10 ms·

These are the kinds of battles that break out when your business model is truly disruptive. The price of taxis is held artificially high and really it is a los

by jtchang 14y ago

These are the kinds of battles that break out when your business model is truly disruptive. The price of taxis is held artificially high and really it is a loss for the consumer. We are left paying the higher prices for what should be a relatively free market.

rprasad 14y ago
Pushing the costs of maintenance, insurance, and safety onto the drivers and passengers is not disruptive. Taxi companies were doing that decades ago. Yes, safety regulation costs money. The reason we accept higher prices is to avoid the catastrophic costs that could result if there was no regulation forcing taxis to maintain their vehicles, carry insurance, accept all passengers, etc. Licensing forces a minimum level of insurance on taxi providers to guarantee that injured passengers are properly cared for in the event of an accident involving the taxi provider. The cost of the insurance and maintenance requirements are the primary drivers (pun intended) of taxi costs. Uber avoids these costs (i.e, the disruption of its business model) by maintaining smaller insurance policies and pushing the maintenance costs onto drivers.
- MichaelGG 14y ago
  The issue is not with licensing and regulation. It's that only a limited number of taxis get authorized. That is most definitely an artificial limit, and does not help safety. And then there's proposed laws like this, where they force a higher cost _just to prevent competition_.
- mseebach 14y ago
  I obviously can't speak for every city in the world, but typically the reason taxis are expensive is severely limited supply (e.g. medallions in NYC). In most cities in the developed world even the best insurance policies money can buy would not allow me to legally run a taxi service.
ahelwer 14y ago
There was an article on here a while back about how the medallion system in NYC is making both sides lose out... anyone remember it/have the link?
- pavedwalden 14y ago
  http://www.slate.com/articles/business/moneybox/2012/06/taxi_medallions_how_new_york_s_terrible_taxi_system_makes_fares_higher_and_drivers_poorer_.single.html http://www.slate.com/articles/business/moneybox/2012/06/taxi...
- bigdubs 14y ago
  It wasn't so much that the medallion system is bad, as defined as limiting the total number of cabs on the road, it was the exemption that the medallion owner didn't have to drive. This leads to cartels of medallion owners that make huge profits off the backs of other drivers.
smokeyj 14y ago
> The price of taxis is held artificially high and really it is a loss for the consumer. When does price fixing ever help the consumer? Honestly.
- wilfra 14y ago
  An argument could be made for rent controlled apartments being a net positive. Not just for the people renting them but also for the businesses hiring those people and by extension their customers.
  - davidandgoliath 14y ago
    That may have been more of an argument prior to the internet -- e.g. now someone can find an alternative place to stay in fifteen minutes on craigslist at a cheaper rate. That is unless all of the landlords get together and price-fix, though I suspect that would correct itself rather quickly.
  - anamax 14y ago
    > An argument could be made for rent controlled apartments being a net positive. Only if you overvalue the benefits and ignore lots of costs. Rent-control discourages turnover and maintenance. It also discourages building new capacity. The various tweaks to try to get around these things have other problems. > the businesses hiring those people and by extension their customers. How many biz want fewer potential customers and employees? Whenever you hear a politician say "I remembered {group}", he's telling you that other people were "forgotten". (Actually, they weren't forgotten, they're paying the bills, and then some.)
    - leot 14y ago
      Are you referring to "rent control" or "rent stabilization" or both? It's not clear to me how/why rent stabilization (which merely limits how much rents can increase each year) would lead to less "building new capacity" -- an argument could be made that it forces new capacity to be created, because landlords can't make much more money off their existing units.
wilfra 14y ago
"The price of taxis is held artificially high and really it is a loss for the consumer." Absolutely. In Bangkok there are more taxis on the streets than all other cars combined. You can find one anywhere, anytime and a ten minute ride costs about $1. No need to own a car, even if you can afford one. Our minimum wage wouldn't allow for that but there is no reason it needs to cost $60 to take a 15 minute ride from San Bruno into SF. The gas cost + labor cost of that ride should be 1/10th of that. Double that to account for profit, administration and the car and you have a $10-15 ride. Price it like that and a lot less people would own cars - and there would be a lot more taxis on the streets to account for the increased demand. And a lot of jobs.
- mbenjaminsmith 14y ago
  Bad example. I've never seen a city in more need of stiffer regulation than Bangkok. The single worst part of driving in the city is dealing with agressive or incompetent taxi drivers. They break traffic laws and block lanes looking for fares. The over-supply of taxis has the opposite effect of a more regulated public transport. It does not reduce the total number of cars on the road. It's useful from a consumer standpoint but the low cost means people are less likely to use the state of the art elevated train and subway, both of which run under capacity. "Price it like that and a lot less people would own cars." Possibly in other cities -- though I doubt it -- but it certainly didn't help in Bangkok. People don't buy cars because they need them, they buy cars because they want them. The number of news cars sold in the country per day is astounding (though the number escapes me) and that's despite the fact that they cost 50% - 350% more than the same cars in the US. Bangkok needs to regulate the shit out of the taxi industry and make it more expensive to drive in the city if it wants to sort out its remaining traffic issues. Uber can probably work in US cities that have the traffic capacity, but it's a horrible idea in congested areas.
  - wilfra 14y ago
