Saturday, 28 June 2014

More fun with taxi drivers

Reader's letter from a recent FT:

… Taxi service forms part of the transportation industry, long a regulated industry for the very purpose of providing the travelling public protection in areas such as insurance, safety, quality of transport and consistency of fares.

Raw, free-market unregulated competition in a field of transport was shown to be flawed when in the 1970s and 1980s US President Ronald Reagan deregulated the airlines. I believe one consequence was a reduction of traffic and of service to and from less-frequented cities (meaning cities of lower volume and higher cost to serve by the airlines).

In protecting city transport travellers, while at the same time not ignoring technological innovations, a rule of reason and fairness is required. Established cab drivers often have invested a considerable sum in the purchase of a licence or medallion, and are bound by strict terms of contract to the taxi-owning enterprises. Their interests require some thoughtful form of protection by the local authorities.

Boynton M Rawlings, Paris, France.


I get the point about safety, but the rest is drivel.

What if airlines had never been regulated? They would never have flown to "less-frequented cities" in the first place, so the fact that they stopped doing so is irrelevant. He might as well compare the relatively unregulated market with a hypothetical regulated market where airlines fly regularly to every last little village, no matter how few passengers wish to take the flight.

The same goes for buying a taxi licence. That is state-created property; there is only "value" because there is an artificially restricted number of them, pushing up the profits which the lucky licence holders can earn. So the value of the licences do not represent net wealth, best case they are a zero sum game but in this case they actually measure negative wealth, an overall loss to society - the higher fares which consumers have to pay and all the services which are not provided by those shut out of taxi driving.

There are plenty of jobs on which the state places no numerical restrictions, and so you don't have to pay a retiree for permission to do them - following his logic, every job could or should be so restricted, generating a one-off windfall gain for present incumbents, a position which can then never be reversed because of the one-off windfall loss to future licence holders.

Seeing as he has not come up with any reason why the number of permits has to be restricted, his argument is surely null and void. If the state wishes to place qualitative restrictions on taxi divers such as clean licence, safe vehicle, no criminal record for assault etc, well that's fine, but that is quite different to having quantitative restrictions.

14 comments:

Lola said...

They use the qualitive restictions to create the quantative restictions. best not to do anything and let us sort it out. In regards to quality, sooner or later, 'good' taxi fimrs will create a self regulation system guaranteeing certain levels of service and quality. If left alone there will spring up competing groupings offering varying levels of quality at different prices from which passengers can select as they feel appropriate.

The Stigler said...

Exactly.

Of course, what we also know about the US deregulation and the EU deregulation (open skies) of airlines is that the prices dropped faster than a whore's drawers. Overnight, the flight to Brussels fell from over £300 to around £100 when British Midland arrived.

And if you want to deal with the social exclusion element of transport, you subsidise it as a public good (many rural bus routes are heavily subsidised by councils to allow little old ladies to come to town).

The Stigler said...

P.S it was Jimmy Carter that signed the Airline Deregulation Act, not Ronald Reagan.

Mark Wadsworth said...

L, I agree there is a grey area between qualitative and quantitative, but in principle they are quite different.

TS, exactly and yes, Ronald Reagan didn't sound quite right to me either, I'd read somewhere that this happened in the 1970s.

In Europe and esp. the UK, there is a quantitative restriction in terms of not enough airports/landing slots, hence and why they are so valuable (and on which they should be taxed - rather than taxing their profits or wages).

The Stigler said...

Just read that Carter also deregulated the brewing industry, leading to the diversity in US brewing that followed.

Might be worth me taking a deeper look at him.

Mark Wadsworth said...

TS, Carter was tip top Pres, he's up there on my list of political heroes like Major and Chamberlain etc

DBC Reed said...

Yes lets get rid of these pettifogging restrictions and let anybody out there ply for hire using any old car of an evening.Who needs the Knowledge in London? You can just get in an unlicensed car in South London as I did and when the driver confessed he did n't know the way threaten him with your violent- looking companions , decide your own fare and direct him how to get there, leaving him ,minus tip, completely lost. That's the way to do it. None dare call this chaos. Its pre 1870's laissez faire.(Buses didn't publish timetables because other operators used to go round three minutes early and nick all your passengers at the bus stops.These buses were so badly maintained they crashed into things.Most people saw the London Transport monopoly as an improvement with safe, trained staff in such numbers that they could fill in during epidemics.(Trains Northampton-London did n't run recently because the small plucky operator never trained any new staff and did n't have enough to go round.)
As for the wonderfully diverse American brewing industry: can you name any drinkable American beers? More to the point can you name any American regional cheese besides the obvious one?
The qualitative-quantitative condundrum boils down to the scenario that you want enough taxis say on a rank at the station; not too many or they'll start getting nasty. If you want the optimum number you discriminate on grounds of quality trying to weed out the sex maniacs with crap cars.( I used to use a taxi firm run by freshly arrived West Indians: you had to sit in the taxi office while they push-started their vehicles down the road outside; the shouting and laughter gave it away. Could n't bring myself to use anybody else: the level of personal service was exemplary.
Of course the next step is a free for all in medicine,surgery etc.Who needs these self serving monopolies ?

James Higham said...

If the state wishes to place qualitative restrictions on taxi divers such as clean licence, safe vehicle, no criminal record for assault etc, well that's fine, but that is quite different to having quantitative restrictions.

Precisely.

Mark Wadsworth said...

DBC: "Yes lets get rid of these pettifogging restrictions and let anybody out there ply for hire using any old car of an evening.."

I recommend that you read and understand the post before you slag it off.

JH, ta.

Graeme said...

DBC says:

"As for the wonderfully diverse American brewing industry: can you name any drinkable American beers?"

I have just returned from 3 weeks in Oregon and the list of good beers brewed in Portland alone, of which I only sampled a fraction, is longer than all the "great" beers produced in the UK.

DBC Reed said...

@MW
There is some need to keep the number of taxis available and customer numbers in sync. Otherwise you are going to get some very skint and angry drivers/owners.
Mail 3 June 2010
'Another driver Steven Paler 27 saw (Derrick)Bird on Saturday night and said his frustration was boiling over.
"Birdy was always complaining about drivers touting for business instead of going to the rank and waiting till they got to the front of the queue. It's because there are too many taxis." '
Bird shot four taxi drivers in Whitehaven, killing one.

The Stigler said...

DBC,

And maybe we should have spent more money on Viennese art colleges and artists, because if we had, Adolf Hitler might have been able to paint for a living instead of becoming Fuhrer and murdering millions of jews.

Let's imagine we regulated taxi numbers. Would we then have a situation where someone murdered some taxi drivers because he couldn't become a driver and by murdering them he'd go up the waiting list and be able to do it?

People react to being made poorer, and any system will make some poorer than others, and therefore resentful and likely to murder people. The free market is at least more likely to grant riches on merit (the minicab company that gets my money does so because they're reliable and polite).

And the free market does very well at working out demand for people. The government's currently trying to get kids into coding, but I'm moving out and into management because there's so much work going to Vietnam now.

Lola said...

@DBCR

"There is some need to keep the number of taxis available and customer numbers in sync."

Can't be done, old son. Needs lots of bureaucrats doing sums which they do not ever have enough or the right information to get right.

See 'socialist calculation problem'.

Bayard said...

"Buses didn't publish timetables because other operators used to go round three minutes early and nick all your passengers at the bus stops."

I remember this happening when bus services were deregulated. Yes. it worked for a while, a very short while, and then the rogue company went out of business, because, basically, they were crap. At least that's what happened where I lived.