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You're correct in your distinction, but you are giving the impression that this is a bad thing. If some companies like Uber and Instacart can nullify a nefario

You're correct in your distinction, but you are giving the impression that this is a bad thing. If some companies like Uber and Instacart can nullify a nefarious law using loopholes, this is a Good Thing. In general, there are strong reason to believe that regulation which restrict the freedom of contract are harmful, and the result of special interests trying to secure a competitive advantage through legislative means.

rayiner 12y ago
There's actually two different kinds of laws at play, of which those restricting freedom of contract is only one. The other kind has to do with when a company can be held liable for the conduct of its employees. Companies generally cannot be held liable for the conduct of their contractors, because they don't control that conduct, while they can be held liable for the conduct of their employees. It's uncontroversial, even among most libertarians, that people should be held liable for the hazards created by their profit-making activities. If your business is shuttling people around in 3,000 pound metal death machines, you should be on the hook when one inevitably hits someone. Not just out of concerns of fairness, but because the contrary rule eliminates any incentive on the part of the business to minimize hazards incident to their profit-generating activity.
- murbard2 12y ago
  Actually no, as Ronald Coase showed, it doesn't matter who the liability falls on initially - If it falls on the driver, the driver will demand higher wages / fares to compensate for the cost of insuring himself. - If it falls on the company, the company will demand higher fares to compensate for the cost of insurance - If it falls on the passenger, the passenger could demand lower fares. However, the company would soon realize that by accepting to take on the liability, they could command a much higher fare. Not only would it relieve the customer of the burden of the liability, but by better aligning incentives, it would also send a credible signal that the cars are safe and the drivers are cautious. What if the liability is on the drivers and they are uninsured and likely insolvent in case of an accident? This is the same scenario as shifting part of the liability on the customer, it likely wouldn't be very appealing. You can make an argument that consumers are irrational and are unlikely to really look into whether or not the cars / drivers are insured, but that's a different argument than externalization, and it is by no means obvious. A single accident where the victim isn't properly compensated could be disastrous for a company.
  - rayiner 12y ago
    Coase's theorem doesn't apply when the parties can't transact with each other to shift the burden. Customers can choose to use properly insured drivers but someone who gets hit or has her property damaged by a driver doesn't get to choose one that has the requisite commercial insurance.
    - pdonis 12y ago
      > Coase's theorem doesn't apply when the parties can't transact with each other to shift the burden. That's true, but it's irrelevant to the point murbard2 was making. He's not arguing that the person who gets hit should bear the liability; he's arguing that it doesn't necessarily have to be Uber that bears the liability, at least not as an initial condition; it could be either the individual driver or the passenger, since all of those parties can transact to shift the burden. (Notice that he didn't list "the person who gets hit" as an option.) Since you were arguing that Uber should bear the liability (instead of just arguing that the person who gets hit should not), his point is a perfectly justified response to yours.
      - rayiner 12y ago
        > You can make an argument that consumers are irrational and are unlikely to really look into whether or not the cars / drivers are insured, but that's a different argument than externalization This part makes me think that he did not consider the scenario of a driver hitting someone else. It is precisely the problem of externalization. If the initial liability isn't on the company, it will be on a party (the driver or passenger) that won't actually have the assets to pay in the case of an accident. In that case, it is de facto externalized onto the poor sap who gets hit.
        pdonis 12y ago
        > If the initial liability isn't on the company, it will be on a party (the driver or passenger) that won't actually have the assets to pay in the case of an accident. Why not? In the hypothetical Coasian scenario where the company doesn't have liability but the driver and/or passenger will negotiate with the company to change the terms to compensate, the driver and/or passenger know that they are liable and the company isn't. (If they didn't know, they wouldn't know to renegotiate the terms.) What you appear to be assuming is that the driver and passenger will not know, i.e., that they will be blindsided by the fact that they are liable, the first time the vehicle gets in an accident. But even if that's the case, why is that the company's fault? Isn't the driver responsible for knowing what he is and is not liable for when he takes paying passengers? Even if he wasn't taking paying passengers, he'd still have to have insurance, so it's not like the concept of him being liable when his car hits someone is new to him. (The passenger has more of an excuse here, since he's not driving and would not be expected to bear responsibility under just about any legal standard currently in play.)
bsder 12y ago
Except that there a some quite good reasons why we do things like regulate cabs. You don't get take make statements like this without discussing why the same thing which happened historically that led to the current laws won't happen again. If you don't regulate them, you wind up with a race to the bottom and have unsafe cars, untrained drivers, lack of insurance, etc. And, gee, once Uber wasn't paying top dollar to drivers anymore, the quality crashed and all the problems appeared that everybody expected. Go figure.
- murbard2 12y ago
  The thing that happened historically is that cabs lobbied for licensing to cut the competition. Do you have any evidence regarding your safety claims?
  - bsder 12y ago
    History of taxis before the Haas Act: http://www.capitalnewyork.com/article/politics/2013/01/7399052/curse-new-york-city-taxi-medallion?page=all http://www.capitalnewyork.com/article/politics/2013/01/73990... "n 1932, 16,732 cabs roamed New York City streets, according to taxi historian Graham Hodges’Taxi! A social history of the New York City cab driver. The competition “was merciless,” according to Hodges, and “Many cabbies turned to petty crime to help make ends meet.” There were strikes, and there were fare wars." The solution isn't to wipe out the medallions. The solution is to issue more until you achieve the balance you seek.
    - murbard2 12y ago
      So the argument is that cabbies weren't making enough money and thus had to supplement their income with petty crime ? Rubbish. First of all, the medallion system does not raise the pay of cab drivers in the long run, since those medallions are eventually traded and leased out. Second, there are plenty of jobs which pay very little, and somehow this is not brought up as a concern.

