Friday, 12 February 2010

How not to organise an industry

The New Zealand Herald reports that Govt preparing taxi safety regulations - Joyce. The Hearld writes,
The Government is looking at forcing taxi companies to install cameras or screens in cars after the murder of taxi driver Hiren Mohini.

Transport Minister Stephen Joyce met with industry representatives today to talk about security regulations in taxis. He said that authorities would be looking to Australia to see what security measures were effective.

"Sadly we are in an environment in New Zealand now where taxi drivers are less safe than they were. It is not something anybody would wish for but we have to look very closely at mandating a higher level of safety in taxis - particularly those working at night," Mr Joyce said.
Why does Joyce think the government has to mandate anything? If the taxi drivers want extra safety equipment do they not have all the incentive they need to install it? After all it is the taxi driver's lives that are at risk, that would seem like the best possible incentive to attend to safety measures.

The Herald report goes on,
Taxi Federation executive director Tim Reddish said there was support for regulations.

"I think there's a realisation that I could be next. That's really what's bought it home. Cab drivers have for a long time been in denial that it could actually happen to them," Mr Reddish said.
But if taxi drivers are no longer in "denial" why do they need extra regulations? What does the Taxi Federation support regulations that don't seem to be needed?

This looks like regulation for no purpose. Why force people into doing something that they seem to have all necessary incentives to do anyway? In addition, why does Joyce think whatever he forces drivers to do is the right thing to do? Is it not possible that there are different answers to this problem which apply in different situations? One size does not fit all and the drivers themselves have the best information as to what works in their particular case, so why not take advantage of this information by letting them make the decision?

Another example of the "there is a problem, government must do something, this is something, lets do it" mentality. Why can't the government work out that sometimes the best thing to do is nothing?!


Economists Do It With Models said...

While I fully agree that private incentives in this case should go a long way towards an optimal outcome, one could argue that there are positive externalities to installing the safety equipment that aren't realized unless a large majority of the drivers participate. If potential criminals knew that all taxis had cameras and such, they might stay away from that market entirely rather than take a gamble on whether they can anonymously attack a taxi driver.

That said, it would be more reasonable to see what drivers do on their own before deciding what the "correct" regulation looks like.

Anonymous said...

I'm not sure how it works in New Zealand, but in America there are both individual, private taxi services and services which own fleets of vehicles and hire drivers. In the latter case wouldn't most of those positive externalities be dealt with if the fleet services took the lead? Granted, in that scenario, criminals may start to look toward the smaller, individually owned and operated rides, but it would substantially minimize the risk overall.

Richard McGrath said...

I agree, Paul. If something is that good, people will want to do it and govt won't have to pass legislation. But politicians just can't resist being seen to be doing something.

One of my heroes is U.S. president Warren Harding, who when Americans were faced with an economic depression in 1920, chose to womanise, drink, play poker and "bloviate". True laissez-faire.