[quatrevingts]

Well, like you said, the fare has to make up for the time the driver is idle, so that problem goes away. Licensing is done to ensure passenger safety, and sometimes to restrict supply. The computer is not going to drive drunk or kidnap you, and excess unproductive machinery can just drive itself to a city where there is more demand.

And the dead miles problem is not a big factor in places like Manhattan where utilization of taxis is high. If this system were pervasive, you could simply maintain a car or two per block.

The biggest issue would be dealing with the peak demand. Fortunately, heavy rail is complementary here, and it's only marginally less convenient when you have quick on-demand service to and from the train station. Demand-based taxi pricing would sort things out.