As Richard points out, D.C. has a pretty decent system for getting taxi medalions out. Last I looked into it–a few years ago–D.C. was one of only two major U.S. cities that doesn’t ration medalions. (The other is San Diego.) Even a lot of smaller cities like Hartford, CT charge a lot for taxi medallions.
The result is interesting: it’s much easier to get a cab during rush hour than it is in other major cities, BUT it’s nearly impossible to get a cab to come to an outlying location simply by calling. No company has been able to set up a decent dispatch system.
But there are market-based workarounds. First-limo-like car service is surprisingly reasonable in D.C.–a trip to Dulles Airport in a chauffeured car that waits for you on both ends costs only about 50 percent more than taking the same trip by taxi. (In New York, it’s 300 percent; Chicago 200 percent.) Furthermore, a handful of enterprising individual cab drivers hand out business cards and higher rates for coming in response to a mobile phone call.
Fares are also low in D.C. for many trips. The cost of a taxi ride is based on “zone” travel that tend to make trips between downtown and the Capitol Hill cheap and everything else expensive. Since there are no meters, furthermore, drivers can always charge tourists more and get away with it. Not fair, perhaps, but it actually makes economic sense in a way: tourists pay more for most everything else anyway.
On balance, D.C.–generally a garden of socalism–has created a taxi system that, for the most part, lets the market work. There are a bunch of tradeoffs involved in this system, but it may be the best system around: it keeps fares low for people in town, lets drivers do better than the fare rates would suggest and makes it easy to find a cab. Has anyone seen a system that works better?