Alberto Mingardi  

A fascinating short history of London's cab regulations

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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.

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CATEGORIES: Regulation

COMMENTS (3 to date)
Brett Gall writes:

Sweden re-regulated its taxicab industry in the past year. Furthermore, the 1980s (and to an extent the 1960s) were a period of nation-wide deregulation of the U.S. vehicle for hire industry. Famously, places like Indianapolis, Cleveland, St. Louis, and Seattle (I believe) deregulated to mixed reviews. Almost every single city that de-regulated to varying extents in the 80's now is re-regulated.

The Addison Lee company is the largest minicab company in the Greater London Area and would seemingly love nothing more than to put up its own barriers to entry. As a side note, minicabs are not a free market, but in fact regulated and are distinct from taxicabs. Largely it has to do with the ability to pick up hail-passengers (as observed in the article) and the pricing system. But this is not unique to London. Hail vs. phone-in cabs are regulated and licensed differently in the U.S. Some of the biggest variances come in insurance requirements. But my point is the minicab industry is not a black or gray market, is fairly regulated, and the cost savings vary tremendously (sometimes it approximates the cost of a black taxi, although usually it is about 85% of the cost [this is my own estimation]).

That being said, I have ridden in obviously unlicensed and unregulated minicabs in London. These are the true "black market." Much cheaper :)

HH writes:
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.

Seems like this would be less important by the day, with GPS (for the driver) and smartphones (for the passenger) can get people from A to B without knowing the street by heart. Granted, novice drivers lack the local knowledge to avoid Street A during rush hour, but that would be offset by lower prices induced by the extra competition.

Patrick writes:

Some London black cab drivers are reputedly using GPS devices surreptitiously. GPS can fail, though. Rain can block the satellite signals, just as with satellite TV.

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