Uber and Smith’s Free Trade System

The Philippine government has recently cracked down on Uber drivers by imposing a registration deadline for regulatory purposes. After going through the major arguments of the government, taxi companies, Uber drivers, and the taxi users, I realized that Uber had some of the major elements of Adam Smith’s free trade system, because it transferred the regulatory power from the government to the people themselves, while providing added convenience and more choices for society while producing lower prices through increased competition, at the expense of vested interests.

Adam Smith’s Free Trade System

Smith explained his free trade system in Books 2 and 4 by describing a way of exchange that is free from the vested and arbitrary interests of the government and the merchants, which I implemented into a web-based Non-Arbitrary Resource Allocation (NARA) System. In theory, this system would sustainably lead to lower prices and increased conveniences for the people and require less attention for the ruling class, all at the expense of the merchants whose interests are usually opposite those of society. Similar effects can be seen nowadays, in the field of private transportation, in areas that allow ride sharing apps like Uber and GrabTaxi: people can now avail of lower fares in a more convenient way, increasing their use of Uber taxis at the expense of the ‘mercantile’ or capitalist taxi companies which live on profits, feed of the work of their drivers, and need to be highly regulated by the government.

Normal System Uber, GrabCar, etc System Smith’s System Implemented as NARA
Regulation Government regulates taxi companies which regulate taxi drivers The people regulate the drivers through an IT system. The people regulate social companies through an IT system or through other new conventions (for areas that have no internet)
Choices Standard Choices. People can only choose taxis from a few taxi companies by hailing on the street or calling on the phone. More choices. People can choose between Uber and non-Uber taxis via smartphone, calling on the phone, or hailing on the street. More Choices. People can choose to buy and sell or work for nonsocial companies (non-NARA corporations, sole proprietorships, partnerships, cooperatives) and social companies within NARA.
Effect on Prices High Prices as the economic power is bestowed on the government regulator (ruling class) and the taxi companies (merchant class). Lower Prices as the economic power is given to the driver (working class), by being his own boss, and to the people (society) by being able to rate the drivers. Lower Prices through increased competition from social companies which use real or commodity-based valuation, and are satisfied with ordinary profits, and allow their workers to be co-owners.
Effect on Revenues High or Regular Profits or Rent Income for Taxi Companies. Some taxi companies demand a flat lease while others, a percentage from the taxi driver’s income, in effect feeding from the drivers who must suffer from such a capitalist system. High Revenue as the driver becomes his own boss and as his profits get mixed with his wages. By giving the driver direct and regular access to his customers or ‘consumers’, Uber allows drivers to work for themselves, in exchange for a small share of his profits, cutting off or underselling the capitalist taxi company while increasing the ‘consumption’ of taxi services. Higher Revenue as workers become co-owners of the social company, preventing outsiders from feeding off their profits. Ordinary profits will be parceled out among a social company’s employees on top of their wages. In fact, Smith advises a maximum wage to prevent people in this system from burnout or from working too much. (Book 1, Chap. 10)

More competition = Lower Prices = Less Toil and Trouble for Society

uber

“In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so.” (Book 2, Chap. 2)

The increased competition would reduce the  profits of the masters and the wages of the workers. The trades, the crafts, the mysteries, would all be losers. But the public would be a gainer, because the work of all artificers would become cheaper this way. (Book 1, Chap. 10)

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However, the main problem with Uber is that it is a mercantile company itself in its relation to its drivers and the riding public. Unlike capitalist taxi companies, it does not own equity in the work of the drivers (it does not demand a guaranteed return as lease for the car). However, it is still profit driven and has an interest in driving its competitors out and arbitrarily acting once it gets a superior position, just as how Facebook bought out its competitors Instagram and WhatsApp to prevent losing to competition.

Combining the Interests of the Workers, Merchants, and the Rulers

To avoid this tendency, NARA combines the interests of all three classes to create a sort of decentralized ‘Uber for socio-economics’ which implements Smith’s free people-regulated trade system to maintain economic activity even during man made disasters such as Credit Crunches and Financial Crises and natural calamities such as famines and typhoons:

As the freedom of the inland trade is the best palliative of a dearth and the most effectual preventative of a famine, so is the freedom of the exportation and importation among the states of a great continent. One part of the continent will be less exposed to calamities: the larger the continent, the easier the land and water communication through it. The scarcity of one country would be relieved by the plenty of another. But very few countries have entirely adopted this liberal system. (Book 4, Chap. 5)

Initially, I tried to submit this system as a Masters-level Economics research scholarship proposal but was unsuccessful. I soon realized that Economics is like a religion worshiping money and prices* because it was forced to become objective when it was turned into a science in the 19th century (when ‘natural philosophy’ changed into ‘science’, ), and the only subjectivity that was left was the goal of utility or pleasure, since morality was unscientific and therefore was abandoned, whereas everyone wants pleasure.

So I decided to change strategy and totally bypass economists and academics and go instead for real-world implementation as a disaster relief app after reading Hume’s strategy to advance his own system:

Here the only expedient for success in our philosophical researches is to leave the tedious lingering method which we have followed. Instead of taking a castle or village on the frontier now and then, we march up directly to the capital or center of these sciences, to human nature itself. Once we master human nature, we may hope for an easy victory everywhere else.

Numbers cannot convey feeling, and thus are best for physical sciences

Instead of wasting time on the tedious lingering method of getting quantitative data disproving equilibrium and and profit maximization, it was better to implement solutions to real-world crises and economic problems directly, just like Uber and most startups went directly into solving society’s problems and needs without going through any expensive study. If the system works, then its underlying theory or ideas will be automatically true. 

In my case, I developed and proposed NARA directly as a disaster relief app to a few NGOs, as they are likely to have a real interest in society. However, my main problem was that Smith’s works have been neglected for so long that no one knew about Smith’s concept of real valuation (grain-based) and the three orders of people, and the use of economics in disaster relief, which in turn led me to simplify his works (and those of Hume) merely to prove that I just didn’t make these up arbitrarily and that these are based on Smith’s observation of societies and economics in all of the time and space that he knew, from the Roman times to his current time, and from the global ‘space’, from the east in China to the west in South America.

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