DRI-223 for week of 11-16-14: ‘She Rides,’ But May She Drive? Lawfully, That Is?

An Access Advertising EconBrief:

 

‘She Rides,’ But May She Drive? Lawfully, That Is?

 

News reports divulge the birth of a “ride-sharing service and corresponding app” headquartered in the New York City market. “She Rides” offers a specialized form of transportation service – automotive transport for women only provided only by woman drivers. It debuted this week in New York City, Westchester County and Long Island.

 

Entrepreneur Stella Mateo claims that she started her business to provide a service that she would feel comfortable offering to her own daughters. She fills requests for service by matching them with up with female drivers working in the immediate vicinity. Currently, those drivers are working for other established services, but Mateo plans to eventually hire her own stable of female drivers.

 

Mateo “wants her business to provide job opportunities specifically for women,” according to the CBS News report on “She Rides.” That same report quotes a law professor at New York University who says that what she is doing is illegal. Really.

 

The “rule of law” says She May Not Drive

 

Law professor Samuel Estreicher of New York University was billed by CBS News correspondent Vinita Nair as an expert in the subject of employment discrimination. When apprised of the impending startup of She Rides, Estreicher cautioned, “Well, on the employment side, I see a real problem.” The problem is that – believe it or not – She Rides rests on an illegal business premise. “Just because consumers want someone of a particular race or gender or national origin, you cannot accede to those wishes. If you do, you are engaging in illegal discrimination.”

 

Readers may well shake their heads in amazement at this point. Elsewhere in the CBS report, Mateo points out that “there are women who don’t want go to a gym with men, they have an option to go to a female gym.” One of her drivers, Dinorah Decruz, opines that “because I am a woman, if I have to call somebody to come pick me up at 2 o’clock… in the morning… to go to the airport… I would prefer a woman, I would feel more comfortable.” So if women want transportation services and they want those services to be provided by other women, who is being discriminated against?

 

The key words in Prof. Estreicher’s sound bite are “on the employment side.” This implies that Ms. Mateo’s business plan to hire only female drivers is the offending discriminatory act. It discriminates against male drivers, the class of potential drivers excluded by her job description. Why does this constitute “illegal discrimination?” Well, the combination of statutory language and subsequent interpretative case law says that employers are not allowed to take gender into account in choosing drivers because the law says that gender does not materially affect the ability to drive.

 

So much for the law. What does economics say about the matter?

 

It says that employment discrimination law is hooey. Ms. Mateo is engaging in potentially beneficial competitive practice. She should be encouraged, not prosecuted.

 

Why She Rides Is Not Economically Discriminatory to Consumers or Input Suppliers

 

Let us break down this subject into its simplest components. Economics conveys the logic behind the choices we make. We choose in order to get the things we want. The creation of those things is called production; our enjoyment of them is called consumption. Consumption is what makes us happy. The things necessary to production are inputs. The ultimate end or purpose behind all economic activity is consumption; production is only a means to that end. When the law professor says that consumers can’t have what they want, he is negating the very purpose of economics. He had better have a damn good reason for that blithe declaration.

 

Is Ms. Mateo discriminating against men by refusing to provide transportation services to them? No, clearly not, because they can get transportation services plenty of other places. (Actually, nobody has considered the possibility that men might also prefer to receive transportation services delivered by women, but that constitutes an alternative version of the argument developed below.) Even Prof. Estreicher does not go so far as to make this argument, but it is instructive to realize why he does not.

 

If men had a right to be employed as drivers of women – or even a right to be considered for that position – then their exclusion should be illegal. But they have no such right. A right is something that can be exercised without depriving somebody else of their rights. In this case, men can claim a right to be considered for employment as a driver of women only by depriving some women of their right to enjoy the pursuit of happiness as consumers. That right is fundamental; it is enshrined in the Declaration of Independence, a founding document of the land.

 

Men have no absolute right to claim employment at She Rides because they can seek alternative employment as drivers at many other competitive firms in the taxi, livery and transportation markets. Beyond that, they can become entrepreneurs and compete with Ms. Mateo as providers of transportation services to women.

 

That is why it is safe to allow discrimination against men in the private, competitive sector – because men can always find alternative employment and consumption elsewhere.

 

This becomes even clearer when posing the discrimination question on the other side of the market: By offering her services only to women, is Ms. Mateo not discriminating against male consumers? The answer is: Yes, but we need not fear any adverse outcome from this discrimination in a competitive market because men can always find competitive alternatives elsewhere. In this case, they can call a conventional taxicab or a limo or jitney or ride the bus or rent a car or prevail upon friends to supply transportation.

 

In the CBS story, Vinita Nair punctuated her story by flagging a random cab. Mirabile dictu, the driver turned out to be male. The fact that the vast, overwhelming majority of all taxi drivers are male makes a practical mockery of Prof. Estreicher’s discrimination case. Does he really expect us to swallow men as victims of invidious employment discrimination by She Rides when the world is chock ablock with male drivers in every transportation segment, particularly taxis?

