The Economic Impacts of Autonomous Cars and Ride Sharing

Initially, when hybrid and electric cars entered the marketplace, there was a lot of concern about what the technology would do to oil prices. Eventually, though, people did some math and came to the conclusion that the economic impacts would be small. That’s starting to change as people begin to consider the larger effect of autonomous vehicles and ride-sharing on the economy.

In terms of commercial use, electric cars require much less maintenance than a traditional combustion engine vehicle:

“After disassembling General Motors’s Chevrolet Bolt, UBS Group AG concluded it required almost no maintenance, with the electric motor having just three moving parts compared with 133 in a four-cylinder internal combustion engine.”

While I am wholly opposed to driverless cars, I also fully expect that my children will work in a world where owning a car is unusual. When you look at the cost savings associated with electric versus gas-fueled vehicles, Laszlo Varro, the chief economist at the International Energy Agency, estimates that it will become more economical to run a fleet of electric cars in 2020. This is five years ahead of the timeline for individually owned cars. The broader economic impacts of such a shift are far-reaching, affecting industries from manufacturing to urban infrastructure.

I’m most interested in Lyft’s aspiration to provide 1 billion rides per year in autonomous cars by 2025. That goal is disheartening for some, especially for Lyft drivers, who will likely feel the economic impacts of this technological transition.

Bubbles and Economic Impacts

Charles Kindleberger, an Economics professor from MIT, once wrote a book called “Manias, Panics, and Crashes.” This is the “bible” of bubbles, and Kindleberger is credited with having predicted the dot-com bubble in 2000. Shortly before his death, he said:

“If I was 30 years younger, I’d write a small book on Fannie Mae and Freddie Mac.”

Four years later, the U.S. housing market crashed. His work has since been carried on, becoming legendary, with articles, research, and regulatory changes. The economic impacts of his predictions continue to resonate today, especially in the wake of the 2008 financial crisis.

Of course, one must consider confirmation bias. Predicting bubbles only matters if you get the timing right. Clients sometimes ask me if I expect the market to go up or down. The answer is always, “yes.” That doesn’t make me a genius.

Me: I’m concerned about the soybean market!

Soybeans crash 10 years later.

The Public: That man is a visionary!

Trump’s Tax Plan and Its Economic Impacts

President Donald Trump recently released his new tax plan. While there is still a lot of speculation about what this means for Americans of all income levels, the proposed changes have sparked a lot of discussions. Gary Cohn, the chief economic advisor to the White House, defended the tax plan by focusing on the middle class:

“If we allow a family to keep another $1,000 of their income, what does that mean? They can renovate their kitchen, they can buy a new car, they can take a family vacation, they can increase their lifestyle… That’s what our tax plan is to do— our tax plan is aimed to return more income back to hard-working Americans.”

Regardless of how you feel about the tax plan, we can all agree on one thing: Gary Cohn does not know how much cars cost. However, the economic impacts of tax reform—whether this particular plan or others—are significant and will shape consumer behavior, business investments, and overall economic growth in the years to come.

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