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editorial

FILE - In this April 26, 2016 file phot taxi drivers line up their vehicles during their demonstration against the use of Uber rideshare application in downtown Budapest, Hungary. (Zoltan Mathe/MTI via AP, file)Zoltan Mathe/The Associated Press

If the taxi industry as is didn't already exist, would we invent it? And if ride-sharing had been around for generations, would we try to limit or prevent it?

Settling the debate over Uber vs. taxis, which consumed Toronto City Council once again on Tuesday and has divided municipal governments across North America, involves facing up to those questions. The taxi industry's regulatory status quo has the advantage of being long-standing; it has the disadvantage of being a scam for short-changing consumers and even cabbies. In contrast, the main knock against ride-sharing is its novelty – and the fact that it is disrupting the taxi status quo. If you like things as they are, this is a problem. If you'd prefer to see a closed market opened up, it's a virtue.

The reason Uber and other ride-sharing services are suddenly so popular is partly because of the advance of technology, which has made it possible to automatically integrate the dispatch of cars and the payment of customers, and to allow any car to turn itself into a cab, any time. But ride-sharing has also become ubiquitous because it is breaking up a costly, artificial cartel.

In most North American cities, the point of taxi regulation was to make the industry inefficient, through rules regulating prices and restricting the number of taxis. Taxi licences were limited and turned into a form of rare property. The cost of renting that artificial, and artificially costly, property was passed on to drivers and passengers. In some cities, taxi medallions became worth hundreds of thousands of dollars. Owners benefited; drivers and passengers were saddled with the bill.

Uber would not have been half as successful if it wasn't challenging an industry saddled with such counterproductive rules. Yes, Uber and the other ride-sharing services bent those rules, but the system they were up against was never designed to make hiring a car cheaper for consumers. Your average taxi customer may not have a PhD in transportation economics, but they can read a receipt. The popularity of car sharing exploded as customers compared prices, and started voting with their wallets.

If a city council, such as Toronto's, wanted to benefit consumers, what would it do? It would turn the existing rules on their head. The business of selling rides for money has to be regulated – but regulation should be light, and focused on the needs of consumers, not the taxi industry's existing stakeholders.

For example, of course Uber drivers should be appropriately insured, so that if accidents occur, passengers and other drivers are fully covered. Uber drivers shouldn't be given a free ride compared with taxis, but neither should they be punished.

But to insist that drivers-for-hire be burdened with a host of unnecessary qualifications and tests, beyond having a licence, a clean driving record and a safely functioning car, is to undermine the whole idea of ride-sharing. A car on the road can go from being a private vehicle to a cab and back to a private vehicle, instantly, based on demand. This shouldn't be discouraged. That's why talk of limiting the number of cars allowed to ride-share, just as the number of taxis was long limited, makes no sense. Instead of fixing what's wrong with the taxi industry, it would further entrench it.

There's also the ever-present concern about crime and passenger safety. It is guaranteed that some small number of Uber drivers will have accidents and even break the law; just like taxi drivers, they are only human. But it's hard to see how a system where a driver's every move is monitored – in ride-sharing apps, there's an electronic history of exactly who a driver picked up, when and where – creates special dangers for passengers. It's the opposite of the anonymity of the traditional, hail-a-cab-and-pay-by-cash model. If you're planning a crime spree, becoming an Uber driver does not seem like the best strategy.

Ride-sharing, if we take advantage of it, will make the taxi industry smaller – but by turning almost every car into a potential cab, the supply of cabs will become much bigger. This is going to turn the business of offering rides for money into something very different than it has been for the past century.

Questions remain about whether taxi plate owners deserve some kind of compensation for the loss of their monopoly, for which some of them paid dearly. In a similar situation, Ottawa last year promised Canada's dairy farmers hundreds of millions of dollars in payments, in return for slightly opening the market to free trade and reducing their guaranteed milk quota. There are parallels between the artificial milk monopoly and the unnecessary taxi cartel. Taxi plate owners in some cities purchased what was essentially a piece of the taxi quota – the right to be one of a limited number of cars allowed to offer rides.

But on every other score, justice and economics are firmly on the side of opening up the taxi market, immediately. Change is coming. It's about time.