By Request: Taxies


Sam L writes:

As a former New Yorker, do you have any insights as to why NYC maintains a command economy for taxi service? I understand the desire to have some kind of licensing system and to protect consumers and especially tourists from egregious rip-offs. What I don’t understand is why they have decided the best way to accomplish this is to have the city government arbitrarily set the supply, prices, and wages for the entire industry.

Well, I don’t think this is too hard to understand. On the one hand, the case for regulation of cabs is compelling. On the other hand, once a regulatory scheme is in place you wind up with regulatory capture and rules that serve narrow interests rather than the public interest. Ryan Avent has a detailed discussion of the issue. I some ways the interesting question is why taxi regulations aren’t worse than they are. I suspect the fact that the consumers of cab rides are, in cities like New York, a disproportionately upscale group to whose interests politicians are unusually responsive. Conversely you have cases like Las Vegas where the customers are all short-term tourists and it becomes about balancing the interests of the cab companies and the interests of the casinos.