Bringing Taxi Regulation out of the Dark (Ages)

Commentary, Regulation, David Seymour

“You manifestly wrong even the poorest ploughman, if you demand not his free consent,” said King Charles I as he attempted to eschew the courts almost four hundred years ago. Charles was no democrat (he believed he was appointed by God), but his quote captured the principle that governments should govern with the consent of the people, or at least a majority of them.

Municipal taxi regulation would better serve the public interest if regulators adhered to Charles’ lesson today. Alas, they appear to be following Charles’ core beliefs more so than his words.

A look at the websites of fourteen of Canada’s largest municipalities shows that municipal taxi regulators are hardly falling over themselves to enlighten voters about how they regulate taxis and how such regulation benefits a few at the expense of many. Some cities show no evidence they even engage in taxi regulation; and none at all make the wider implications of their activities—i.e., who gains and loses through the protection of quasi-monopolies—clear to voters.

The practice of regulating the price and quantity of taxi services by issuing a limited number of plates and setting taxi rates is an anomaly in government regulation. Usually, governments focus on quality and safety. But this means taxi regulation and its preferential approach has political and economic implications that are uniquely difficult for voters to understand, and therefore consent to.

Limiting taxi numbers can only create taxi shortages. As such, it is an inconvenience for ordinary citizens, and an opportunity denied for would be drivers without licenses. Conversely, it creates a benefit of reduced competition for incumbent plate holders, and that benefit can roughly be measured by the price people will pay to get a plate –often in the hundreds of thousands of dollars.

In economic jargon, this arrangement gives rise to a phenomenon known as “concentrated benefits and dispersed costs.” In plain English, it means government deliver up a lucrative quasi-monopoly to a few while many share the bill.

Because any benefits of reformed taxi policy would be dispersed over thousands of voters, the benefit for any individual voter is unlikely to justify searching for elusive information, let alone stir them to political action. On the other hand, plate holders—often cab companies who hold hundreds of them, find that the stakes are indeed high enough to justify them entering and influencing the debate. Just visit your local city hall when taxi issues are discussed to see dozens of taxis parked outside while plate holders make their case inside. Making information about taxi regulation more accessible would go a long way towards helping ordinary voters influence the issue at the ballot box.

A start would be to disclose the fact that license numbers are limited. Of Canada’s ten largest municipalities only Toronto, Montreal, Edmonton and Winnipeg actually do this. A next step would be to collect and regularly publish the prices people pay each other when they buy and sell plates, and the income plate holders receive from sub-letting their plates. This step would allow voters to appreciate the value of the privilege attached to holding a taxi plate under present policy.

Perhaps more controversially, cities should also publish the identities of plate holders. Some would object on grounds of privacy, but municipalities should pay these objections no heed. Exclusive access to the market courtesy of city hall is a publicly endowed privilege, so the public has a right to know who benefits.

Voters specially have a right to know this if plate holders attempt to skew the debate over taxi regulation through public comments or municipal campaign contributions. The common media quote “taxi operator X says the industry doesn’t need more competition.” Sounds a lot different when followed by “The latest taxi regulation report identified Mr X as holding twenty plates valued at two million dollars.”

Democracy is supposed to ensure the greatest good for the greatest number, but the current lack of disclosure around taxi regulation tilts the greatest good toward a very small number. Some might claim that this call for transparency is a plot to undermine the status quo and its incumbent providers. But if the status quo really does survive at the pleasure of murky disclosure, then the case for better disclosure is all the stronger. If municipalities won’t bring their regulatory activities into line with the basic principles of western democracy, then perhaps it is time for provinces to change their Municipal Acts and force them to.