Apart from all the obvious externalities of cab driving operations, the extremely high probability of fraud, and the fact that policing cabs is extraordinarily expensive, there's another problem a lot of these analyses miss about why cabs are regulated the way they are.

In many large cities, the taxi system is a fundamental component of the transport infrastructure. There are locations in most cities that are not efficiently or safely reachable via bus. Visitors to cities also tend to need point-to-point transit; it takes some know-how and a lot of flexibility to get from an airport to a business meeting in a near suburb, for instance. Taxicabs are effectively a privatized component of metro transport systems.

Cities therefore have a powerful interest in making sure that whatever else happens, there is a strata of taxi service available to all residents of the city at some predictable rate.