    "The single worst part of driving in the city is dealing with agressive or incompetent taxi drivers." That method of driving is not unique to taxi drivers - and those issues exist in several other Asian countries, regardless of the number of taxis on the road. I'll leave it at that. "people are less likely to use the state of the art elevated train and subway, both of which run under capacity." That's not accurate. Taking the BTS from Thonglor to MBK is faster than driving or taking a taxi at nearly all times. Thats an extreme example but traffic is so bad that its faster in a lot of cases. That's why both the BTS and MRT are always packed, with people of all classes. You make some good points otherwise, some I disagree with like whether Bangkok is an example of an unregulated market failing or thriving, but I don't want to get too off into the weeds of a political discussion :)
nirvana 14y ago
It happens also when a business model isn't so disruptive. Regulation ends up favoring the politically connected. The more politically connected, generally, are bigger or more established interests. This benefits politicians as well, because the ability to change regulations is useful for raising donations. "You gotta mighty fine business here, it would be a shame if we lowered your tariff...."
- alttab 14y ago
  Its called racketeering and it's illegal. Happens all the time and it perpetuates because those engaging in it are financially rewarded if successful, which in today's system simply makes success more probable the next time.
jemfinch 14y ago
But Uber's prices (at least, last I checked: $4.80/mi in SF, iirc) are higher than cabs' prices.
- simonk 14y ago
  If you get UBERx its $3.25/mi now but still higher than cab pricing.
  - officemonkey 14y ago
    Have you ever taken a taxicab in DC? DC cabs are dumps. Getting one with air conditioning is a crapshoot. Another city that has really crap cab service is Detroit. Both cities have thriving private car services because for a little bit more money, you get a much better experience. Combine that better experience with app convenience and for most people the extra money doesn't matter.
    - goostavos 14y ago
      Totally agree. Getting a cab in sweltering mid-summer DC weather is freaking awful. I almost always shell out the few extra bucks for a town car on my way back to the airport. It cozy, air conditioned, and even smells nice. I also get really, really tired of the credit card dance that every cab driver does. Before I hop in a cab, "You take credit cards, right?" "Oh, sure! Of course!" Then we arrive at destination "Buddy, you don't have cash? C'mon? My machine doesn't work. There's an ATM inside, you could just run in and get some cash." "Not my problem, champ. You can take the card, or you call call your boss." Not to be stingy, but complaining at me for paying you the way I said I was going to pay you is not the best way to get a good tip. I'll definitely checkout the Uber service (If it is still around) next time I'm in DC.
      - gte910h 14y ago
        They do that in Atlanta too. Also fuck with the "Business to residential" fare and try to not turn on the meter and instead charge you the much higher business to business zone fare
Cogito 14y ago
The biggest concern is maintaining a consistent and high quality service. For example, if the market was to become saturated with drivers undercutting the market, it is plausible that some drivers would be forced out of the market as they are unable to make enough to sustain themselves. If this happens to enough 'regular' drivers the service may become irregular and the goal of providing accessible, consistent public transport (or whatever the goal is) suffers. I guess what I am saying is that a completely free market _might_ actually harm the market in the end. We expect free markets to self-correct, but are we willing to accept sub-par services whilst waiting for that correction? I have seen this concern in the taxi market in Canberra Australia. Taxis there are tightly regulated, and the numbers are kept low to make sure it is profitable. Their numbers have recently been increased to try an accommodate the increased Monday morning and Friday evening rushes as more people are flying in and out every week. The traffic during the rest of the week has remained fairly constant. This means that profits are lower and so some taxi drivers are getting out of the business. In a free market it's possible that this inflation of service providers could happen unchecked for a time, before it is realised that there is not enough consistent work to support the new drivers. The possibility for extreme fluctuation in service provision is high, and this could have terrible consequences for anyone who happens to need a taxi home on a Wednesday evening after too many drinks at the pub. It is hard to say for sure if a free market would deal with the irregular nature of taxi business in that city better than a regulated market, but I think it is clear that the purpose of a taxi system could be at odds with the outcomes of a free market. A free market could fluctuate between too many and too few providers, removing the reliability that is essential in an effective taxi service, even though the regulated service might provision a greater than optimal service cost.
- guynamedloren 14y ago
  > We expect free markets to self-correct, but are we willing to accept sub-par services whilst waiting for that correction? Yes. When the service goes to shit, a competitor comes in, steps up their game, and if demand for a superior service is high enough, they succeed.
- mahyarm 14y ago
  Uber is a premium service that is more expensive than the typical overpriced cab. If service is undercut, something like uber can pop up to provide reliable and quick service. I've gotten an uber cab in 3 minutes at 1 am during pride weekend and 5 minutes in north beach during a sunday morning. Uber is near instant in SF.
felipemnoa 14y ago
Taxis seem over hyped. Why not just call a car service. Don't know if such things exist outside of NYC though. Basically you call them to pick you up and drop you off anywhere you want. They give you a fixed price depending on your destination rather than having a meter running. The only limitation they have is that you cannot wave them down. You have to call them. Overall I feel I get a better service from a car service than from a yellow cab. Also, as far as I'm aware there isn't a limitation on how many car service there can be (I have family members that work in such) which keeps competition high and prices low.

