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And for your idea about hailing a cab already in route to a similar destination, Lyft already has that https://www.lyft.com/line
Its pretty obvious you've never tried these services
If your Taxi driver is unsafe, who do you report him to? How about if he rips you off? If there is anything that is wrong with the service, from car maintenance, driver hygiene, navigation, safety; the passengers are able to remove the driver from the system
Since all of the drivers are independent contractors, Uber needs an incentive to have their drivers out in full force on special occasions, and the promise of surge pricing does just that. If New Years Eve is going to net you the same amount as any other Saturday night, why bother driving instead of spending it with your friends and family