Destruction of Wealth

$9.30 + .50 Surcharge (Take 2)

Here is a thought.  This small little regulatory agency may pack a much larger punch than its size and lack of apparent influence suggest. It may be that the worst, or perhaps best, example of wealth destruction, service reduction, and market interference, as this busybody regulator restricts the number of taxi licenses in Calgary.

First there is a wealth transfer, which is insidious and enormous.  Pennies or small dollars are transferred from consumers to license holders under the watchful eye of the benevolent taxi commission (benevolent if you own a taxi license).  Without a free market, fares are held up and enforced with all the zeal of any monopolist.  Cab drivers cannot compete and offer lower fares; they and their customers have to accept the regulated fare.  What if you could lean in and say “Five bucks to take me to the other side of the core,” or “Ten bucks to the belt line,” or maybe “Twenty bucks to take me home in Strathcona, I know it’s a long drive, but you don’t have any other fares, what about it?”

Second, there are transfers of wealth from drivers who cannot afford a license to the license holder.  The license owner can take an economic rent, and that only makes sense, because he has paid for the license and also incurs the lobbying costs of protecting the regulatory monopoly.  And the economists might say he also has to recover a ‘risk premium’ of loss of the license monopoly if bloggers and others are successful in removing the ability of this small committee to control the number of licenses.

Without a restriction on business, hundreds of new drivers, part-time and full-time, would enter the market.  They would keep all that they can, and not share with some faceless license holder hiding behind a taxi commission.  Consumers would find lower rates and fares for better quality of service.  Much as we did with the privatization of the liquor stores.

Other Parts of this blog:

Part 1, Life without

Part 2, Into the free market

Part 3, Protection racket

Part 4, Cab fair

Part 6, Diversity compression


Image: Flickr CC Heath Brandon $9.30 + .50 Surcharge (Take 2)

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