Because that market inefficiency is illegal.

The entire livery ecosystem evolved from artificially scarcified resources. Ever been to Vegas? Seen the porn slappers? Every 5 feet on the strip there's someone whose job it is to try and touch you with prostitution pamphlets. Why? There's no regulation against them, really, and the investment cost to get into it is low.

Let's make taxi services completely unregulated. You've got a '78 pinto with a Home Depot bucket for a back seat but you're only charging 10 cents per mile (since you siphon gas and are uninsured). You're going to be undercut by the dude on the stolen Vespa. And it won't even really matter because there's 900 other drivers doing the exact same thing. So the people who live there? Nowhere to park. And the people looking for a ride? No recourse when that '78 pinto careens off a telephone pole because you're only in it for the heroin anyway.

Hollywood Blvd on a Friday night? Curb-to-curb Uber Black. Santa Monica Blvd on a Friday night? Curb-to-Curb Uber. It's literally a rolling traffic jam full of hopeful short-timers attempting to determine if they really want to do this a living (they don't) two weeks into their six-week tenure.

That's what we call an "externality" and that's why taxi services are regulated.

Taxi rates are expensive because the externalities are internalized. Uber is cheap because the externalities are fucking up the traffic, screwing up insurance rates and taking advantage of 20-somethings whose only asset is the Prius they got for graduating college.