Q: I recently got into a cab and the driver offered a flat price instead of the meter. I learned from bitter experience that when they do this, if you ask for the meter they go the long and slow way. Do I have to give in to this extortion?
A. There are two sides to this question -- your side and the driver's side. Let's start with your side.
Given that cab rides are regulated with standard fares, and cab drivers are required to take customers by the shortest route, the cab driver's demand for a fixed fee above the standard rate is extortionary. He is taking advantage of the fact that he has you "over a barrel" since he knows it is not worth the extra few dollars (or shekels) he is demanding for you to get out of the cab and hail another one (who in all likelihood will offer you the same deal). Jewish law takes a dim view of such extortion, and in many cases holds that when a person is taken advantage of in this way, he is required to pay only the going price. Here is an example:
"If someone is fleeing from prison and found a ferry before him, and said to him, take a dinar [a very large sum] and ferry me across – [the ferryman] is entitled only to his [usual] price. [The passenger] can say, I was only kidding." (1)
In this case the ferryman customarily takes all customers for a fixed price; from his point of view there is no special reason to ask a higher price from this particular customer (who understandably is in unusual haste). If the customer asked for a special service, for example to row more quickly, then certainly the ferryman would be entitled to extra. But when the reason for the surcharge is solely that this particular customer is over a barrel, Jewish law doesn't sanction it.
Following this same logic, most taxi and limousine commissions have rules stating that taxi drivers are not allowed to charge extra for services that are not "extras", and if they do customers are required to pay only the regular price. (Sometimes they state that the customer is required to pay only what appears on the meter, but since the meter will be blank this would be a bit unfair.)
However, I also want to look at the taxi driver's point of view. We have to ask ourselves, why are tactics like this more prevalent in some times and places than in others?
In most areas the taxi fare is composed of three parts: a flat rate for getting a cab, a per-mile (or per-kilometer) charge, and a per-minute waiting charge. If these three charges are set fairly, and the number of cabs granted permits (medallions) is reasonable, then drivers will have no incentive to engage in this kind of trick. If the flat fee is high enough they would rather get you to your destination quickly and pick up someone else. But in some places the fee structure is poorly structured, encouraging mischief.
Sometimes the problem is even worse: permissible fares are just too low to allow cabbies to make an honest living. This is why the only cab drivers in some US cities are poor immigrants living on a few hundred dollars a week. In this case the ethical course of action for them is not to gouge customers but rather to lobby for a change in the rules or perhaps even go on strike. Still, it is possible to understand the cab driver's point of view.
The Talmud affirms that local authorities are entitled to regulate commerce: "And the townspeople are authorized to regulate weights and measures and wages, and to punish offenders". (2) However, this authority needs to be used in a responsible way that doesn't take unfair advantage of the regulated. Indeed, on the very next page of the Talmud we learn that this authority has to be subject to oversight to ensure that it is in the public interest.
So the simple answer to your question is, chances are local regulations allow you to passively consent to an unfair price and in the end pay only whatever the fair price is (you would have to estimate this). Even better would be to file a complaint, if you have the time and energy. This is the best course of action if you feel you are being taken advantage of.
However, if you have reason to believe that it is the cab driver who is being taken advantage of, by a fee structure that doesn't allow him to make an honest living, it may be that the best thing is just to give the driver a break and agree to the suggested price.
NOTE: The above analysis is predicated on the assumption that the flat price is meant to get a higher rate, not to evade taxes or charges. Even if you give in to the driver's threats, you should demand a receipt for the price you end up paying.
SOURCES: (1) Babylonian Talmud Bava Kamma 116a (2) Babylonian Talmud Bava Batra 8b
The Jewish Ethicist presents some general principles of Jewish law. For specific questions and direct application, please consult a qualified Rabbi.