Over the past few days in the NYT from 100 years ago there have appeared several articles concerning the prices charged by cabs in New York, especially when compared to London, Berlin, and Paris. The short version is that in European cities the taximeter is already in place, that is a meter that tells how far the cab has travelled and how much is owed.

In the U.S. the taximeter is not in place, although the city aldermen are considering its requirement. There is considerable consternation amongst cabbies that the taximeter is an unnecessary intrusion of government into their affairs and that the government will move to further regulate the price of cab services. On the other side of the debate is the public which claims "random pricing" and distinctly different pricing practices between day cabbies, ostensibly more honest, and night cabbies, ostensibly less honest.

From the Aug. 10, 1908 NYT comes the following points:

The real question is not how the thing [the taximeter] should be spelled, but how it works. And it seems to work very well indeed. It is a revelation from minute to minute and from block to block, of the distance a cab is making and of the indebtedness that is rolling up against the occupant thereof. Neither can the driver possibly pretend to charge him more, nor can he have the face to offer less, than the automatic monitor calls for. Altercations between driver and fare are thus put out the question.

There is always a way to "hack" whatever technology would be implemented to measure the distance/fare of a cab. Nevertheless, for the most part, perhaps such above board pricing generated by an agreed-upon arbiter, in this case the taximeter, would be welfare improving.

There is a brewing set of problems between four groups: The Public Hack Owners Association, which is comprised of the owners of cabs, the Independent Hackmen's Association, which is comprised of owners and drivers. The former want more enforcement against cabbies who are accused of "over charging." The latter are not impressed, and suggest that it is owners extorting drivers.

On a different front there are public hackmen who are allowed to solicit fares from anywhere, and there are hotel hacks, which by law have no right to solicit business from the street. There is a "battleground" centered at Grand Central Station where "a man leaves the station he is more than likely to take a a hack attached to the Grand Union Hotel or the Hotel Belmont. This may be because he would rather deal with the hotel vehicles, or it may be because the public hacks are stretched along the Park Avenue to Fortieth Street, and are therefore more difficult to reach."

The prices charged by hotel hacks are generally higher than the public hacks, but the hotel hackman's rates are "regulated" or "set" by the hotels and "few complaints of hotel hackmen's extortion are heard."

There are movements to start licensing cabs, install the taximeter (but it's not clear at this point who will pay the $15 for each one), regulate the rates that can be charge, hopes to regulate the rates that will be paid, to do away with pre-fare negotiations, to ensure the ability to engage in pre-fare negotiations, fears of collusion amongst cabbies who operate in a local area, and other interesting problems.

Can these problems be solved by government regulation? Like many other areas of government intervention, it is likely that any benefits from the regulation would be more than offset by the unintended, bureaucratic consequences introduced by the specific regulation employed.

Nevertheless, markets often organize (read, regulate) themeselves without the direct intervention of the government. For example, my experience in Morocco (in 1998) was that the self-regulation of the cab market was very powerful and was more than likely welfare improving.*

In Morocco, local taxis were typically Renault R-4's or Opels or Ford Escorts, not the type of vehicle you would want to pay to ride cross-county in. Each town had their own specific color - Rabat was Blue, Casablanca was Yellow, etc. The long-distance cabs (intercity) were all Mercedes-Benzes, usually 300D diesels, and were all white.

The self-regulation made it easier for consumers to locate the type of taxi they needed, and the color-coding to city kept local cabbies from infiltrating the wrong market. I thought the taxi market there worked at least as well as those in other cities (perhaps even better than Taipei and current Washington DC?).

In the Aug. 9, 1906 NYT, one cabbie explained his expenses and complained that the regulated $0.25 $0.50 per mile ($5.41 $10.82 per mile in 2005 CPI adjusted dollars) was set too low. I will report those costs next.

* I spent the month of May 1998 in Rabat, Morocco and travelled around the country during a Faculty Exchange program. There were numerous examples of self-regulating markets that, I assume, are much more common to lesser-developed countries than many realize.

My visit/experience was overwhelmingly positive, although my visit was pre-9.11.