One way or another, the supply of taxis is regulated in most places. In some countries, governments raise barriers to entry and get into fixing prices, awarding licenses only to individual drivers. In others, cab companies are allowed to operate and to buy medallions. Everywhere, regulation notwithstanding, competition is becoming intense, because of private car-services and, well, because of technology. I'm thinking of Uber, the App that allows you to request a ride using your cell phone: according to Cass Sunstein, Uber could be the asteroid to the taxi regulatory dinosaurs.
Few countries have moved along the path to deregulation: Sweden and, to the best of my knowledge, Ireland, the Netherlands, and New Zealand.
London is an interesting case, as the black cabs are strongly regulated but also highly reputed, as the drivers need to pass an extensive exam testing their knowledge of the city's roads.
Anne Jolis has a phenomenal article in The Wall Street Journal Europe, that both summarizes the history of taxi regulation in London and speaks about the current, stronger, competition by private drivers, interviewing the head of the Addison Lee minicab company.
The whole thing is well worth reading, but let me just point to an amusing passage:
King Charles I initially forbade that "any hired coach be used or suffered in London" in 1635, as a sop to the Thames Watermen's guild. Their own monopoly on "plying" for river passengers had become meaningless with the arrival of suspended carriages, already crowding the streets and disturbing Queen Henrietta in her sedan chair.
Londoners ignored the King and continued hiring any coach they could, often from "innkeepers, brokers and other tradesmen, intruders into the profession of coachmen".
Yesterday as today, when people have needs somebody may try to respond to them. Regulations and prohibition may just shift them into the shadow economy.