Fishing for Customers: Uncertainty and the Microfoundations of the Taxi Market in Warsaw

When we think of the economy as a complex economic system we think about the banking sector, credit default swaps, the housing bubble, about credit rating agencies and international trade. We think about Silicon Valley, technological innovation and the recent financial crises. We are not likely to think about something as ordinary as a taxi market. In this article I argue that taxi markets too are complex systems and understanding the microfoundations of such systems might just provide us with some insight into the operation of other markets as well.

The microfoundations of supply of taxis cannot be captured by neoclassical economics. For taxi drivers to be able to rationally plan their day and maximize their income would require them having access to knowledge of the locality (the space-time position) of each potential customer throughout the day, the destination of each potential customer, the traffic situation during the time and thus the length of journey with each customer, and the plans of all the other taxi drivers with whom the taxi driver is competing for fares. This knowledge would then allow the individual taxi driver to rationally calculate and choose the best combination of clients over time, thus maximizing taxi driver’s income and limiting waiting time in between fares.

But model has little to do with real life. Even if we considered that taxi drivers have the knowledge of where and when each potential customer will want to be picked up (they do not) and where each customer wants to go (again they do not), the length of each journey, the plans of all the other taxi drivers with whom they are competing for fares, the number of possible strategies that the taxi driver would have to choose between would be astronomical.

Based on fieldwork conducted in Warsaw, I argue that rather than rationally plan what to do Warsaw taxi drivers rely on two types of strategies to cope with uncertainty: defensive strategies and adaptive strategies.

Defensive strategies take the form of routines. Taxi drivers use 4 types of routines: related to space, time, movement, and income. Spatial routines have to do with coming back to the same location. Some taxi drivers have their favourite stands where they like to work. A second routine used by taxi drivers to cope with uncertainty is a temporal routine or a working schedule. Since taxi drivers cannot rationally plan ahead some resort to working the same hours. Thirdly, taxi drivers rely on income routines as taxi drivers try to earn a certain amount of money each day. Fourthly taxi drivers use routines that have to do with movement. Thus, after dropping off a customer the taxi driver tries to move as little as possible and does not go looking for customers in another part of the city.

While routines are defensive strategies that are aimed at ignoring uncertainty and excess of possible strategies, taxi drivers also use adaptive strategies that aim at adjusting to the unfolding of the market process. I argue that adaptive strategies take the form of acts of observation. Through observation taxi drivers are able to acquire individual islands of knowledge in the sea of uncertainty. Like fish, customers come in shoals and schools in the sense that there are certain temporal and special regularities in demand throughout the day and across days. Skilled taxi drivers get to know the routines of some of the individuals and social groups they are driving.

When taxi drivers observe the market they do so mostly to look for ecological niches. Just like companies in a market try to occupy a niche to avoid competition, the skill of the taxi driver is to find a niche to avoid other taxi drivers with whom he or she is competing for fares. But since a driver provides a very similar service to other drivers, the ecological niches that taxi drivers can look for are locational niches or niches in time-space. A taxi driver finds a locational niche by looking for a location with the best driver-customer ratio.

While many taxi drivers become skilled at anticipating demand for their service, overall the strategies of Warsaw taxi drivers lead to the emergence surplus supply and a situation of collective self-exploitation It is not exploitation in the Marxist sense of workers selling their labour time to an employer who then tries to get as much as possible out of them, extending their working time or forcing them to be more efficient. Rather taxi drivers' working day is a form of self-exploitation. It is self-exploitation because it is the taxi driver himself/herself who extends his/her own working time without getting the benefits of higher income. By extending working time the driver increases waiting time rather than earning time. However, this form of self-exploitation is collective because as different taxi drivers extend their working time they contribute to surplus supply and the waiting time of others with whom they are competing for fares.

This article is the result of a larger dissertation project that looked at the working day of taxi drivers in Warsaw. The fieldwork was conducted in Warsaw between November 2012 and June 2013. It consisted of a historical analysis of the Warsaw taxi market; observant participation at taxi stands and in taxis; semi-structured interviews with taxi drivers, family members, corporate owners, labour union leaders, and regulators; informal conversations with taxi drivers; a close reading of internet forums for taxi drivers, taxi driver websites; and an online and paper survey  among taxi drivers.