Long Beach officials loosened restrictions on local taxi fares to benefit consumers

See Another example of Perry’s Law — ‘competition breeds competence by Mark Perry.

"Here’s an example of “Perry’s Law,” which says that “competition breeds competence” and thereby forces producers to offer consumers better service, higher quality and/or lower prices. The LA Times is reporting that “Long Beach’s answer to Uber and Lyft is Cheaper taxi fares,” here’s an excerpt:

Long Beach officials loosened restrictions on local taxi fares Tuesday, a move aimed at keeping cabs competitive with the flexible pricing models of ride-hailing services like Uber and Lyft.

At its meeting in downtown Long Beach on Tuesday evening, the City Council voted, 9-0, to allow Long Beach Yellow Cab, which holds the city’s exclusive franchise agreement, to charge passengers less than the metered fare. The company will now be able to offer discounted rates and free rides.

The vote makes Long Beach the first major U.S. city to eliminate the price floor that prevents taxi drivers from providing free or discounted rides. The maximum price remains unchanged. Yellow Cab officials said the shift would help its drivers better compete against Uber and Lyft.

Both services set fares based on supply and demand. During periods of high demand, called “prime time” or “surge pricing,” the companies raise prices to coax more of their drivers onto the roads. Discount codes are also common. As in most cities, taxi fees in Long Beach are set by city regulators, and do not fluctuate. Cabs charge a base fare of $2.85, plus $2.70 per mile. The policies were put in place to protect customers years ago, officials say — before Uber and Lyft existed.

“Taxicabs have had no opportunity to experiment and fail, or experiment and succeed,” said William Rouse, the general manager of Long Beach Yellow Cab Cooperative Inc. “Most people know it’s illegal for drivers to charge more than the meter, but it’s just as illegal to charge less than the meter. For a long, long time, we’ve known there’s been a need to address this imbalance.”

L.A.’s nine licensed cab companies reported a 21% drop in trips in the first half of 2014 compared with the same period the previous year, the steepest decline on record.

This example helps to illustrate Perry’s Law, and provides an example of how direct, ruthless, even cutthroat competition is often the most effective form of regulation, and provides the intense discipline that forces firms to maximize their responsiveness to consumers. To maximize the competence of producers and suppliers, we have to maximize competition, and to maximize competition we usually need to reduce the government barriers to market competition artificially restricting the number of taxis that are allowed to operate in a city and forcing them to charge fixed, government-mandated prices. In other words, we need to move away from the ubiquitous crony capitalism that protects well-organized, well-funded, concentrated groups of producers like taxi cartels from market competition. Government regulation typically reduces competition, which then reduces the competence of producers, and reduces their willingness to serve consumers and the public interest, which make us worse off. I say the more market competition the better, for consumers and for the human race. As Bastiat pointed out in 1850:

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.

Competition from Uber and Lyft have forced the traditional taxi cartels to lower prices and offer better service and become more competent, which has generated tremendous benefits for consumers, just as Perry’s Law predicts."