Re: Potential topic for Worstal...
Yes - see here. Basically in the 1920s the level of service was bloody awful, and the decision was taken to limit the number of cabs that could operate legally and require standards of service of those who were licensed to operate. This scarcity meant that operators with higher costs (carrying out proper maintenance on cars, properly trained drivers, clean cabs etc) could afford to maintain their standard service and still make a profit, and had the desired result of turning the cab service into something useful.
The problem is that medallion holders are able to lease out their medallions at ludicrous rates, essentially re-establishing the old problem of promoting undesirable behaviour from taxi drivers because nobody can afford to run a service with higher standards.
Edit: beaten to the punch by Irony Deficient