These medallion schemes are major examples of what economists call "rent-seeking" -- that is, they induce people already in the market to spend huge sums, not to generate new wealth but to move existing wealth from others to themselves. David Friedman has written about this and the huge costs it inflicts on an economy.

So yes, the medallion schemes need to be repealed ASAP. Or better yet, ruled unconstitutional so that they can never come back.

As far as people who've bought them wanting compensation, I've mixed feelings about that. Certainly any person or firm who has lobbied to create or extend the medallion rule is part of the problem and deserves nothing.

Rather than "sorry", how about "this is what you get for engaging in crony capitalism, suckers!"?

Or forcing the taxpayers - who for generations are the ones responsible for electing the officials who have charged outrageous medallion fees - to refund said fees on some pro rata basis to operators who switch to a ridesharing model?

I can't think of a workable solution that's truly fair, but I'm all for punishing public stupidity and/or corruption...some folks might learn from that.

I think that whatever law you decide to choose, it should apply to all taxis, whether they hook up with clients on the street or by iphone. If you need a license to drive people around you need one, if you don't you don't.

I fail to see how these are "new business models"... someone is getting into a car and paying someone to drive them somewhere. Sounds like a taxi to me.

The same standards for everyone.

So they made an investment that was obsoleted by technology. So did the buggy-whip manufacturers. And the 8-track manufacturers. And many others.

Life is constantly changing: deal with it. .

It's very difficult to police the new car services. They'd basically have to entrap someone, by consistently hiring them, to build a case worthy of prosecution.

The NYC taxi medallions are sold at auction and they've gotten very expensive because both the city and owners have incentives to restrict the supply. As a consequence, you have far fewer owner operated cabs than you used to, and few locals. Now most cabbies are deranged arabs who don't know their way around and barely speak english.

One reason that alternatives are so popular is because it's become unpleasant to take a cab. And New York is big enough that a gypsy driver can work full time and make a living at it. I imagine there are people who used to drive medallion cabs now driving freelance using these services.

But NYC doesn't have to 'do' anything. Let the medallions reflect their market value. That's going to be less than a bazillion dollars, but they still wont be cheap. Yellow and green cabs will still have privileges at the airport and train stations, hotels, taxi lines etc..

To Keith: That reminds me of this passage from Sterling North's "Rascal" (this chapter takes place in 1918 Wisconsin):

"Garth Shadwick, like his father before him, was a craftsman in leather whose skill was known as far away as the county seat and the state capital. He made handsome leather luggage, custom-fitted riding boots, and engraved book bindings. But most of his trade was in harnesses; and harness-making was a profession threatened by the automobile."

And, a couple of paragraphs later, Shadwick starts ranting, apropos of nothing, against automobiles.

I have to say, though, I didn't quite get it - why couldn't leather craftsmen just make coverings for car seats? With designs, maybe?

Lenona, that's an interesting question. In contrast to the buggy-whip manufacturers, many coachmakers of the early 20th century transitioned to making bodywork for automobiles and did quite well. (There was a time when, upon buying a "car", what you received was a rolling chassis with engine and drivetrain installed. You then took it to a coachmaker to have bodywork and interior of your choice fitted. Early racing cars had the look that they did because they were basically built the same way, but had only the minimum necessary body and interior in order to save weight.)

Back to the topic: I think Fatwa named that tune already. When you engage in a line of business where success depends on political connections, you can't be surprised when it comes back to bite you in the ass.

It seems like a real problem.

Where I used to live - the county I lived in had effectively no limit while the neighboring county had a strict limit that had long been met. The annual license fee was about the same for both. If you wanted to be a cabbie you had to buy a license from someone who already had one (which I read in the paper was around $1 million) or get hired on at one of the big companies in the one county. In the other you had to have your vehicle inspected, show insurance, take a written test about the laws around taxi's -- usually around $400 (according to newspaper article).

Both had problems. In the highly regulated county, at peak demand there was often not enough available. In the low regulation, in off hours there was often times none available. (e.g. your early morning ride to the airport cancels, there may be no taxis available). The obvious difference was there was 3 major companies and few minor in the highly regulated county, while in the other there was one middle sized company, a couple of small ones...and lots of companies that were 1 or 2 cars.

Now that I think of it, iirc there was a co-op where you could call one number and get a taxi from one of about 10 different companies...that sounds very similar to what is going on here.

And what a limo-companies? They can't (by license) pick up customers off the street - they need to be pre-arranged. That doesn't seem that different to me.

This rent seeking behavior is not unique to taxi licenses. You find it with liquor licenses, and contractors licenses.

The natural tendency of government is to use these licensing schemes as revenue generating measures, which usually results in a black market for whatever goods or services they are trying to restrict.

One way to gradually pop the bubble is to issues a few more new licenses every year, until the value is debased. There is seldom the political will to do this.

Similar to how mortgage interest deductions inflate the cost of housing makes it impossible to get rid of mortgage interest deductions since homeowners with mortgage interest deduction inflated prices don't want to see those prices go down.

