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.