In a recent editorial in the Post-Dispatch, the co-owner of a St. Louis area cab company cautions us to remember, when talking about Lyft and Uber, that cab companies can innovate too. While this claim is surely true, the editorial goes on to argue that the heavy regulation imposed on the taxicab market in St. Louis is justified because it protects and benefits customers. These claims are not backed by the evidence.
Opponents of taxicab regulation argue that regulatory bodies like the St. Louis Taxicab Commission (MTC) stifle innovation, but that does not mean they stamp it out completely. Some St. Louis cab companies have begun using apps and other technology to improve service. But small, bureaucratically approved technological improvements do not make the St. Louis taxicab industry innovation friendly. The MTC controls how many cabs there are, how they operate, and what they charge. That leaves little room for new business models and little incentive for innovative practices.
The editorial itself talks about how innovative cab companies can be while openly bashing innovative pricing practices, like peak pricing, tacitly supporting regulations to stop them. The author states:
“Cab fares are public and never change. Cab drivers don’t jack up prices in times of high demand.”
Peak pricing for cabs makes perfect sense for both companies and customers. It incentivizes more cabs to drive during times of peak demand and pushes customers to travel during less busy times. That better matches cab supply with demand. And, as many St. Louisans learned on New Year’s Eve, an expensive cab that will give you a ride is better than a cheap cab that decided to stay home. A shallow understanding of innovation and market forces runs throughout the editorial and likely explains why so few St. Louisans can rely on prompt taxi service.
If we believe the author, taxi regulations are all about safety. Suspending the issuance of new taxi permits? All about safety. Requiring that prospective taxi companies provide proof that there’s enough demand for more taxis? All about safety. Requiring a commercial address with 24/7 operations? All about safety. Set pricing? Safety. Barring airport cabs from serving the city? Safety. Dress code? Of course, safety.
The fact is that most of the MTC’s regulations have nothing to do with safety and everything to do with protecting existing cab companies. And while there’s little doubt that innovative taxi entrepreneurs would be able to compete with Lyft or Uber absent the MTC, why bother when you can keep competition out under the guise of protecting the consumer?