direction, it will not be easy to go back and you will most likely have to continue on the same path.

I know it is very bitter to say such a word; But in the author’s opinion, if economic reforms are to be implemented one day, the online taxi market should be reduced, and by removing the hidden subsidy, we should spend the resulting resources on the development of public transportation such as buses, subways, and trams, and the people who are currently working as system drivers are to appear in the role of bus, subway and tram drivers or repairmen of these public transportation means.

It is with such reallocation of resources that it can be said that the country’s resources have been better used and the country faces less negative consequences such as more severe traffic or very severe pollution in cities.