The licenses are limited in number, and re-sold. They’re seen by taxi drivers as a kind of life insurance. Talk about abolishing them or issuing more and, you guessed it, they’ll strike.
This is why regulation is more often bad than good. It always starts out with great intentions and often works well in the beginning, then crumbles over time either do to it's own bureaucracy, it's selective enforcement, or it's crippling effect on technology or markets.
In addition, it's always difficult to evolve the law with the times, or remove it entirely, than to create new ones. So we're left with an ever-growing legacy of non-productive policy.
In general market regulations start out with good intentions, but the protection they afford specific groups eventually tends to seen as a sacred right by those groups. Especially after the first generation--those who could still remember a time without that regulation--have passed on.
The type of regulations that can work well are those that benefit a large number of diverse groups (i.e. financial regulations preventing banks from doing stupid things with their customers' money) whose interests are so poorly correlated that they cannot effectively organize for a monopoly on some special privelege.
