The Globe’s searing series on the ugly side of taxis in Boston reminds us that excessive regulation can turn entire industries into shadowy, corrupt spheres. The purpose of taxi regulation is simply to protect passengers against being fleeced by unscrupulous cabbies, and to keep passengers, bystanders, and the environment safe. Yet the system instead has evolved mainly to enrich the holders of government-issued taxi medallions, even as taxi drivers struggle to earn a living and passengers pay some of the highest rates in the country.
An obvious way for Boston’s budding mayoral candidates to show their commitment to a freer, better city is to champion far-reaching reform of the taxi system. The exposure of the problems with the medallion system creates an opportunity to replace it with an annual license fee, extend single-city cab systems into a regional network, and permit genuine price competition in car service.
Boston has regulated hackney carriages since 1795, but the current system dates from the Great Depression, when laissez-faire competition seemed passé. A 1930s law allowed for 1,525 annual taxi licenses, a number that has gone up to 1,825 today because the act allows increases if “public convenience and necessity require a higher limit.” Under the law, the city can charge an annual fee for the renewal of these licenses, but the fee has never been high enough. As a result, medallions — which can be bought and sold on the private market — have acquired great value, and medallion owners have an incentive to resist any efforts to increase the supply.
Yet restricting the number of medallions to the point where the right to simply operate a taxi costs $600,000 is not in the city’s best interests. Drivers end up working for medallion owners on unfavorable terms because they themselves can’t afford the up-front cost. And the high cost of the medallion system puts upward pressure on city-mandated taxi rates.
Better regulation would base the fees on a hard estimate of the burden each cab imposes on its surroundings. Just like other cars, cabs create congestion, pollution, and safety risks for pedestrians and other drivers; these and other problems associated with driving amount to a social cost of 10 cents per mile, by one estimate. So if Boston cabs travel an average of 60,000 miles per year, the annual medallion fee should be about $6,000.
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