More on those illegal taxis

Recently I wrote about the illegal taxis operating in Dubai. Illegal taxis operate in many big cities in New York, Seoul and Buenos Aires. At Dulles airport outside Washington you are warned not to take rides from people who approach you.

Back in 1997 John Tierney wrote a very nice piece for NYT Magazine on illegal taxi vans operating in New York (Times Select). Here are few extracts:

Vincent Cummins looks out from his van with the wary eyes of a hardened criminal. It is quiet this evening in downtown Brooklyn . . . too quiet.
...
He looks left and right. No police cars in sight. None of the usual unmarked cars, either. Cummins pauses for a second -- he has heard on the C.B. that cops have just busted two other drivers -- but he can't stop himself.
...
Five seconds later, evil triumphs. A middle-aged woman with a shopping bag climbs into the van . . . and Cummins drives off with impunity! His new victim and the other passengers laugh when asked why they're riding this illegal jitney. What fool would pay $1.50 to stand on the bus or subway when you're guaranteed a seat here for $1? Unlike bus drivers, the van drivers make change and accept bills, and the vans run more frequently at every hour of the day. ''It takes me an hour to get home if I use the bus,'' explains Cynthia Peters, a nurse born in Trinidad. ''When I'm working late, it's very scary waiting in the dark for the bus and then walking the three blocks home. With Vincent's van, I get home in less than half an hour. He takes me right to the door and waits until I get inside.''

Some of Tierney's analysis

The van drivers have refuted two modern urban myths: that mass transit must lose money and that it must be a public enterprise. Entrepreneurs like Cummins are thriving today in other cities -- Seoul and Buenos Aires rely entirely on private, profitable bus companies -- and they once made New York the world leader in mass transit. The first horsecars and elevated trains were developed here by private companies. The first subway was partly financed with a loan from the city, but it was otherwise a private operation, built and run quite profitably with the fare set at a nickel -- the equivalent of less than a dollar today.

The whole article is worth reading. It's reprinted in Mankiw's Principles of Economics 4e (look in right column under self promotion).

And if you are not a Times Select subscriber can become one free if you have an edu email address. Here's how.

Illegal taxis benefit the public at the expense of "public transportation"

The headline is mine. Gulf News reports,

The Franchise and Performance Control Section at the Agency has launched a new campaign to increase awareness on various categories of illegal ferrying of passengers in Dubai. The practice is inflicting heavy losses on the public transport sector, officials said.

"Statistics gathered from a series of field campaigns between 2004 and July 2007 show the practice of illegal taxis is rampant in virtually all areas of Dubai. It is particularly acute in some locations of Dubai well known to both the offenders and the passengers, but rarely does it take place by the sides of the main thoroughfares," Al Mulla [Mohammad Obaid Al Mulla, CEO of Public Transport Agency at the Roads and Transport Authority (RTA)] said.

Why not go the other direction and legalize competition? Consumers now are saying they prefer the unauthorized taxis, and legalization would only make taxi services even less expensive. But that would be more direct competition for the government taxi monopoly.

Perhaps the concern is that the proliferation of taxis adds to the congestion problem in Dubai. But that's not the justification is giving for cracking down on the illegal taxis.

UPDATE, 31 Aug, Gulf News editiorial

But knowing these risks, some commuters still prefer to hire illegal taxis, so there must be a reason for it. Possibly it is that charges for metered taxis are considered high, and with the ever-increasing costs in Dubai, people look to save a few dirhams or more.

Also, even with over 4,000 registered legal taxis in Dubai, it is insufficient to meet passengers' needs at most times of the day or night. Waiting for the call centre to answer and then for the taxi to arrive can sometimes take well over an hour, precious time exacerbated in hot weather. The answer has to lie in the RTA providing a better public transport system than present.

Could it be that RTA is restricting the quantitied supplied just as any monopolist would?

The irony is that in the larger scheme of things Dubai, Inc. could be even more profitable if it opened up the taxi industry to competition. Afterall, Dubai has become The Place because its economy is so open relative other economies in the region. Lowering the cost of transportation would translate into a fall in the cost of living and lead to a further expansion of the success of Dubai. Government sanctioned monopolization is a short-sighted temptation that has been the bane of many societies.