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Are Greek Taxis Actually Inefficient?

March 8, 2012

The Troika’s push for structural reforms in Greece has been marked by a troublesome one-size-fits-all kind of logic in which all closed professions are viewed as being somehow equivalent.  The fact that tanker truck drivers are a closed profession clearly contributes to the premium that Greeks pay on their petroleum as the cost of the permit is added to the price that truck drivers charge their customers.  Opening the profession will have concrete benefits as increased competition drives down prices to more logical levels.  Was this the case with taxi drivers, however?

Greek taxis, which are largely independently owned, have over the past two decades been far less expensive than their European counterparts.  Admittedly, since joining the Eurozone, prices have gone up.  They remain, however, moderate in comparison to other European Union countries. 

So, if taxi prices in Greece are comparatively low, what exactly is the point of reform?  Philip Atticus asks precisely this in a very interesting blogpost.  He argues that the reform here is creating strife with little in the way of tangible benefits since the number of taxis is going to capped based on population at about current levels and the rates are set by law.  I couldn’t agree more.  Indeed, it looks like one of the principle reasons for this reform is to push out the individual entrepreneur and allow taxi cab companies more access to the market.

On the other side of the coin, some might argue that the time has come for greater standardization of the profession and that this can be achieved only by centralized management.  Admittedly, the experience of taking a taxi is very different in Greece than elsewhere in Europe or the North America.  Drivers routinely violate the ban on smoking in the cab (usually they ask permission first) and picking up second and third fares is commonplace during peak hours.  Stories of unscrupulous drivers taking advantage of tourists are legion, though I suspect largely exaggerated.  In nearly 20 years of travelling to Greece, I’ve never had problems with drivers, and I’ll go as far as to say that I don’t even know anyone personally who has been taken advantage of.  The stories are almost always third- or fourth-hand.

It could very easily be argued that the practice of picking up second and third fares actually increases the efficiency of the system.  Athens is not built on a grid and its streets generally lead to a limited set of destinations.  Additional fares can almost always be picked up without inconveniencing the person who initially hired the cab, and the cab driver is able to use his or her expertise to increase the profitability of the venture.  The shared cab experience, I would argue, also had an unintended consequence: it creates what Robert Putnam might refer to as a kind of social capital.  It makes one’s fellow citizen a tangible, concrete entity as opposed to an abstract entity in the other cab.   It allows unplanned conversations to flourish and ideas to be exchanged.

A more logical approach to Greece’s taxi cab drivers would have been to allow them to remain a closed profession, but to formalize and tax the second and third fares that they often collect on a given trip.  As a closed profession, by the way, Greece’s taxi cab drivers would be in good company.  Taxi cabs in New York City, the bastion of capitalism, run on a medallion system which was created during the Great Depression.   To drive a cab, you need to possess one of the 13,327 medallions that are currently in existence.  It is, in other words, a closed profession.  Not surprisingly, the medallions are worth over $500,000 on the open market.  The only difference between Athens and New York, is that the majority of medallions in New York, some 71%, are owned by a few major cab companies.  In Greece, the vast majority are still owned by individual entrepreneurs.  Oh, and there’s another difference: the medallion system probably actually does contribute to the inflated rates that New Yorker’s pay for their cabs.

 

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