[SilasX]

>more drivers than passengers and it couldn't pay the bills. How do we solve this? Limit the supply of drivers, therefore raising the price and reducing competition. From a consumer standpoint this is terrible.

Yes, but what regulators didn't realize (and still don't) is that economic incidence is tricky. Just because you can charge more, doesn't mean any specific factor in the production chain gets to partake in any of that.

For example, just because Gucci bags surge in popularity doesn't mean the Gucci office janitor can charge more for his labor -- the supply of such services is unaffected and they can find more providers at the same price.

And indeed, the same dynamic applied for taxi medallions: sure, you can charge more to passengers, but the immense supply of qualified drivers -- who only need a small takehome -- means that they'll bid up the price of the medallions (rental price or capitalized) so that the drivers are still poverty level, and almost all the monopoly profits go to medallion holders, not drivers.