Baggage Carousel Econ Lesson
David N. Laband writes in the WSJ about "a simple lesson in free-market economics, provided courtesy of the harsh winter weather of recent days in the eastern half of the U.S.":
Coincidentally, the annual meetings of the American Economic Association were scheduled to take place in Philadelphia, from Jan. 3-6. My friend and colleague, Haizheng Li, flew in to Philadelphia late in the evening of Thursday, Jan. 2, landing around 10:45. As he later told me, by then it was snowing heavily. Because of backed-up air traffic, the pilot was not able to park at their arrival gate for 40 minutes. After de-planing, Haizheng waited for another 40 minutes to retrieve his luggage.The AEA conference is huge, with several thousand attendees. Under ordinary circumstances, the participating conference hotels are constantly running shuttles to and from the airport to pick up guests. Taxis are running nonstop. Not on this night.
While waiting to collect his luggage, Haizheng learned from a colleague that the hotel shuttle service was taking two hours or longer. Worried, he went out to the taxi line even before getting his luggage. Snow was falling, the line of prospective customers waiting for taxis was long--and there were no taxis in sight. It was near midnight. The taxi staff said it was unlikely any cabs would be coming in such bad weather.
Haizheng and a number of other passengers were facing the grim prospect of an uncomfortable night at the airport. The food vendors were all closed. Haizheng was tired and hungry--and he was scheduled to make a presentation at 8 the next morning.
Unexpectedly, out of the night came a savior. A man walked through baggage claim asking whether any of the recently arrived passengers needed transportation to one of the downtown hotels. Haizheng didn't ask what the ride might cost, he just said yes. As it turned out, the man took six stranded passengers, plus luggage, to their hotels for $25 each.
No doubt in doing so he broke at least one, probably several, laws regarding passenger transport that are designed to prop up the local taxi cartel. Yet this man's action dramatically improved the lives of six individuals, each of whom undoubtedly would have been willing to pay much more than $25 to get from the airport to their respective hotels. Haizheng told me he would have paid a lot more.
Euvolutionary Exchange blogs about this, explaining:
The logic of "price-gouging" opponents is sometimes hard to follow.People have very few choices, and they are in trouble.
Therefore, we will take away one or more of the choices they do have, because...wait, why?
...The state would have prevented this transaction from taking place, if it could have. Were the six people "exploited"? If you mean, did they have to pay more because they did not have good alternatives, yes they were. The exchange was NOT euvoluntary.
But prohibiting the transaction would have violated the non-worseness principle. They were all bad off. They would have been EVEN WORSE off without recourse to the market.
The driver was not doing this for fun, or out of charity. He was trying to make money. He was THERE because the (implied, shadow, black market) price had risen in the face of transport scarcity. The market told him to help those people who needed help.
A comment from the WSJ by Charles Klaniecki:
Sorry to rain on this free market parade, but I would generally be reluctant to get into an unlicensed cab. With six passengers the risk is lower. And with the exceptional case of a particularly nasty storm, the risk is probably lower still. Still, those taxi shields do as much to protect us customers as they do to boost wages of cabbies.I wish to add that I generally believe in a free market. Here, however a few regulations are desirable.
Vincent P. Emmer replied:
You are free to be reluctant to get into an unlicensed cab. I hope you'd agree that others should be free to take the unlicensed cab.
Gary Lapidus added:
Silly article. Without the local government selling taxi medallions, it would not be possible for the taxi industry to be a source of graft, corruption and patronage for politicians.
via @FriedrichHayek
Patrick Smith has seen markets like this with no controls. You might want to see what he says about that.
Radwaste at January 11, 2014 12:34 AM
Consider my comments minutes ago regarding France, and see also.
Crid [CridComment at Gmail] at January 11, 2014 3:26 AM
Also
www.economist.com/node/21591880/print
Crid at January 11, 2014 4:13 AM
Patrick Smith has seen markets like this with no controls. You might want to see what he says about that.
I might indeed -- if you'd post a link.
Amy Alkon at January 11, 2014 5:48 AM
Some government regulation is desirable. We really don't want someone erecting a tall radio antenna at the end of the airport runway. The problem is that government regulations never go away - they just accumulate. Once all the important problems have been covered, the bureaucrats employ themselves by solving nonexistent problems.
