Calgary’s Taxis: With the Right Expectations, Everybody can be Happy: Calgary’s taxi system is out of step with trends in the wider world beyond it.

Commentary, David Seymour, Transportation, Uncategorized


In 2006 the tiny Himalayan country of Bhutan was ranked the “happiest country” in Asia and the eighth happiest in the world. It was a place ruled by an unelected monarch, the average person lived to 62 earning $4,500 per year, and only sixty percent of its people could read and write. The country’s mountain isolation was compounded by a yearly quota on outside visitors. In place of democracy, literacy, longevity, wealth, and contact with the outside world, Bhutan was the only country on earth with an official measure of Gross National Happiness. Western commentators had a field day pointing out that ignorance really must be bliss. 
Calgary’s recent taxi report exposes a Bhutanese-like situation.
At the end of 2010, City Hall received a 93-page Hara Associates report commissioned to assess the state of Calgary’s taxi industry. One cannot fault the report’s author for giving value (and volume) for money. Its pages are filled with voluminous observations, quotes from numerous stakeholder interviews, as well as statistical modelling of how many cabs there should be.
The report’s “Bhutanese happiness” feel is evident in a few spots. The conclusions (that Calgary’s taxi industry is fine, thank you very much) seem made to fit the situation because the real questions just weren’t addressed, let alone answered.
Case in point: Why restrict supply? Why is it that Calgary taxi plates trade for an estimated $150,000 and are rented to drivers for $200 per week? The study makes it obvious that plate holders earn monopoly rents at the expense of drivers and customers when it says: “whenever taxi plates command significant market value, there is always an alternative combination of more taxis and lower meter rates that would provide improved service to customers, while maintaining adequate returns to the industry.”
The brief burst of lucidity is abandoned within sentences because “The licence is the property of the city. However, because the rights to the licence are transferable drivers view it as an asset.” (Note: most licenses are not actually held by the drivers who use them.) Supply restrictions mean that a relatively small number of Calgarians (a few hundred at most) bring in almost $300,000 per week in monopoly rents by holding over $200 million in plates, and that privilege cannot be challenged even for the welfare of one million fellow citizens.
Meanwhile in the outside world, the Organisation for Economic Cooperation and Development (OECD) summarised a study of taxi regulation in seventeen countries by writing: “Increasing numbers of OECD countries have removed or loosened supply restrictions on taxis. The results of these reforms have been strongly positive, with reduced waiting times, increased consumer satisfaction and, in many cases, falling prices being observed.” This is a list of the conditions that Calgarians could have. Needless to say, they are a long way from joining such a movement.
A useful addition to the report might have been a concrete assessment of supply and demand based on the usage data collected from the electronic dispatch systems employed by taxi brokerages. These data have been shared with city regulators on an “ad hoc” basis. Nevertheless the brokerages (who collectively own half the licenses) refused to share the data with the author of a study, whose terms of reference were to “research the taxi supply/demand ratio in the City of Calgary” because “there is a big difference between a customer survey and performance reviews.” If the logic seems to twist when you read that passage, it’s because it does.
Having the sacred cow of monopoly rents off limits to questioning and the main rent beneficiaries refusing to provide hard data on their performance, the study’s author was left with counting taxis at ranks, asking Calgarians how they felt about the taxi service, and comparing the city’s cab-to-population ratio with other North American cities with a similar regulatory approach to Calgary’s. With low enough expectations, everybody can be happy.
The Bhutanese story has something of a happy ending. In 2007, Bhutan’s monarch unilaterally liberalised and allowed a measure of democracy. Bhutan is opening up to the world and now has (from an admittedly low base) one of the fastest growing economies in the world. Hopefully one day Calgary’s taxi users will experience a similar liberalisation.