Mayor John Tory summed up the conundrum facing every city trying to deal with the Uber blitzkrieg when he announced on Monday that he plans to update Toronto's taxi bylaws.

"What we need is one bylaw that applies without question to everybody," he said. "We cannot have the Wild West, but we also cannot have a city that in some way ignores the march of technology and time."

Exactly. It's unfair that taxi drivers who have paid for their expensive municipal permits and licences are now watching cities like Toronto do little or nothing while Uber, via its popular ride-sharing app, profits from what are effectively black markets. You can't blame drivers and fleet owners for being upset – they are playing by the rules. The thing is, those rules are asinine. They limit competition, reduce supply, diminish quality and force up prices. They should have been done away with decades ago.

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So how do you level the playing field without ignoring the march of technology? Regulating Uber and other car-sharing services into submission would be self-defeating. Whatever bylaw ecosystem Toronto's bureaucrats come up with, the final version should look more like Uber than the outdated and indefensible cartel system that currently controls the taxi business in many cities.

In Toronto, for instance, anyone can get a permit to drive a cab as long as they can pass a few minor hurdles and cough up $634. So far, so reasonable. But the number of cars is strictly controlled by the city licensing system. There may be lots of drivers, but there's an artificial shortage of cabs.

That's not good for the customer or the economy, because the cab owners and dispatch companies don't have to compete. The result, among other things, can be run-down, smelly cars that have no business being in service. Or worse. In Paris, for instance, when you call for a cab, the driver immediately turns on the meter and charges you for the time it takes to come pick you up. That's indefensible, but enforceable through a cartel.

The cartel system also hurts drivers. They know there is always someone coming up behind them willing to work longer hours and for less, for whoever owns the car they drive. In Toronto, if a driver manages against all odds to get a new taxicab licence, they have to pay a ridiculous $4,742 for it. Or they can buy an older, existing licence from its owner for well over $100,000.

For what good reason is it so expensive to get into the business of driving a car for hire? There is no evidence – none – that Uber drivers and cars are less safe than municipally licensed ones. Uber has demonstrated that there is little public interest in defending an artificial cartel system that enriches licence-holders to the detriment of everyone else.

If cities are to keep their hand in the taxi business, let it be a light touch. Require all drivers-for-hire, Uber and otherwise, to buy a modestly priced permit at City Hall. Demand a minimum amount of insurance coverage for each driver. Then get out of the way and let the market roll.