Competition Improves Cab Service for Riders

It’s ironic that the front page of The Washington Post recently featured an obituary of long-time columnist William Raspberry on the same day it included a story warning that “D.C. cabbies fear being pushed out of business as earnings fall amid new rules, competition.”

After all, Raspberry famously liked to build entire columns around discussions with a fictional D.C. cab driver, and the Post built its story by riding around with some real D.C. cab drivers who complain about how difficult it is for them to make a living.

But not everyone seems to agree. A company called Uber is eager to expand in D.C. and is finding that many customers are willing to pay higher prices for better service. There’s a market lesson here: After many decades of stagnation, change is coming to the D.C. cab market—that is, if the D.C. city council doesn’t block it.

Here’s the background: Around the country, taxi service tends to be heavily regulated. For example, starting in the Great Depression, writes Megan McArdle in The Atlantic, “local governments began setting minimum as well as maximum fares, and controlling the number of cabs that could enter the market. In 1937, New York City’s Haas Act introduced its famous medallion system, limiting the number of taxis to 13,566—about where it remains today.”

The regulations are different in D.C., of course, but the result is the same: “the slowly churning wheels of regulation can barely keep pace with swift changes in how people get around,” as the Post puts it. And all the regulation doesn’t improve service; it just reduces competition. When government gets in bed with business, it leads to cronyism, and consumers lose.

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But both McArdle and the Post spotlight the answer: more robust competition, not more regulation. With Uber, McArdle notes, “a car is always available (because at peak times, such as New Year’s Eve, the company raises prices until supply matches demand). The car is well maintained. And as long as you’re willing to pay the fare, that car will take you wherever you want to go, without regard to race, ethnicity, or ZIP code.”

And the Post rides along with one Uber user, Roger Whyte, who pays $4 or $5 more than a normal cab fare, but “I get a ‘Good morning. How are you? Do you have a special route you’d like me to take?’ They are never on the phones. There’s no radio.”

More competition is coming as well. McArdle mentions Cabulous, an iPhone app to help hail a nearby cab. Robust competition, not further regulation, is the way to bring better service to taxi riders.

Source material can be found at this site.

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