The drivers are the ones who get hosed in the current situation, being legally compelled to offer their services at sub-market rates.

You're a programmer. What about the people who do not have the means to hire you to write code for them. Should you be required to offer your services for $8/hour? Should the rate for programmers be fixed at $25/hour?

Economics is the study of the allocation of scarce resources. Our policy choices are a reflection of those decisions. I'm open to a debate on capitalism as a concept - I certainly think it has its pluses and minuses - I don't consider myself a laissez-faire capitalist by any stretch of the imagination. But at some point every decision is a decision that has consequences - we're allocating scarce resources, which means that we're balancing diverse interests in some way.

If you believe that "hiring a vehicle" means "depriving someone else of a cab that they are entitled to" and thus has a cost to society, another policy choice would be to tax cab transactions and then distributing the proceeds evenly across the population.