Taxi Cab Deregulation

I've been in DC for about 2 years. During that time I've ridden in 9 taxi cabs. All of those rides have been business-related. I've never used my own money to hire a cab, and I don't plan on doing it anytime soon. I've had far too many negative cab experiences to make me want to do it again. I know of others who feel similarly.

Robert Samuels has a great article in the Post abut the mayhem that occurs at Union Station after midnight as people arriving on late-night trains try to get a ride home. I'd add that this phenomenon is not limited only to Union Station. My understanding is that trying to get a cab ride on a Friday or Saturday night is nearly impossible if you aren't in a group or if your destination isn't in a "choice" neighborhood.

(from afagen on Flickr)

During the late night hours, DC doesn't have taxi dispatchers or inspectors, so many cabbies make a calculated risk to disobey the law. In a sense, this creates a very interesting natural experiment. During normal hours, cab drivers operate mostly in accordance with the law. After hours, that all changes.

Cabs are a highly regulated industry. The government licenses drivers. The government sets the fares. The government enforces the rules. Late at night, the cab industry morphs into a sort of free market, where drivers become profit maximizers. The highest bidders get served first, and everyone else can fend for themselves.

The response to the article, especially these letters to the editors, makes me believe that many people aren't happy with the current system, not because it's over-regulated, but because the regulations are too weakly enforced and drivers aggressively try to skirt them. We don't need to imagine what a de-regulated cab industry in DC would look like because, for a few hours each night, we can already witness it.


    On May 16, 2012 alai said...

    When most people talk about cab deregulation, I think the number one issue is the limits on the number of cabs. This is certainly still in play at night-- it's no "free market" in that respect. If more cabs were allowed to operate, you'd expect that there would be enough to go around, since they could still make money even with single fares.

    On June 18, 2012 Peter Gray said...

    The whole point of taxi regulation is to increase fares by limiting the number of cabs. Other reasons given, like protecting the public from poorly maintained cabs, are just excuses. Pick any random Economics 101 textbook, and it's sure to feature the NYC cab "medallion" system as a classic example of an indirect (quantity-based) price control.
    It's always to the detriment of customers, but this doesn't mean taxi drivers benefit from it. The original owners of permits or medallions can do very well, but anyone wanting to enter the market must pay a high market price for the permit, enough to wipe out all the excess profit from the high fares.
    Taxi regulation, like rent control, always cause net losses to society, including the inefficiencies you describe. But good luck trying to get rid of it.