04 November 2016

In recent years, smartphone-enabled applications such as Uber have gone a long way to resolve the market imperfections which gave rise to taxi regulation in the past. GPS technology and Big Data have spurred market innovations which reduce informational asymmetries, facilitating transactions between passengers and drivers.

App-based transport services form part of the so-called ‘sharing economy,’ which involves the reduction of transaction costs to make more efficient use of assets. In particular, sharing economy providers add value by providing information in a timely and searchable way, outsourcing trust on behalf of users, and consummating transactions in a reliable and immediate fashion.

Recent market innovations make reform of taxi regulation urgent. The principles of such reform should be decentralisation, to facilitate trial and-error and fitness for local conditions; a one-tier system of regulation, as the old separation between taxis and private hire is obsolete; technology neutrality; and a preference for private governance, which has proven so successful in app-based services.