Most cities place a numerical limitation on the number of taxis licensed. This means that if one wants to enter the taxi business he must purchase a license from an existing licensee. The prices for these licenses can be prohibitively expensive. Such a license sells for $65,000 in New York City, $45,000 in Boston, $35,000 in Philadelphia and $40,000 in Chicago, just to list a few cities. What is the effect of such licensing requirements? They tend to discriminate against people who do not have the license price or who have credit records such that they cannot get bank financing for the license price. Obviously, the disadvantaged are disproportionately represented among such persons, particularly minority disadvantaged. In Philadelphia, for example, there are two black-owned taxi companies having a total of approximately ten cars. In Washington, D.C., the picture is quite different. Blacks own approximately 75 percent of all the taxis that operate in the District. Can we explain this outcome by reference to the standard arguments of racial discrimination? No, we cannot. It turns out that the entire cost of licenses and other fees in Washington, D.C. is less than $100.00. Furthermore, there are no numerical restrictions on entry.’ Earning opportunities for the disadvantaged are not the only benefits from the free market for taxis. Taxi consumers are better off also. Washington’s taxi prices are among the lowest in the country. Services, measured by the number of taxis, are also higher.
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