Market for DC Taxicabs Under Assault

Washington, D.C. is known for its accessible taxis and cheap fares. Apparently, that’s a bad thing. Now, a D.C. city council member is agitating to reduce the number of cabs.

“The soaring number of taxicab operators in D.C. — roughly 8,000, most of whom own their own cars — is a “pressing and urgent problem,” [Ward 1 Councilman Jim] Graham said. There are more licensed drivers in D.C. per capita than any place in the world, he said, and new applicants continue to take the required class, giving them access to the driver exam administered by the D.C. Taxicab Commission. A glut of drivers could jeopardize the chances of any cabbies making an adequate living, Graham has said.

“Whatever system we use, we need to limit the number of operators or this boat is going to sink by its own weight in terms of the number of taxicab operators that we have,” Graham said. “We’re going to determine which of these two approaches we should take, but we’re going to have one or the other.”

This is an unfortunate turn of events and all too common. The goal of regulation is to ensure high-quality services to customers, not protect the economic interests of service providers.

Graham wants to install a medallion system that rations the number of cabs. This is a recipe for disaster for consumers–higher costs, less service, and a much bigger bureaucracy.

For a review of the academic literature on taxicab regulation, take a look at the article by Ted Balaker and Adrian Moore in EconJournal Watch.

For a review of the unintended consequences of capping the number of taxis, take a look at this consultant’s report I prepared independently for the Village of Port Chester.