The Metropolitan Taxicab Commission and the Myth of Effective Regulation

We’ve written before about the benefits of ridesharing businesses like Uber and Lyft. However, these companies have been met with resistance from taxicab regulatory bodies around the world. Few have been as intractable as the St. Louis Metropolitan Taxicab Commission (MTC), which has blocked cheap ridesharing from entering the city. The MTC even prevented Uber from offering free rides on the Fourth of July weekend.

MTC representatives, along with other opponents of ridesharing, criticize Uber and Lyft as being unsafe, unprofessional, and discriminatory. They argue that these companies need to be regulated so these problems can be addressed. But is the MTC really effective at protecting the consumer? Let’s ask some questions:

1. The MTC, unlike Uber or Lyft, specially requires cabs to pick up any customer and take them wherever they want to go. So taxis never refuse fares or avoid going to certain neighborhoods?   
2. The MTC has rules on insurance that they claim are more comprehensive than Uber and Lyft’s policies. So cabs never operate without proper insurance?
3. The MTC has a myriad of rules to ensure cab drivers dress and act professionally. So all cab drivers provide good service?

The answer to all these is an emphatic no. Cabs have ways to refuse fares and avoid certain neighborhoods. Drivers sometimes act unprofessionally and, as an editorial in the Post-Dispatch claims, even operate without proper insurance.

The presumption that creating a regulatory commission and writing regulations will result in intended outcomes, and only intended outcomes, is an example of the “Unicorn Governance” fallacy; it’s magical thinking. In reality, even when regulators are competent, impartial, and have the public interest in mind, regulation can fail to be effective or even make matters worse. But with a regulatory body like the MTC, which has taxi company representatives as commissioners, impartiality is an unreasonable assumption. And after recent outbursts from the MTC’s chairman, competence is in question as well. Given the incentives at play, it should not come as a surprise the MTC is more effective at blocking competition than protecting consumer safety.

Market competition and open information, not regulation, are the best ways to ensure customers get a safe, comfortable ride when they want. Unfortunately, the MTC still wants to prevent that competition from coming to Saint Louis, to the continued embarrassment of the city. Saint Louisans should consider whether the MTC now does more harm than good.