All Hail The Taxi App

The Saint Louis Taxicab Commission recently approved its first multi-company taxi-hailing app, allowing customers to book cabs from the airport. While this is a step in the right direction, Saint Louis should move aggressively toward allowing more ride-hailing apps and deregulating the taxicab industry.

Taxi service in Saint Louis City and County, like most metropolitan areas in the United States, is regulated in terms of both price and entry. This despite the fact that most economists find that this regulation reduces the total number of cabs, raises prices for customers, and increases rents for taxicab companies. They find that cab companies end up using regulatory bodies to reduce competition and increase prices. A prime example: Not long ago, the chairman of the Saint Louis Taxicab Commission said he suspects there are too many cabs in Saint Louis. Residents have to question whose welfare is protected when a cab commission official believes that.

One of the traditional defenses of the regulated taxi industry was that a free market would allow too many different pricing schemes. This would lead to price gauging of less-informed customers and, in the long term, deter ridership.

Enter ride-hailing apps, which allow anyone with a smart phone to set up a ride whenever needed. Carmel, the app that the taxicab commission approved, only partners with existing companies. However, services such as Uber and Lyft in other cities can work with individual cabs.

The approval of Carmel did not come without opposition. Some cab owners fear that eventually Carmel will start to work with individual cab owners, cutting out traditional dispatches and devolving control. As St. Louis Public Radio reported, one owner stated:

“Right now, there’s other operators that operate illegally within St. Louis, sedan operators, and they’re not able to control that, so how are they going to be able to control and monitor this?”

Why is this a bad thing? If new apps allow customers to find a cab they want at a price they are willing to pay, what “problem” is the taxicab commission solving by controlling prices and market entry?

If the only answer to this question is “control,” it is clear that the taxicab commission should not regulate entry or market prices. They should focus instead on simple cab registration and safety inspections.