The Economics of Taxis

One difference between life in Malaysia one year ago and life in Malaysia today is with regards to taxis.  Since we’ve arrived, we’ve noticed a big change in negotiations with taxi drivers.  It used to be that in Kuala Lumpur, if you flagged down a cab, the driver would *almost* always take you where you wanted to go, and use the meter.  There was an exception for the really touristy area of KL known as Bukit Bintang or in front of the Petronas Towers, but besides that, the driver would take you and use the meter, no questions asked.

That is not the case now.  Now, almost everywhere that we go after around 3PM or with the exception of when we get cabs actually at our hotel, taxi drivers refuse to use their meters.  Instead, they insist on negotiating some absurd price–often about four or five times the metered fare–for the trip.  This is a real problem.  You can often negotiate the price down to about twice the metered fare, but besides that, the drivers refuse to budge.

We cannot figure this one out.  In essence, this has produced an annoying feature of KL life that all over the city, their are cab drivers sitting around with no passengers, just hanging out at taxi stands and refusing to take people who don’t pay inflated prices.  The reason that this doesn’t make sense is that they are not making any money by just sitting around.  Taxis in KL operate on concessionary bases, like in New York, where they have to pay a fee for the right to use the cab and then they make any take-home pay after that cost.  So by sitting around at taxi stands and refusing to take passengers, or driving around, pulling over, and then refusing to pick you up, they are shooting themselves in the foot. 

There are two things that explain why there could be a difference between now and a year ago.  (1) Government-mandated gasoline prices have risen, but government-mandated metered taxi fares have not.  (2) Downtown KL is experiencing a construction boom that creates more traffic.  But neither of these can explain why cabbies would be willing to forgo all income by offering absurd prices that price passengers out of the market.  Remember, KL does have pretty good mass transit, so people have options even if they would prefer to take a taxi.  And we know that the market isn’t clearing because there is a surplus
of cab drivers waiting around and doing nothing as well as a surplus of
passengers complaining that cabs are too expensive and therefore taking
the subway even though they would prefer to take a cab.  Furthermore, Indonesia and Singapore have experienced the same construction booms, gas price rises, and steady taxi prices, yet in both countries, taxi drivers will pick you up and use the meter, no problem.

Any Malaysian readers who can explain this to us?

Comments 4

  1. Leony July 11, 2006

    Hi Julie and Tom,
    Di Jakarta kadang juga sama. Mereka tidak mau pakai argo. Istilahnya argo kuda, karena sama saja dengan naik kuda, ditentukan dulu harganya sebelum kita gunakan jasa taksi.
    Ibu saya minggu lalu di KL, mereka menginap di hotel yang baik, tetapi koper mereka dibongkar di dalam kamar hotel, dan managernya tidak mau bertanggung jawab. Kata ibu saya, kemungkinan besar managernya sendiri yang membongkar. Padahal KL terkenal maju. Bingung juga ya.

  2. Julie and Tom July 11, 2006

    Aduh, sayang sekali. Besar kemungkinannya dibongkar Si Manajer. Tetapi biasanya, kalau ada kejahatan di KL, orang Indonesia yang di-blame…
    Empat bulan lalu, waktu di Jkt, saya (Tom) tidak ada masalah dengan teksi. Mungkin karena SBY-JK (Susah Bensin Ya, Jalan Kaki aja).

  3. Matt Glassman July 12, 2006

    Oh, come on. I was so excited to read the comments on this post, and then you guys go and get all provincial on me. Don’t you remember – the Brit lost their empire, but English conquered the world.
    But seriously, If either of the above two comments have any bearing on the original post, how about a translation.

  4. Tom July 14, 2006

    Hah, good point. Leony says (roughly)
    “In Jakarta it’s often the same. The taxis don’t want to use the meter. The term is “horse meter,” because it’s just like riding a horse, you have to set the price first.
    My mom last week was in KL, staying in a nice hotel, but her suitcase was broken into in her room and the manager didn’t want to take responsibility for it. But my mom says, it was probably the manager who did it. Even though KL is considered developed. Confusing.”
    Then we say (roughly)
    “Very sad. Very probable that it was The Manager. Usually, though, when there’s a crime in Malaysia, they blame Indonesians…
    When I was in Jakarta a couple months ago, we didn’t have any problems.”
    Then I make a pun. The initials of the Pres. and VP of Indonesia are SBY-JK (Susilo Bambang Yudhoyono-Jusuf Kalla). They recently raised gas prices, leading cab drivers to say that SBY-JK stands for Susah Bensin Ya, Jalan Kaki aja, which means “Tough Time (buying) Gas, just Walk.”

Comments are closed.