Taxi Driver Online

Million Dollar Taxis: Another Wall Street Ripoff?

So, is driving a taxi in New York City a good way to make a living?

Don’t be stupid. In return for putting up with the hassles of New York traffic and the risks of being robbed — not to mention the occasional drunk who leaves his partially digested dinner on the back seat — a driver can expect to net a measly $15 an hour. That explains why the vast majority are young immigrants lacking marketable skills (and, often, command of the English language). But it certainly doesn’t explain why one fortunate investor recently found a buyer willing to pay $1,000,000 for a New York City taxi “medallion,” the little aluminum plate screwed onto taxi hoods that gives the owner the right to operate a single yellow cab in Gotham.

We don’t know if a taxi medallion is actually worth a million bucks. But we do know that the six-figure transaction is an eye-catching consequence of what economists call “regulatory capture,” in which the regulated gain control over their regulators – in this case, City Hall.

There are some good reasons to regulate taxis. When you flag one down, you’d like to be sure that the driver has a license, the vehicle is insured and the meter ticks along at the advertised rate. But in New York (and, to be fair, most other cities), the regulators’ first loyalty is to the interests that butter their bread. So, while New York’s Taxi and Limousine Commission does pay attention to safety and does work at discouraging fraud, its primary task is the care and feeding of the investors in the taxi cartel.

When the Great Depression hit New York and the city’s 30,000 taxi owners couldn’t pay their bills, the city’s impulse was not unlike that of the Roosevelt Administration in Washington: limit supply, so that demand would be adequate to support the suppliers left standing. FDR’s plans were (thankfully) declared unconstitutional, but New York City’s taxi cartel was there to stay. To operate a yellow cab and solicit passengers on the street you need a medallion. And the number of medallions is fixed at 13,237 – roughly 3,000 fewer than in the year (1937) the system was created.

A minority of medallion taxis must be owner-operated, but the owners are free to lease them to others when they aren’t behind the wheel. The rest are “corporate” medallions, which give the owners – any investor is welcome — the right to attach them to cabs and lease them to the highest bidders.

The taxi commission sets fares according to criteria vaguely related to operating costs, and taxi owners are perennially happy to explain that they are too low. But one fact proves the owners have it all wrong: investors are willing to pay a lot of money for the privilege of joining the government-enforced cartel.

As a thought experiment, let’s say the expected return on a $1 million medallion is seven percent annually (a low figure in light of the risks). To meet expectations, fare would have to be high enough to yield about $200 a day in profits. Yes, that’s right: $200 a day, after netting out the cost of drivers, fuel, maintenance and vehicle depreciation!

Of course, it’s hard to say what the “right” regulated fare would be because we don’t know what the “right” number of taxis is. In a competitive market, the quantity and the price would be set simultaneously by the invisible hand. Such an auction market wouldn’t work very well in New York, since patrons – many of whom are strangers to the city – would have to negotiate fares each time they flagged down a taxi. But one could imagine switching to a system like the one in Washington DC, where fares are regulated, but anyone who meets minimum service criteria can go into the taxi business.

Don’t hold your breath. If corporate medallions are worth $1 million each, the whole lot of them is worth something north of $10 billion (owner-operated medallions are presumably worth less than $1 million). And the owners are hardly likely to give up this unearned, government-defended surplus without a struggle. In any event, there’s no one around willing to give them a fight.

The wholesale cartelization of American industry didn’t survive in the 1930s, but arguably, only because the unelected geezers on the Supreme Court didn’t give a toss what the powerful business interests who favored the National Recovery Act thought of them. All too often, though, the wheels of regulation grind in only one direction.

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IDFIMH

Lemme get this straight, what you are saying is de-regulation will mean lots of highly qualified British people going for a badge and the immigrants can go do one as they will be considered surplus in the new world order of cab driver's?

If and when a council de-regulates it's like leaving the lion cage open at London Zoo, all those that were contained to PH and worked for a company who should hold them accountable for poor performance would then be free to roam the streets picking up all and sundry in a cab that looks exactly like the other cabs.

I can see it now, now miss can you tell me what the attacker looked like? ur um ur um well I know the car was black and one of those London style ones, ahh but what did the driver look like, err um err, I think he was middle eastern, although he might be Turkish, or was he Indian, I remember he had a Glasgow accent and had a green and white hooped shirt on.