 

HOLD EVERYTHING! AREN’T MS. MATEO, MS. DECRUZ, ET AL GUILTY OF REVERSE SEXISM? AREN’T THEY EXHIBITING THE SAME BIAS AGAINST MEN THAT FEMINISTS AND THE LEFT WING ACCUSE MEN OF HARBORING?

 

For decades, men have been taking it in the neck for their patriarchal domination of women, their condescending assumption of feminine inferiority. Isn’t the fundamental premise of She Rides just the mirror image of this same sexist attitude, directed by women against men? Isn’t the implicit picture of men painted by Ms. Mateo and Ms. Decruz fundamentally Hobbesian – nasty, brutish and short on civilized qualities?

 

Review Ms. Mateo’s comments: In order to assure herself of safe transportation for her daughters, she had to go as far as starting her own new business. Ms. Decruz doesn’t feel safe riding with a male driver to the airport – or anywhere else – in the wee hours of the morning. Why not, pray tell? Are these women afraid of rape? Robbery? Or merely that they or their daughters will have their delicate sensibilities brutalized by an unwelcome innuendo or even a sexual proposition?

 

Presumably, that is part of the argument Prof. Estreicher is making – the part intended to persuade the general public, since most people are both unable and unwilling to penetrate the density of legal precedent in employment-discrimination case law. He is implying that government cannot allow this obvious anti-male bias to be reflected in She Rides’ employment policies. That would make the government look bad after all these years of legislative against supposed anti-female bias shown by men. And that may be the supreme irony of this particular case. Women in general and feminists in particular have been a spearhead of left-wing progressivism throughout the 20th century. Now the revolution is beginning to devour its children. Throughout America, draconian regulation is dungeoning up the American Jacobins and chalking their cells with an execution date. The piteous cries of these left-wing aristocrats are now crowding the op-ed pages, letters columns and essay sections of newspapers and magazines.

 

Is the impending fate of Ms. Mateo’s firm only poetic justice?

 

No. There is every reason to believe that Ms. Mateo and company are wrong about men. But markets are the proper venue to settle the issue, not courts. Consider the possibilities:

 

(1)  Ms. Mateo is absolutely right. There is a durable audience of women who want to be driven only by other women. In that case, those women deserve to be served. Allow Ms. Mateo to do it. She will succeed and the market for this service will expand to the extent indicated by the size and durability of this audience.

(2)   Ms. Mateo is completely wrong. There is no significant audience of women who agree with her. In that case, she will go broke quickly and the matter will soon be forgotten.

(3)   Ms. Mateo is right, but only to a limited degree. The audience for her product exists, but it is curious and somewhat ephemeral. Her startup will stimulate competition from people who disagree with her premise – people such as the author of this EconBrief, who spent twenty-eight years successfully providing transportation services to women at night – and this competition will ultimately limit her business or even kill it off.

 

This list of alternatives may not be exhaustive, but it is sufficiently suggestive. Regulatory action is superfluous for the purpose of disciplining Ms. Mateo is she is wrong. If she is right, regulatory action is wrongheaded. Either way, Ms. Mateo has every right to test her hypothesis.

 

Is Ms. Mateo “discriminating against men?” Yes she is. Not only that, she is undoubtedly guilty of bias against men, either consciously or unconsciously. In a free society, people constantly “discriminate” against things and people they don’t like and in favor of things and people they like. A totalitarian government will try – and fail – to stop this. A free society will allow free markets to validate “good” discrimination and invalidate “bad” discrimination.

 

In theory, discrimination is dangerous only when practiced by government. Why? Because government operates without competition. Government produces so-called “public goods” that cannot be produced successfully by the private sector. When government discriminates against you, you have nowhere to turn for relief. When government denies you the vote, you can’t turn to another supplier for redress. When a government-franchised public utility cuts off your power, you were (until quite recently) without recourse. In practice, throughout history, the harmful discriminatory regimes have been those operated by government. The apartheid systems in southern Africa and “Jim Crow” system in the southern U.S. were failures until backed by their respective government. The pressures of supply and demand continually eroded the effects of discrimination in those regimes and helped bring them to an end.

 

The “rule of law” vs. the Rule of Law

 

Prof. Estreicher’s use of the phrase “the rule of law” is chillingly Orwellian. In the nineteenth century, classical liberals cultivated the term Rule of Law to describe a government that eschewed arbitrary rule in favor of limited, narrowly circumscribed actions specified in a constitution. The aural similarity between the modern and classical liberal terms is purely coincidental; they describe antithetical systems, not identical or even similar ones.

 

Estreicher’s “rule of law” is really the rule of government, the rule of statute over freedom. It places the emphasis on “rule” rather than on “law” in the traditional sense. The word “rule” denotes both the fact that the state is an authority figure that rules over us and the rules that form the basis of its rule. In this system, “law” is simply the set of rules by which the state dictates our actions. There are no limitations on this book of rules. How do we know that? Because the state can dictate the nature of consumption. Since consumption governs our happiness and well-being, the state rules over us.