by jtchang 14y ago

rprasad 14y ago

Pushing the costs of maintenance, insurance, and safety onto the drivers and passengers is not disruptive. Taxi companies were doing that decades ago. Yes, safety regulation costs money. The reason we accept higher prices is to avoid the catastrophic costs that could result if there was no regulation forcing taxis to maintain their vehicles, carry insurance, accept all passengers, etc. Licensing forces a minimum level of insurance on taxi providers to guarantee that injured passengers are properly cared for in the event of an accident involving the taxi provider. The cost of the insurance and maintenance requirements are the primary drivers (pun intended) of taxi costs. Uber avoids these costs (i.e, the disruption of its business model) by maintaining smaller insurance policies and pushing the maintenance costs onto drivers.

MichaelGG 14y ago
The issue is not with licensing and regulation. It's that only a limited number of taxis get authorized. That is most definitely an artificial limit, and does not help safety. And then there's proposed laws like this, where they force a higher cost _just to prevent competition_.
mseebach 14y ago
I obviously can't speak for every city in the world, but typically the reason taxis are expensive is severely limited supply (e.g. medallions in NYC). In most cities in the developed world even the best insurance policies money can buy would not allow me to legally run a taxi service.

ahelwer 14y ago

There was an article on here a while back about how the medallion system in NYC is making both sides lose out... anyone remember it/have the link?

pavedwalden 14y ago
http://www.slate.com/articles/business/moneybox/2012/06/taxi_medallions_how_new_york_s_terrible_taxi_system_makes_fares_higher_and_drivers_poorer_.single.html http://www.slate.com/articles/business/moneybox/2012/06/taxi...
bigdubs 14y ago
It wasn't so much that the medallion system is bad, as defined as limiting the total number of cabs on the road, it was the exemption that the medallion owner didn't have to drive. This leads to cartels of medallion owners that make huge profits off the backs of other drivers.