Don't ask me for a solution though.

Maybe a schedule of getting rid of the deductions gradually over 20 years?

And increasing the supply of medallions by 20% every year until they are done away with entirely?

Just have the city buy back the medallions from the cab drivers for the same purchase price. All that extra moolah ought to help the incumbent cab drivers adjust to their new competitors.

The problem extends to every type of work where the incumbents have gotten licensing instituted as a way of reducing competition.

Of course I can sympathize a little more with the doctors and lawyers, since they have had to invest more than the usual number of years in college, and taken on massive debt, just to get their jobs. Even those careers need to be deregulated, but let's repay them for those burdens.

I'm going to offer a pretty drastic (and maybe unpopular) solution for this.

The taxi drivers that bought into the medallions get to choose whether to appeal for recompense to those they paid for the medallions, or they get to eat them.

It's not the business of the free market to make it up to them for what they bought in their attempt to secure some specific 'rights' to a portion of the business.

You don't get (in principle) to buy your way out of competition, even if it cost you to buy into the system in the first place.

I do feel kind of bad for those who had to buy a medallion, but I don't feel bad for when they have to compete on even ground.

The medallion system was (is) fundamentally flawed from the onset.

I will agree that the political idiots who set up the medallion system should have to repay the taxi drivers (since this should never have had to have been a requirement in the first place), but the simple fact that they had to pay doesn't mean that they get to be immune to competition.

Too bad, so sad.

The option to compete, especially outside of the status quo, absolutely outweighs the wishes of the entrenched interests, even if it hurts them financially.

There's no right to 'business as usual', whether or not they can adapt to new market forces.

I'm sure buggy whip and custom carriage makers felt like they got a raw deal also.

If they can't compete on the open market, well, it sucks for them, but that's the way it works.

To quote Heinlein:

"There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back."

It is kind of sad that some drivers have paid a large amount to contribute to a monopoly, but that is not sufficient cause to obstruct those who want to compete with them.

How is this comparable to whips and buggies? The cabs are cars, the "ride shares" (or as I see it, unlicensed cabs) are cars. The only difference is how they are contacted, there is absolutely no difference in the service they are providing.

I say phase out the licenses. Or elimiated, and re-imburse the difference between what they paid and the amount of time between when they would have to renew.

I have to say, though, I didn't quite get it - why couldn't leather craftsmen just make coverings for car seats? With designs, maybe?
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I thought of one possible reason - maybe harness-making required a good deal more skill than making covers for car seats, so a lot of money would have been lost in making the switch.

But as I mentioned elsewhere, the leather craftsman industry seems to be alive and well - it just isn't as big as it used to be a century ago. (In that discussion, I was talking about how, if we could adjust to the economic earthquake caused by the invention of automobile, despite the dozens of different types of jobs that became obsolete, we ought to be able to adjust to a world where people choose to have fewer babies and many even choose more frugal habits in general, to save for their old age. So what if everyone ends up being forced into personal frugality because there aren't enough young taxpayers to shake down or as many luxury-based, polluting jobs to choose from? You do what you have to.)

In that discussion, I was talking about how, if we could adjust to the economic earthquake caused by the invention of automobile, despite the dozens of different types of jobs that became obsolete, we ought to be able to adjust to a world where people choose to have fewer babies and many even choose more frugal habits in general, to save for their old age. So what if everyone ends up being forced into personal frugality because there aren't enough young taxpayers to shake down or as many luxury-based, polluting jobs to choose from? You do what you have to.)

Posted by: lenona at March 31, 2014 11:26 AM

Historically cultures which are shrinking in population, haven't survived to tell us about how wonderful it is.

They have all been overrun by civilizations and ethnic groups who were expanding.

I can only hope and pray that sooner or later, the cultures that don't believe in birth control will realize they're condemning themselves - and everyone else - to a not-so-slow starvation. (Leaving aside those who HAVE to have children because of the high infant mortality rate and lack of any type of Social Security.)

I can only hope and pray that sooner or later, the cultures that don't believe in birth control will realize they're condemning themselves - and everyone else - to a not-so-slow starvation. (Leaving aside those who HAVE to have children because of the high infant mortality rate and lack of any type of Social Security.)

Posted by: lenona at April 1, 2014 3:41 PM

If you think third world cultures are going to just sit there and stave, as opposed to invading their neighbors, You haven't read much history.

If you think third world cultures are going to just sit there and stave, as opposed to invading their neighbors, You haven't read much history.

Posted by: Isab at April 3, 2014 3:32 PM
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Depends how you define "third world," maybe.

I recall that in her autobiography "Infidel," Ayaan Hirsi Ali said something to the effect that really poor people - the ones with nothing to lose - don't have time to rebel; they're too busy trying to get their next meal. It's the ones who are a little better off who are dangerous to their neighbors. (Something that Michael Kimmel said in his new book, too, though the subject was very different.)