One of the biggest Canadian political stories of the year is happening well outside the federal arena.

It is the story of the taxi industry’s deregulation. Centred on the giant U.S. firm Uber Technologies Inc., this tale is raising hackles in cities across the country, including Toronto, Montreal, Ottawa, Edmonton and Vancouver.

Like all deregulation stories, it is about whether market forces alone best serve the public interest.

The regulation of taxis began as an effort to curb ruinous competition. New York City, for instance, introduced regulation in 1937 to deal with a spate of violence sparked by cabbies undercutting one another’s fares as they strove to attract customers.

New York’s solution, copied across North America, was to limit the number of taxis allowed on city streets and set fixed fares.

The upside to this arrangement was twofold. First, customers knew well ahead of time what prices they would have to pay. Second, cab owners and drivers could make a decent living.

The downside was that limiting the number of cabs kept fares higher than they otherwise might have been.

In this sense, it was like other regulations that interfere with market forces. The regulations that require slaughterhouses to reject diseased cattle, for instance, may raise the price of hamburger. But they are designed to keep the meat-eating public healthier.

Enter Uber. The corporation doesn’t call itself a taxi company. But to all intents and purposes it is.

Its computer software acts as a kind of central dispatch service for drivers who use their own cars to offer taxi services, which Uber euphemistically refers to as ride-sharing, at unregulated rates.

Sometimes the Uber rates are lower than the regulated fares. Sometimes, during so-called surge periods, they are higher.

But that’s the market’s way to ration scarce resources. Regulated cab systems ration by wait time: at peak periods it takes longer to find a taxi. Uber rations by price: at peak periods, its cabs are too expensive for some people to use.

Standard economic theory holds that rationing by price is more efficient. But as two Montreal women interviewed by CTV this year found, those efficiency gains don’t always go to Uber passengers.

The pair said they were charged $630 on New Year’s Eve for a ride home that in a regular cab would have cost $83.

Uber’s business style is aggressive. Its classic strategy is to begin operations without permission and dare the government to shut it down.

In Quebec, where it has been operating since 2014, it has ignored calls from the province’s transport minister to stop.

Nor has it been deterred by the fact that Quebec police have seized 1,000 vehicles from Uber drivers for operating without proper authority.

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In Toronto and Edmonton, Uber demanded that its cabs be treated differently from regular taxis. In particular, it demanded that they be allowed to charge whatever fare they please.

Earlier this year, Edmonton complied with virtually all of those demands. A Toronto staff report, based on the Edmonton model, recommends that Toronto comply as well.

Exactly what would happen if Uber succeeds in upending decades of taxi regulation is unclear. It talks of bringing competition to the cab business. But the $62.5 billion company has few competitors.

Lyft, its major U.S. rival is valued at only $5.5 billion and, as the Star reports, has no intention of moving into Canada.

One possible scenario predicted by economic theory is that after driving all other cab companies out of business, Uber would raise its prices to monopoly levels.

Throughout the Uber debate, the role of technology has served to mystify and confuse. Yes, the company’s software, or app, allows passengers to order up and pay for cabs on their cellphones. That’s new.

But this new technology doesn’t explain why, as the Toronto staff report recommends, Uber taxis should be subject to less stringent safety inspections than other cabs.

In particular, the new technology doesn’t explain why Uber should be exempted from fare regulation.

If it is a good idea to prevent regular cabs from price-gouging during peak periods and price slashing at off times, why is it a bad idea to extend this rule to taxis that use apps?

Thomas Walkom’s column appears Wednesday, Thursday and Sunday.

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