Much of the problem could be solved by imposing an upper limit on the total size of laws and regulations. An average person ought to be able to read and understand all the laws and regulations that apply to them as individuals, in a reasonable period of time. Say one million words, written at tenth-grade level, to include federal, state, country and city laws and regulations. Double that for businesses. Anything that doesn't fit, doesn't exist.
a_random_guy at January 11, 2014 5:52 AM
I can agree that some things need regulation, but at a reasonable level.
So you want to run a taxi service. This is the way the law should have been done:
That pretty much would be it. That is the idea that a limited government should be operating under. The whole medallion system is prone to corruption and abuse.
America was founded off the idea that we shouldn't see the government in our daily lives beyond the minimum to keep general order ans safety.
Jim P. at January 11, 2014 6:23 AM
The more regulation there is, the more expensive the ride, and also the more taxis will ignore it.
I noticed that the rates in Italy were quite flexible. There was the meter rate( very expensive) and then there was the flat price you could negotiate up front for a ride to a certain place, before you got into the cab.
No one by really stupid tourists ever paid the meter rate.
The more taxes and the more regulation a country imposes on their goods and services, the more economic activity they drive off the books.
Isab at January 11, 2014 7:41 AM
Interestingly, in the DC area we have something called "slugging," which is basically population-level unlicensed taxi service.
People go to slug lots/locations and wait for a ride or pick up folks going to the same general location. These are all commuters.
To my knowledge, there is no monetary compensation, but you get to use the High Occupancy lanes.
I've never done this because, to me, it's shady and unreliable. BUT, move to the DC area and if your experience is anything like mine, you will have gobs of people tell you how wonderful it is and you should just try it, etc.
Shannon M. Howell at January 11, 2014 7:52 AM
I went to look at the cab fares in Philly via http://www.taxifarefinder.com/ , and from the airport to the Philadelphia Marriott Downtown (the central hub of their meeting) is a cool $31.
The fare for additional passengers is listed as a flat $1 each, but I'm left wondering how many cabbies actually charge that?
A problem with government regulation, especially on the local level, is that they're creating sanctioned monopolies that they can reward to their friends and buddies. Who I'm sure feels generous when it comes time for campaign financing...
It isn't about left or right, Dem or Repub, but insiders and outsiders.
I R A Darth Aggie at January 11, 2014 9:08 AM
"I might indeed -- if you'd post a link."
I would – but Patrick Smith has commented on the state of airports and their surroundings in many places in his "ask the pilot" – related journalism.
Radwaste at January 12, 2014 7:20 AM
The thing that Patrick Smith probably doesn't understand is that markets with too many restrictions and controls, are inevitably replaced by a black market with "no" controls. It is a tough balance to achieve.
The only other way to offset over regulation is with government subsidies, a.k.a. "Crony capitalism"
You need enough controls to keep the public "reasonably" safe, without so many that you create an artificial shortage which is then filled by a black market supply, or people are forced into a less safe alternative.
Example. You shut down a small airport because they don't have the money to install all the crash prevention measures currently required by the FAA. This puts the former passengers, on the highway, for a hundred miles driving to the nearest big airport to get on the plane. Statistics tell us, that their individual risk of death and injury has been increased substantially, because passenger vehicles are less safe than commercial airplanes.
Isab at January 12, 2014 10:24 AM
"You need enough controls to keep the public "reasonably" safe, without so many that you create an artificial shortage which is then filled by a black market supply, or people are forced into a less safe alternative." ~Isab
I think the new ride share programs are meeting that need. This might be a good time to sell one's taxi medallion.
http://www.pewstates.org/projects/stateline/headlines/state-regulators-step-in-on-ridesharing-controversies-85899511062
Michelle at January 12, 2014 1:56 PM
"You need enough controls to keep the public "reasonably" safe, without so many that you create an artificial shortage which is then filled by a black market supply, or people are forced into a less safe alternative." ~Isab
I think the new ride share programs are meeting that need. This might be a good time to sell one's taxi medallion.
http://www.pewstates.org/projects/stateline/headlines/state-regulators-step-in-on-ridesharing-controversies-85899511062
Michelle at January 12, 2014 1:57 PM
...apologies for the double post.
Michelle at January 12, 2014 1:58 PM
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