DC’s New Taxi Pricing
Regular visitors to Washington, DC this fall will notice a new taxi meter pricing system. It replaces the zone pricing system that had been in effect for generations. Under the old system, fares were based on how many zones a trip traversed (there were 8 main zones and 23 sub-zones); under the new one, fares are based on a combination of distance travelled and time consumed. The change, approved by the Mayor after Congress required him to act, took effect earlier this summer.
Cynics note that the old system benefited Congress. Capitol Hill and Georgetown, where many Members have homes, were within a single zone despite being miles apart; many governmental buildings where Members attend meetings are within a single zone. Citizens and visitors are said to benefit from the new approach. A Washington Post poll reveals that the overwhelming majority of DC residents (some 80%) favored it. Taxi owners and operators resisted, staging work slowdowns and stoppages and unsuccessfully challenging the change in court.
It is possible that neither the old nor new system is optimal, as both are products of regulatory imposition. The alternative to regulatory imposition is private market pricing. Individual taxi operators elect how to price, whether using zones, time and/or distance, flat or negotiated rates, peak and off-peak pricing and so on. The most common approach to taxi pricing in large US cities, however, is by regulatory imposition using the time-and-distance meter pricing, now adopted in Washington. It does not appear that Congress or the District government seriously considered a private market pricing alternative.
The old zone method had several disadvantages. It can be confusing and opaque. Uninformed travelers don’t know how to take advantage of it to minimize fares. There is often only a fortuitous relation between the price and distance travelled or time involved. The DC zone system also enabled drivers to charge different prices to different customers, depending on a sense of whether they were, say, tourists or local denizens.
The zone method also has some advantages. It carries no incentives for drivers to drive out of the way; it enables those in the know to catch and drop off within few zones. Yet time-and-distance meters are imperfect too. On long trips, meters result in relatively lower fares given distance compared to short trips, where they result in relatively higher fares given distance.
The case for private competitive rates emphasizes that taxi cabs are private enterprises funded by private capital. Such rates also can enhance consumer choice. True, consumers cannot always easily discriminate or negotiate fares when hailing a cab. But it can occur often with roving livery cabs and certainly occurs with chauffeur transport where fares are privately negotiated typically outside the public commission’s jurisdiction. Revisions can even be made mid-trip, to address surprise traffic jams and other surprises.
Regulatory commissions setting fares can sometimes interfere more deeply in market operations. They often limit the number of cab companies or cabs in operation. Cab rates may be kept artificially high to induce people to use city transportation, especially subway systems. This may now be occurring in Washington. The DC meter pricing is expensive: the initial rate in DC is $3, compared with $1.75 in Boston, $2.25 in Chicago and $2.50 in New York.
These issues and details aside, what may be most interesting about this change is that Congress, in legislation written by Carl Levin (D. Mich.), instigated it. Congress essentially demanded that the DC government adopt the meter system or explain why not. For a time, at least, it will be a daily reminder of how much power Congress wields over the District and its citizens, even though we have no representation in that body.