smokeyj 14y ago

> The price of taxis is held artificially high and really it is a loss for the consumer. When does price fixing ever help the consumer? Honestly.

wilfra 14y ago
An argument could be made for rent controlled apartments being a net positive. Not just for the people renting them but also for the businesses hiring those people and by extension their customers.
- davidandgoliath 14y ago
  That may have been more of an argument prior to the internet -- e.g. now someone can find an alternative place to stay in fifteen minutes on craigslist at a cheaper rate. That is unless all of the landlords get together and price-fix, though I suspect that would correct itself rather quickly.
- anamax 14y ago
  > An argument could be made for rent controlled apartments being a net positive. Only if you overvalue the benefits and ignore lots of costs. Rent-control discourages turnover and maintenance. It also discourages building new capacity. The various tweaks to try to get around these things have other problems. > the businesses hiring those people and by extension their customers. How many biz want fewer potential customers and employees? Whenever you hear a politician say "I remembered {group}", he's telling you that other people were "forgotten". (Actually, they weren't forgotten, they're paying the bills, and then some.)
  - leot 14y ago
    Are you referring to "rent control" or "rent stabilization" or both? It's not clear to me how/why rent stabilization (which merely limits how much rents can increase each year) would lead to less "building new capacity" -- an argument could be made that it forces new capacity to be created, because landlords can't make much more money off their existing units.

wilfra 14y ago

"The price of taxis is held artificially high and really it is a loss for the consumer." Absolutely. In Bangkok there are more taxis on the streets than all other cars combined. You can find one anywhere, anytime and a ten minute ride costs about $1. No need to own a car, even if you can afford one. Our minimum wage wouldn't allow for that but there is no reason it needs to cost $60 to take a 15 minute ride from San Bruno into SF. The gas cost + labor cost of that ride should be 1/10th of that. Double that to account for profit, administration and the car and you have a $10-15 ride. Price it like that and a lot less people would own cars - and there would be a lot more taxis on the streets to account for the increased demand. And a lot of jobs.

mbenjaminsmith 14y ago
Bad example. I've never seen a city in more need of stiffer regulation than Bangkok. The single worst part of driving in the city is dealing with agressive or incompetent taxi drivers. They break traffic laws and block lanes looking for fares. The over-supply of taxis has the opposite effect of a more regulated public transport. It does not reduce the total number of cars on the road. It's useful from a consumer standpoint but the low cost means people are less likely to use the state of the art elevated train and subway, both of which run under capacity. "Price it like that and a lot less people would own cars." Possibly in other cities -- though I doubt it -- but it certainly didn't help in Bangkok. People don't buy cars because they need them, they buy cars because they want them. The number of news cars sold in the country per day is astounding (though the number escapes me) and that's despite the fact that they cost 50% - 350% more than the same cars in the US. Bangkok needs to regulate the shit out of the taxi industry and make it more expensive to drive in the city if it wants to sort out its remaining traffic issues. Uber can probably work in US cities that have the traffic capacity, but it's a horrible idea in congested areas.
- wilfra 14y ago
  "The single worst part of driving in the city is dealing with agressive or incompetent taxi drivers." That method of driving is not unique to taxi drivers - and those issues exist in several other Asian countries, regardless of the number of taxis on the road. I'll leave it at that. "people are less likely to use the state of the art elevated train and subway, both of which run under capacity." That's not accurate. Taking the BTS from Thonglor to MBK is faster than driving or taking a taxi at nearly all times. Thats an extreme example but traffic is so bad that its faster in a lot of cases. That's why both the BTS and MRT are always packed, with people of all classes. You make some good points otherwise, some I disagree with like whether Bangkok is an example of an unregulated market failing or thriving, but I don't want to get too off into the weeds of a political discussion :)

nirvana 14y ago

It happens also when a business model isn't so disruptive. Regulation ends up favoring the politically connected. The more politically connected, generally, are bigger or more established interests. This benefits politicians as well, because the ability to change regulations is useful for raising donations. "You gotta mighty fine business here, it would be a shame if we lowered your tariff...."

