South African Taxi Regulation and "Deregulation"

by Don Boudreaux on March 29, 2006

in Foreign Aid, Regulation

Enterprise Africa! — a joint research project of The Mercatus Center at George Mason University, the Free Market Foundation in South Africa, and the Institute of Economic Affairs in London — just released this study of South Africa’s taxi industry.

The research reported in this study finds that the "deregulation" of the South African taxi industry was too circumscribed, too faux, to be regarded as genuine deregulation.  One consequence of the faulty policy steps is an increase in violence.  What causes this violence?  What proposals are advanced to reduce this violence?

Read this important study to find some answers.  (Full disclosure: the principal author of the study is my better half, Karol Boudreaux.)

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Ramzi Saouma March 30, 2006 at 6:00 am

Dear webmaster

I am having difficulties to open the link to the article. I think it is due to a technical problem, can you please try to fix it.
Thank you.

SaulOhio March 30, 2006 at 1:25 pm

Lets see. Someone supposedly privatized and deregulated an industry, but didn't really. They probably passed a bunch of regulation to prevent anyone from winning the competition in order to preserve competition. Where have we seen this before? California? The contents of my 401K says that the industry is going to experience all sorts of problems, including shortages, high prices, and bad service. Not only that, but the free market will be blamed for the problem, despite the fact that there was no free market.

eddie March 31, 2006 at 12:11 pm

Am I reading this correctly? The study claims that taxi routes are subject to the tragedy of the commons issue in the same way that land and broadcast spectrum are and advocates issuing property rights in routes based on homesteading principles.

Am I reading the right blog?

The authors are advocating that the government dictate how many people and which people are allowed to *drive* *cars* at a particular place and particular time.

By the logic used here, the government should be creating property rights in pedestrian routes in Manhattan. The first X number of people to establish a routine habit of walking from Grand Central Station to Times Square will have homesteaded a big chunk of 42nd Street and be given permits for that route. This will be a great thing, though, since a market will arise in trading the rights to walk down the street. As long as we can keep overhead costs low, Coase tells us it will be efficient.

From the study: "In South Africa, only a limited number of taxi operators can operate on a given route. Too many operators will clog roads, making it impossible to provide the service. Thus, it became crucial to develop a sorting mechanism to access routes." Is there any support for the claim that transportation routes are subject to tragedy-of-the-commons problems?

Might not the violence between the taxi gangs simply be a matter of rival thugs trying to eliminate competition rather than good-minded private citizens trying to enforce defacto property rights in the absence of government law enforcement? We see the same kind of violence over territory in the illegal drug trade, but there's no tragedy-of-the-commons issue there, simply competition for business. The violence can be ended in both the drug business and the taxi business by making the business legal and thus inviting law enforcement to ensure peaceful transactions rather than hiding from law enforcement and allowing violence to hold sway. But making taxis legal doesn't require making taxi routes property and thus restricting who can drive down the street when, any more than drug legalization requires giving drug dealers exclusive distribution rights within various areas.

pete June 28, 2006 at 8:00 am

hi, i'm a masters student at the University of Cape Town – I'm presently writing a dissertation which investigates the Taxi industry and illicits a response toward formalising the industry in terms of a formalised, regulated, subsidised, scheduled service. I would really like to see the article but the link doesn't seem to work :( please mail me at

IVA Advice UK February 14, 2007 at 6:23 pm

Does it always get structured in this way or only under these specific circumstances? – Thanks, Kyle

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