 

In contrast, the Rule of Law as shaped by classical liberalism envisions the law as a system of justice. Justice is defined as the absence of arbitrary rule and privilege and the preservation of liberty. It does not and cannot guarantee equality of circumstances.

 

The example of She Rides (what lawyers would call “the instant case”) illustrates the difference between the two systems. In Prof. Estreicher’s formulation of the “rule of law,” the government forbids Ms. Mateo’s startup firm from hiring only women as drivers – or rather, it forbids them from explicitly considering only female applicants as a matter of firm policy. It does this because it purports to find no objective basis for discrimination between males and females in this particular productive service. In this, the government is pretending to possess knowledge known subjectively only to millions of consumers who purchase transportation services.

 

In contrast, the Rule of Law disclaims all pretense of possessing this knowledge. Instead, it safeguards the right of consumers to makes their knowledge known and effective in markets. It preserves the right of producers to cater to those consumer preferences. It guarantees the right of input owners to supply their inputs to producers for the benefit of consumers. Since government cannot possess all or even a significant part of the relevant knowledge possessed by consumers, producers and input suppliers, it cannot hope to somehow stage-manage the outcome of this market process to achieve “income equality.” Instead, the Rule of Law strives to guarantee the integrity of the market process.

 

The “rule of law” violates economic logic and the Rule of Law by placing the welfare of some input suppliers (special interests) above that of consumers in general – remember, Prof. Estreicher said in so many words that “consumers may prefer [female drivers] but we [the government] cannot accede to those wishes.” The “rule of law” must benefit only special interests because its actions are entirely redistributive; it could not purport to guarantee benefits to everybody because it is impossible to take money from everybody and give it to everybody. That is why, for example, Prof. Estreicher did not try to charge Ms. Mateo with discriminating against men as consumers. The government is already redistributing money to women; if it tried to redistribute money to all men as well, this would violate the logic of redistribution. The Rule of Law does not guarantee the welfare of any particular individual or any special interest but fights to retain the process that creates maximum value for consumers in general; e.g., for everybody. It is highly ironic that, while the political Left has long boasted of its devotion to “social justice” and “fair shares for all,” it is this classical liberal Rule of Law that actively works for the system that produces the biggest economic pie for everybody.

 

The great economist and political philosopher F.A. Hayek was the foremost 20th-century exponent of the Rule of Law. He decried the fact that Nazi Germany cloaked many of its worst actions under the doctrine of a rule of law by embodying them in statute. Hayek was shocked to learn that a particular school of legal philosophy actually maintained that Nazi Germany followed the Rule of Law – merely because its officials obeyed existing statutes.

 

The case of Nazi Germany is the most vivid historical illustration of the contrast between the “rule of law” and the Rule of Law. A startup ride-sharing company and app may seem like tiny potatoes in comparison. But we have another controversy on our plate now that affects every American. Conflicting views of the law go to the heart of this conflict.

 

Immigration and the Rule of Law

 

The media issue du jour is President Obama’s executive order offering temporary security against deportation for some five million undocumented aliens who entered the U.S. illegally. While many Republicans choose to frame the issue in terms of “rewarding illegal behavior,” the larger question is what to do about the current system of immigration law.

 

We allow people to move about between cities and states of the U.S. based on economic considerations of supply and demand. We do not have a quota system for applicants to move between Missouri and Kansas or between New York and California. The first two chapters of an introductory textbook in economics teach that resources should be devoted to their highest-valued uses, that people, goods and inputs should move as necessary to bring this about. Political borderlines are irrelevant to this process.

 

The upshot of this is that immigration law is required only insofar as truly international considerations intrude. The current system of international quotas has no economic rationale and no justification under the Rule of Law. It is quite true that millions of current aliens living and working in the U.S. entered the country illegally. It is also true that their presence benefits Americans despite their illegal status. Several polls of economists have confirmed this a priori verdict of economic logic.

 

The anti-immigration wing of the Republican Party has the “rule of law” on their side. But the Rule of Law is on the side of free immigration, subject only to inspection at a port of entry. As for undocumented aliens, that problem can only be addressed by means analogous to that proverbially used by Alexander the Great to surmount the Gordian knot – amnesty.

 

The Rule of Law abhors privilege. This should apply to immigrants and beneficiaries of amnesty. True felons should be prosecuted. (Illegal entry itself has traditionally been treated as a misdemeanor and punished with deportation.) Proposals that illegal immigrants be made ineligible for federal welfare programs have got it backwards, since it is the welfare state that is collapsing throughout the Western world. Rather than preserve the welfare state by exempting immigrants, we should end the welfare state itself in order to preserve freedom and order. That would help make it possible for freedom of mobility to increase living standards for all. The welfare state itself is incompatible with the Rule of Law since the redistributive ethic that underpins mandatory welfarism is a system of rotating privilege.

 

Of Great Oaks and Little Acorns

 

Our discussion began by contemplating the fate on one woman wishing to start a small business in one city and two suburbs. It concluded by extending the operative principles of political economy to eleven million people living on the periphery of the world’s greatest economy. That speaks to the timeless validity and adaptability of those principles.

 

 

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