alttab 14y ago
Its called racketeering and it's illegal. Happens all the time and it perpetuates because those engaging in it are financially rewarded if successful, which in today's system simply makes success more probable the next time.

jemfinch 14y ago

But Uber's prices (at least, last I checked: $4.80/mi in SF, iirc) are higher than cabs' prices.

simonk 14y ago
If you get UBERx its $3.25/mi now but still higher than cab pricing.
- officemonkey 14y ago
  Have you ever taken a taxicab in DC? DC cabs are dumps. Getting one with air conditioning is a crapshoot. Another city that has really crap cab service is Detroit. Both cities have thriving private car services because for a little bit more money, you get a much better experience. Combine that better experience with app convenience and for most people the extra money doesn't matter.
  - goostavos 14y ago
    Totally agree. Getting a cab in sweltering mid-summer DC weather is freaking awful. I almost always shell out the few extra bucks for a town car on my way back to the airport. It cozy, air conditioned, and even smells nice. I also get really, really tired of the credit card dance that every cab driver does. Before I hop in a cab, "You take credit cards, right?" "Oh, sure! Of course!" Then we arrive at destination "Buddy, you don't have cash? C'mon? My machine doesn't work. There's an ATM inside, you could just run in and get some cash." "Not my problem, champ. You can take the card, or you call call your boss." Not to be stingy, but complaining at me for paying you the way I said I was going to pay you is not the best way to get a good tip. I'll definitely checkout the Uber service (If it is still around) next time I'm in DC.
    - gte910h 14y ago
      They do that in Atlanta too. Also fuck with the "Business to residential" fare and try to not turn on the meter and instead charge you the much higher business to business zone fare

Cogito 14y ago

The biggest concern is maintaining a consistent and high quality service. For example, if the market was to become saturated with drivers undercutting the market, it is plausible that some drivers would be forced out of the market as they are unable to make enough to sustain themselves. If this happens to enough 'regular' drivers the service may become irregular and the goal of providing accessible, consistent public transport (or whatever the goal is) suffers. I guess what I am saying is that a completely free market _might_ actually harm the market in the end. We expect free markets to self-correct, but are we willing to accept sub-par services whilst waiting for that correction? I have seen this concern in the taxi market in Canberra Australia. Taxis there are tightly regulated, and the numbers are kept low to make sure it is profitable. Their numbers have recently been increased to try an accommodate the increased Monday morning and Friday evening rushes as more people are flying in and out every week. The traffic during the rest of the week has remained fairly constant. This means that profits are lower and so some taxi drivers are getting out of the business. In a free market it's possible that this inflation of service providers could happen unchecked for a time, before it is realised that there is not enough consistent work to support the new drivers. The possibility for extreme fluctuation in service provision is high, and this could have terrible consequences for anyone who happens to need a taxi home on a Wednesday evening after too many drinks at the pub. It is hard to say for sure if a free market would deal with the irregular nature of taxi business in that city better than a regulated market, but I think it is clear that the purpose of a taxi system could be at odds with the outcomes of a free market. A free market could fluctuate between too many and too few providers, removing the reliability that is essential in an effective taxi service, even though the regulated service might provision a greater than optimal service cost.

guynamedloren 14y ago
> We expect free markets to self-correct, but are we willing to accept sub-par services whilst waiting for that correction? Yes. When the service goes to shit, a competitor comes in, steps up their game, and if demand for a superior service is high enough, they succeed.
mahyarm 14y ago
Uber is a premium service that is more expensive than the typical overpriced cab. If service is undercut, something like uber can pop up to provide reliable and quick service. I've gotten an uber cab in 3 minutes at 1 am during pride weekend and 5 minutes in north beach during a sunday morning. Uber is near instant in SF.

felipemnoa 14y ago

Taxis seem over hyped. Why not just call a car service. Don't know if such things exist outside of NYC though. Basically you call them to pick you up and drop you off anywhere you want. They give you a fixed price depending on your destination rather than having a meter running. The only limitation they have is that you cannot wave them down. You have to call them. Overall I feel I get a better service from a car service than from a yellow cab. Also, as far as I'm aware there isn't a limitation on how many car service there can be (I have family members that work in such) which keeps competition high and prices low.