Thursday, February 18, 2010

Ireland's Shift From Taxi Cartel to Deregulation


From the report about Ireland's taxi industry and the deregulation that took place in 2000, "Economic Review of the Small Public Service Vehicle Industry":

"For more than two decades prior to the year 2000 entry to the taxi market was substantially restricted. While some additional taxi licenses were granted by the licensing authorities, the increase in numbers was curtailed, especially during the 1980s. By the early 1990s, however, this restrictive policy was giving rise to a poor level of service, particularly in the Dublin area, and there was increasing public pressure to grant additional licenses .

Substantial economic growth and a recovery in the national population levels took place during the 1990s, and the supply of taxi services did not keep pace with the demand that arose. This was evidenced by the increasing market value ascribed to taxi licenses, with market values rising from £40,000–£50,000 in the early 1990s to £80,000 towards the end of the decade.

Following a ruling by the High Court, the Minister for the Environment and Local Government introduced regulations in late 2000 which provided that any suitably qualified person could obtain a license. The result was an immediate and full liberalization of entry to the taxi market.

Following these fundamental changes to the market, there was a sharp increase in the number of taxis. By the end of 2001, the number of taxis in the Dublin area had doubled from 2,700 pre-liberalization to 5,500. These trends continued, so that by the end of 2003, the number of taxis in the Dublin area had increased to 8,400. Similar trends were seen in the country as a whole. In 2000, there were a total of 4,200 taxis in the country and this had risen to 16,000 by end 2004."

MP: Deregulation also led to a significant reduction in waiting times for a taxi, from 11.5 minutes in 1997 to 6.2 minutes in 2008, resulting in an estimated value of time savings of more than $400 million annually for Irish consumers. This is a good example of how excessive regulation stifles competition, leading to high prices and poor service, and how deregulation restores competition (often the best "regulator" of all), resulting in lower prices and better service.

7 Comments:

At 2/18/2010 11:12 AM, Blogger C. August said...

Excellent, and thanks for posting this.

I analyzed a similar regulatory scheme in Boston, examining all the negatives associated with the restricted medallion licenses, and advocated for complete deregulation. How great it is to see an example of how well deregulation works.

Now if they would just fully do away with licensing and let people enter markets freely with no government interference.

 
At 2/18/2010 11:42 AM, Blogger James Fraasch said...

Bet those guys that paid $100k for a taxi license are a bit upset!

 
At 2/18/2010 12:31 PM, Blogger sethstorm said...

I'd like to see quality of service overlaid on the same graph.

 
At 2/18/2010 1:55 PM, Blogger Marko said...

It is great to see these old remnants of guilds and mercantilism fall. It is a shame that our current government seems to be trying to revive certain elements of mercantilism, such as using government policy and regulation to try to increase exports and control the flow of labor. Shame.

We need to remove similar barriers of entry in the medical field as part of health care reform. This will tend to lower costs and improve service, just like we have seen again and again in the taxi industry. Physician's Assistants and Nurse Practitioners need to be given additional authority to practice medicine, and we should allow more medicines to be dispensed without requiring prescriptions. There is no need to go through the extremely long, difficult and fiercely competitive medical school system to be qualified to practice many types of medicine. You have to wonder about the type of physicians this system produces, when getting good grades in medical school involves so much cut-throat competition and residency requires such an extended period of self deprivation.

 
At 2/18/2010 6:38 PM, Anonymous Lyle said...

It has always bothered me that cities issue certificates of public convenience and necessity for taxis and the like. It should be certificates of public convenience only with no concern if the industry has bankruptcies.
So entry would have insurance and safety requirements, and the like but no regulated rates, but that they must be posted, and anyone could go into the business.

 
At 2/19/2010 12:12 PM, Blogger Michael said...

Taxis are still licensed, licenses are still restricted to "suitable individuals." So this is an example of intelligent regulation rather than deregulation. If you want to see how lack of regulation "improves" the market you probably need to go to the third world and walk out to the street and hire a taxi there.

 
At 4/19/2010 7:21 AM, Blogger GoingBoy said...

Well, i am a taxi driver in Ireland and while I agree that there was a problem with the Taxi Industry, I think that the usual applies here. OVERFIXING! The correct balance must be found. If you're looking for a good service, dont expect us to smile, do any more than we have to, when we are on the breadline. Morale is rock bottom out there. I'd leave if there was alternative work for sure.

 

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