C'mon Suss, get off it mate, you know as well as I do there are pro's and con's whichever way the coin falls, only my way has a reasonable history over at least 100 years where yours has messed up 3/4 of the country and driven out quality drivers who've been replaced by cheap old cars and drivers who bring the whole trade into disrepute, and I don't mean just foreign ones either.

Fair points Doom, but how exactly does having $1 million medallions in New York address them?

Basically it doesn't Dusty, and as i'm not an American I don't know the full in's and out's of how things tick over there, but moving it to our shores unless you make license condition's that mean only the clever and educated can qualify you will just move one stagnent pond into another.

Plates or Meds changing hands for cash has gone on forever, admitedly it's not a flawless enviroment, but neither is to allow anyone in, a hack has as many rank spaces as the council has made to work from most of the time, flags are few and far these days, PH has a blanket telephone network to draw from, so one should be limited, well both should be tbh, if there should be any lifting of it it should be managed growth, this is the only sensible thing I've ever seen suggested, but it should go a step further with PH, PH should prove it has the demand for the car count before any more licenses are allowed.

The buying in process is no different to any other business, ppl say it's council property, this is true the plate itself is, what is bought is the right to compete on the street, exactly the same as me going to an estate agent and buying the name from him, he rents his shop so he can't sell that, so he sells me the operation within those walls, somewhere along the line it's been seen as black market dealing, when infact it actually shows desire to do the job by putting up an ante, ok the baron side of things needs looking at, but the simple trade aspect is the same thing that happens daily in businesses all over the world.

I mean you could bend it so instead of selling a plate you don't own you sell a car you do own for £50000?

Strange....these economists would have probably have been jailed for such thoughts during the early part of the century.....even in America.

The National Recovery Act (NRA) was brought in specifically to fix prices......anyone setting a lower price than the one prescribed by the NRA was jailed......the belief was that anyone cutting prices contributed to lower wages and not giving the consumer the money to purchase the US out of the recession.

CC

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Think of how stupid the average person is, and realize half of them are stupider than that.
George Carlin

That is good thinking tbh, if you cut it to the bone nobody can puchase after a while, best to employ your own at a sensible rate, those folks will then spend it and it goes round in the money go round, put a block in and the money stops and everyone is skint, look familiar to today, I had a foreign driver ask me why it was so quiet, I said to him it's cos you keep eating the apples but don't replenish the apples, he didn't like it, but DIGAF, NO!

Yes, like if you pay £500 for a night at the Dorchester then you can be sure that the person washing the dishes down below is being paid a fortune.

I see you have been reading up about The Great Depression too!!

Isn't this one following a similar path of loony ideas to get us out of the crap!!!

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Kind regards,

Brummie Cabbie.

Type a message, post your news,
Disagree with other members' views;
But please, do have some decorum,
When debating on the TDO Forum.

Some economists suggest FDR's National Recovery Plan actually held the US Economy back.

CC

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Think of how stupid the average person is, and realize half of them are stupider than that.
George Carlin

Do you want 409 pages on the subject?

And I never knew wheat could f*kc up the soil to the extent it became a Dust Bowl!!

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Kind regards,

Brummie Cabbie.

Type a message, post your news,
Disagree with other members' views;
But please, do have some decorum,
When debating on the TDO Forum.

No thanks, and perhaps that's why your farm didn't take off

CC

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Think of how stupid the average person is, and realize half of them are stupider than that.
George Carlin

The 409 pages are in their 5th Edition.

Are you sure you don't want a copy?

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Kind regards,

Brummie Cabbie.

Type a message, post your news,
Disagree with other members' views;
But please, do have some decorum,
When debating on the TDO Forum.

5th edition of what?

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Think of how stupid the average person is, and realize half of them are stupider than that.
George Carlin

Thats where it all breaks down, by paying the dish washer poorly you reduce his spending power to purchase, when you purchase you create manufacturing which creates jobs which creates tax which in turn gets us out of debt, we don't stand a chance right now they don't have a clue in Westminster, it's all rosy in their world so they will never understand the moneygoround principle.

all very communist and suchlike

_________________
Think of how stupid the average person is, and realize half of them are stupider than that.
George Carlin