Who Owns Taxi Licences?

Publication, Regulation, David Seymour

Executive Summary

• Taxi regulation, which limits the number of available cabs and the price owners and/or operators can charge in a jurisdiction, is a rare act of government wherein the regulators control the price and quantity of the service supplied to the market rather than just the quality and safety.

• Taxi regulation has some unusual effects on the market. Limiting the number of taxis creates the possibility of monopoly rents. For the licence holders, it means that licences can be leased out for significant fees and that they have a government-created, above-market tradable value of their own.

• One of the cornerstone conventions of Western democracy is that governments are expected to govern with the informed consent of their people. In the case of taxi regulation, it is difficult for voters to understand the regulator’s activities without understanding what the regulator actually does and what secondary effects result, including the creation of monopoly rents.

• Because the potential benefi ciaries of limits to the taxi supply are small in number and the members of the public (who might benefit from an expansion in cab numbers) are greater in number, taxi-regulation decisions are subject to a phenomenon that public choice economists
call “concentrated benefits and dispersed costs.” This distorts the political dynamic toward favouring a smaller number of licences because the benefits of political action around taxi regulation are more likely to exceed its costs for licence holders than for regular voters.

• Current public disclosure of taxi regulation varies and is often abysmal. Visitors to the web sites of some of the country’s largest cities find no indication that the city regulates the taxi industry, or any implications of such regulation.

• Municipalities devoted to transparency in taxi-industry regulation should ensure they periodically make the following information available, so voters are in a better position to assess the policies enacted on their behalf: the number of licences in circulation, the identities of licence holders, the value of licences when transferred and revenue made by licence holders from leasing out their licences.

• These reporting requirements are necessary, as signifi cant licence values result from a publicly endowed privilege. The reporting requirements should reveal only information that could be gained through a typical freedom of information act. There are no legitimate objections to publishing any of this information on a periodic basis; in fact, it would be in the public interest to do so.

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