That's not a reason to limit the supply of taxis. That's a reason to charge a fee for a taxi license that defrays the cost of regulating them.

Sounds like a reason to stop regulating taxis to me. If some sort of independent "certification" is needed, there's no reason the free market can't provide such a service. In fact, it such a service is actually valuable, it's almost inevitable that it would emerge.

> there's no reason the free market can't provide such a service

sure there is. here's a bunch of reasons: http://en.wikipedia.org/wiki/Market_failure

Let me rephrase that, then:

> there's no particular reason the free market can't provide such a service, but there's no guarantee that it will.

Still, I stand by my assertion that, in general, if such a service is legitimately valued and necessary, a provider will emerge. No, a free market does not guarantee an optimal outcome for every individual, not does it guarantee that well get what we wish for. But free markets are still generally better than non-free ones. Pointing out that there are pathologies in full fledged laissez-faire doesn't count for much, unless one contends - and can prove - that (one or more of) the other options has no pathologies of it's own.