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Josh Dowlut
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Former mortgage company owner who used to write about the nuances of a rigged system, until I left that world to do something productive.  I'm now part of a team that has built a total IT solution that obsolesces the need to ever buy hardware, software, or IT services again. Regarding a... More
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Josh Dowlut
  • Government Taxicab Regulation Causes Drunk Driving 4 comments
    Dec 31, 2010 5:59 PM


    Government regulation of taxicabs reduces the available supply of cabs, and raises the prices of those cabs that are available.  The increased price discourages the use of a taxi throughout the year.  On heavy usage "party" nights (such as New Year's Eve), it results in an outright Soviet style shortage where landing a taxi at any price becomes a game of chance.

    On New Year's Eve, there usually are programs for free taxi rides such as Baltimore's "Tipsy Taxi" or DC's "Sober Ride."  Both programs are funded primarily by the government and by big alcohol companies.  But user experience indicates the program is more of a PR stunt than any substantive method of transporting drunk drivers.  

    Complaints about the free program from several commenters on the Baltimore Sun blog:  

    • This service does not exist. Every time I've attempted to use tipsy taxi, the number rings busy and cuts off. Tipsy taxi is nothing but a big fat joke.
    • I've tried it several times, on NYE, July 4th, Halloween, etc., and it's a FRAUD
    • This is a total scam orchestrated by someone well above my pay-grade.

    But the shortage isn’t just for the PR stunt program; there's a shortage for regular service as well. The problem is that you can’t expect a business to operate profitably all year long while maintaining enough capacity to handle the huge spikes in traffic that come on these holidays. The natural solution to this would be to allow individuals to freely enter and exit the taxicab business. The government-imposed regulations impose inflexibility to what must be a flexible market if it is to function properly. Every time there is a severe shortage of holiday taxicabs, you are witnessing a government-created market failure. It is an example of regulatory capture that practices monopoly economics to transfer wealth from society as a whole, into the hands of taxicab companies. Montgomery County, for example, limits the total number of licenses issued and even resorts to a lottery method for allotting them.  The state of Maryland requires an FBI background check and a personal, one-on-one interview with a government employee. Ironically, information about traffic violations is not required on the criminal disclosure section.


    The solution is a licensing holiday. Exempt licensing requirements on the heavy load holidays: New Year’s Eve, Saint Patrick’s Day, Halloween, 4th of July. On these days anyone with a valid driver’s license, a legally registered vehicle, and the willingness to work should be able to hold himself out as a driver-for-hire.  At a time with seemingly permanent 10% unemployment, the government should not be maintaining laws that prohibit honest work, especially when a spillover effect of that honest work would be to reduce drunk driving.

    If the government truly were serious about reducing drunk driving, the government would ditch the futile PR stunts and would allow those who need money to provide a service to those who need the service

     To put it another way, increased drunk driving is a negative externality of government regulation of the taxicab industry.

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Comments (4)
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  • John J. Walters
    , contributor
    Comments (5) | Send Message
    Good point -- and this is just one example of how government regulation generally increases the cost (by decreasing the supply) of specialized services. Service providers love it because it pretty much puts up a moat around their business to ward off new competition (barriers to entry) and foolish believers in big government latch on because they believe the rhetoric about how it will make them safer.


    Perhaps to a certain extent it does, but people seem to forget that it's a two-way street. You weed out the riff-raff scammers but you also keep many otherwise-qualified applicants out of the pool.
    3 Jan 2011, 01:23 PM Reply Like
  • Josh Dowlut
    , contributor
    Comments (110) | Send Message
    Author’s reply » The granddaddy of taxicab regulation studies. 176 pages of the federal government's inquiry into determining of regulation is beneficial to society. The answer: NO.


    The FTC studied taxi regulation in depth 26 years ago and concluded: "The principal conclusion of this report is that no persuasive economic rationale is available for some of the most important regulations."


    Federal Trade Commission


    An Economic Analysis
    of Taxicab Regulation


    Mark W. Frankena
    Paul A. Pautler


    Bureau of Economics Staff Report


    May 1984, fundamental economic theory is timeless.
    26 Feb 2011, 02:32 AM Reply Like
  • Josh Dowlut
    , contributor
    Comments (110) | Send Message
    Author’s reply » Blaine Young of Frederick County MD, a Republican who has recently formed an exploratory committee to run for governor, is all about big government when it creates protective barriers his incumbent business can hide behind so he can rent seek off his drivers and the public at large.


    The list of comments from this local Frederick story on "illicit gypsy cabs" says at least most of the public gets it.



    Frederick News-Post
    'Gypsy cabs'
    Originally published June 29, 2011


    "June 29, 2011 @ 09:21 AM: inspectoroncall


    Blaine loves gubment as long as it lines his pocket and there's still room for his little black book in their. Tight fit for sure. "


    "June 29, 2011 @ 10:34 AM: Traderarb99


    The problem here is not the rogue companies but the limited number of taxi licenses that are issued, which creates the oligopoly of cab companies. Everyone should be allowed to open a cab company and be issued a licensed provided they meet the necessary requirements. Let’s let the free market decide who runs the best cab company at the lowest price, not an arbitrary panel who decides the number of licenses that are granted and who receives them. Nature abhors a vacuum and if there is a market need, someone will fill it whether it is legal or not. "


    "June 29, 2011 @ 01:03 PM: winstonsmithy


    I don't know how anyone can argue without a smirk on their face that taxicab regulation benefits consumers of taxi service. All drivers must be licensed and insured, all vehicles must meet safety criteria set by the State, and it doesn't require years of schooling and internship to ensure competency to drive a passenger from Point A to Point B. All that Frederick City's taxicab regulation scheme achieves is to restrict competition, artificially raise the cost of taxi service, and provide politicians a "constituency" that must buy their favor to preserve their business. "


    "June 29, 2011 @ 08:50 PM: j_kai


    Taxi cab commission???!!! what a joke..... thats why this country is in a MESS.....regulations so certian people can keep thier monopoly on a enterprise. these cab company is just afraid of competition..... I say.....get a business license, insurance and let the better business bureau be the informative arm for the public. thats real capitalism and democracy. '


    and more at the link...
    16 Mar 2012, 11:26 PM Reply Like
  • Daniel A Johnson
    , contributor
    Comment (1) | Send Message
    Well done. I was just thinking about this during New Year's a few days ago. I'm from Pittsburgh and we experience a similar shortage. As a result, we have a thriving black market of illegal taxis otherwise know as "jitneys". More proof that when there is demand for a service, the market will provide it one way or another.
    5 Jan 2014, 12:32 PM Reply Like
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