Too often, regulations designed for one purpose ended up shutting down innovations that were not considered when the regulations were drafted. See, e.g., this story from Austin's local paper:
Josh Huck, creator of an app that helps Austinites in need of a lift find drivers willing to give them one, sees himself as a social networking entrepreneur. But the city of Austin announced it has issued a cease-and-desist order against the company.Of course, the difference between a licensed and branded taxi and Heyride is huge: The people who used Heyride know that they are buying a lift from an amateur. His car might be messy, he might be an irresponsible driver, or he might not carry insurance. But the price is negotiable, and the Heyride participant might be available when a yellow taxi is not, as is often the case in Austin. Should not adults be allowed to accept some risk in exchange for those benefits?
City officials reason that because Heyride passengers pay drivers, it is subject to the city’s strict regulations, which are intended to give customers reasonable assurances that a taxi service will be reliable and safe.
More likely, the taxi cartel, which has persuaded the city to limit hack licenses to a mere 270, wants to protect its profits. Austin has one licensed taxi per 3040 residents. Compare that to New York City's notoriously regulated taxi market, where there is one yellow cab license per 623 residents. The two cities are obviously very different, but the regulatory attack on Heyride sure looks like cronyism.