rayiner 12y ago

There's actually two different kinds of laws at play, of which those restricting freedom of contract is only one. The other kind has to do with when a company can be held liable for the conduct of its employees. Companies generally cannot be held liable for the conduct of their contractors, because they don't control that conduct, while they can be held liable for the conduct of their employees. It's uncontroversial, even among most libertarians, that people should be held liable for the hazards created by their profit-making activities. If your business is shuttling people around in 3,000 pound metal death machines, you should be on the hook when one inevitably hits someone. Not just out of concerns of fairness, but because the contrary rule eliminates any incentive on the part of the business to minimize hazards incident to their profit-generating activity.

murbard2 12y ago
Actually no, as Ronald Coase showed, it doesn't matter who the liability falls on initially - If it falls on the driver, the driver will demand higher wages / fares to compensate for the cost of insuring himself. - If it falls on the company, the company will demand higher fares to compensate for the cost of insurance - If it falls on the passenger, the passenger could demand lower fares. However, the company would soon realize that by accepting to take on the liability, they could command a much higher fare. Not only would it relieve the customer of the burden of the liability, but by better aligning incentives, it would also send a credible signal that the cars are safe and the drivers are cautious. What if the liability is on the drivers and they are uninsured and likely insolvent in case of an accident? This is the same scenario as shifting part of the liability on the customer, it likely wouldn't be very appealing. You can make an argument that consumers are irrational and are unlikely to really look into whether or not the cars / drivers are insured, but that's a different argument than externalization, and it is by no means obvious. A single accident where the victim isn't properly compensated could be disastrous for a company.
- rayiner 12y ago
  Coase's theorem doesn't apply when the parties can't transact with each other to shift the burden. Customers can choose to use properly insured drivers but someone who gets hit or has her property damaged by a driver doesn't get to choose one that has the requisite commercial insurance.
  - pdonis 12y ago
    > Coase's theorem doesn't apply when the parties can't transact with each other to shift the burden. That's true, but it's irrelevant to the point murbard2 was making. He's not arguing that the person who gets hit should bear the liability; he's arguing that it doesn't necessarily have to be Uber that bears the liability, at least not as an initial condition; it could be either the individual driver or the passenger, since all of those parties can transact to shift the burden. (Notice that he didn't list "the person who gets hit" as an option.) Since you were arguing that Uber should bear the liability (instead of just arguing that the person who gets hit should not), his point is a perfectly justified response to yours.
    - rayiner 12y ago
      > You can make an argument that consumers are irrational and are unlikely to really look into whether or not the cars / drivers are insured, but that's a different argument than externalization This part makes me think that he did not consider the scenario of a driver hitting someone else. It is precisely the problem of externalization. If the initial liability isn't on the company, it will be on a party (the driver or passenger) that won't actually have the assets to pay in the case of an accident. In that case, it is de facto externalized onto the poor sap who gets hit.
      - pdonis 12y ago
        > If the initial liability isn't on the company, it will be on a party (the driver or passenger) that won't actually have the assets to pay in the case of an accident. Why not? In the hypothetical Coasian scenario where the company doesn't have liability but the driver and/or passenger will negotiate with the company to change the terms to compensate, the driver and/or passenger know that they are liable and the company isn't. (If they didn't know, they wouldn't know to renegotiate the terms.) What you appear to be assuming is that the driver and passenger will not know, i.e., that they will be blindsided by the fact that they are liable, the first time the vehicle gets in an accident. But even if that's the case, why is that the company's fault? Isn't the driver responsible for knowing what he is and is not liable for when he takes paying passengers? Even if he wasn't taking paying passengers, he'd still have to have insurance, so it's not like the concept of him being liable when his car hits someone is new to him. (The passenger has more of an excuse here, since he's not driving and would not be expected to bear responsibility under just about any legal standard currently in play.)

bsder 12y ago

Except that there a some quite good reasons why we do things like regulate cabs. You don't get take make statements like this without discussing why the same thing which happened historically that led to the current laws won't happen again. If you don't regulate them, you wind up with a race to the bottom and have unsafe cars, untrained drivers, lack of insurance, etc. And, gee, once Uber wasn't paying top dollar to drivers anymore, the quality crashed and all the problems appeared that everybody expected. Go figure.

murbard2 12y ago
The thing that happened historically is that cabs lobbied for licensing to cut the competition. Do you have any evidence regarding your safety claims?
- bsder 12y ago
  History of taxis before the Haas Act: http://www.capitalnewyork.com/article/politics/2013/01/7399052/curse-new-york-city-taxi-medallion?page=all http://www.capitalnewyork.com/article/politics/2013/01/73990... "n 1932, 16,732 cabs roamed New York City streets, according to taxi historian Graham Hodges’Taxi! A social history of the New York City cab driver. The competition “was merciless,” according to Hodges, and “Many cabbies turned to petty crime to help make ends meet.” There were strikes, and there were fare wars." The solution isn't to wipe out the medallions. The solution is to issue more until you achieve the balance you seek.
  - murbard2 12y ago
    So the argument is that cabbies weren't making enough money and thus had to supplement their income with petty crime ? Rubbish. First of all, the medallion system does not raise the pay of cab drivers in the long run, since those medallions are eventually traded and leased out. Second, there are plenty of jobs which pay very little, and somehow this is not brought up as a concern.