4 ms·

People face investment risk all the time, but medallions are a case of a city setting explicit expectations when selling the medallions and then changing the te

by qq66 11y ago

People face investment risk all the time, but medallions are a case of a city setting explicit expectations when selling the medallions and then changing the terms of the deal post facto. Chipotle devoured a huge chunk of the fast food market, but the city didn't collect money from McDonalds for a guarantee that Chipotle wouldn't be allowed to enter. Notably, this is illegal by federal law for auto manufacturers and other franchisors: if you promise a 25-mile exclusivity radius and get a franchisee to build a dealership, you cannot renege on that without being liable for damages. Interestingly, it's auto manufacturers who lobbied for these laws, wanting to kickstart a dealership ecosystem and knowing that franchisees would not invest money in building and marketing dealerships if they did not have suitable protections. Taxi drivers are a form of franchisee, and they are asking for similar protections. One possible solution is for the city to buy back all the extant medallions at some fixed price, do away with the system, and finance the purchase with an excise tax on all types of transportation going forward, whether rideshares, taxis, etc. You can imagine how Uber feels about that, and how they can mobilize their vast PR capabilities against such a concept.

deleted 11y ago
[deleted]
SilasX 11y ago
Hold on -- there's a big difference between "the government reneged on its promise to keep squatters off your land" vs "no one wants your land anymore". If they start turning a blind eye to squatters, it's fair to criticize that government for reneging. If the other city becomes such a vibrant spot that no one wants to live near you -- different story entirely. While local governments are arguably failing to require newer livery services like Uber and Lyft to meet e.g. higher insurance requirements, they are not reneging on the medallion promise, which still gives holders the exclusive right to pick up street hails. That right is still enforced, and the Uber/Lyfts of the world are not infringing on it. The situation is much closer to "street hail pickup rights aren't valuable anymore" than "governments enable encroachment on the right to pick up street hails". And before you dismiss "arranged hire" (livery) vs "street hail" as a technicality, there are very good reasons to put a cap on the latter but not the former (and otherwise subject the latter to harsher regulation): - By necessity, street hails require clogging of "Schelling points" where drivers can expect to get line-of-sight to a potential fare, and vice versa. That doesn't happen with livery, where they go only where requested, not significantly different from a private car. - Street hails create a risk of fighting over fairs, livery doesn't. - Street hails enable you to pressure naive passersby/tourists to take your rate, livery requires you to ask for the fare from a central service. - Medallion holders get use of the scarce privileges to use taxi stands and bus-only lanes, livery doesn't. - Livery creates a central, auditable record of the event, while street hails can rip you off without showing up on an audit. To be sure, Uber/Lyft are flouting even some of the requirements of livery services ... but the medallion case looks more like "street hails are becoming obsolete in the information age, so of course they'll lose value".
- elektromekatron 11y ago
  Street hails work when my phone battery dies.
- mistermann 11y ago
  Everything you say is technically correct, but when something has been valuable for a very long time primarily due to government regulation only, and then it suddenly loses most of its value in the span of just a few years, I don't think it's fair for people who just recently entered the market after years of waiting to suffer all the loss (while their predecessors, purely by chance, made their investment back many times over). At the very least this loss should be spread around in some way - Uber and Lyft drivers could bear some of the load, recent purchasers of medallions could be bumped to the front of the sales line, etc. Many different options. I don't want to live in a society where government regulation leads to financial disaster for individuals, and the society and government response is "tough luck".
  - rohansingh 11y ago
    Why should the loss be spread around? There are a number of rights and privileges you can purchase from the government, which are an investment risk. You go into them with a hope of profit and accept a risk. For example, if I pay for rights to drill for oil somewhere and oil becomes obsolete, should I be reimbursed by my competitors? The upside potential of one of these medallions was unlimited. After buying it once, you could use it to make an unbounded amount of money. Part of that is accepting the risk that it might make no money. Otherwise you're asking the rest of society to subsidize a private interest.
  - SilasX 11y ago
    The medallions did not have value primarily due to government regulation (in terms of limiting how many). The value was equally due to the regulation and the fact that street hails are so convenient relative to the other options. Just like property value is due equally do to the exclusive usage rights to it, and to utility of using the property itself (and I'd appreciate any feedback regarding how I can better communicate the dynamic in that analogy). Therefore, it is well known that both a) regular property and b) medallions can lose value from either 1) governments not enforcing exclusivity or 2) legal alternatives becoming better. Governments never made any promise (either for property or medallions) that thy wouldn't lose value from 2). (To extend the analogy further to the car dealership case, the manufacturer makes no promises about eg Chevy demand falling because public transit gets better.) To be sure, it certainly does suck when you put all your net worth in one asset and it loses value, but it does not thereby follow that your rights were violated or that a promise was broken. Nor does it necessarily make sense for the government to spread out the losses from this, because, well, why stop there? Why not socialize the losses from tepid real estate markets for leveraged homeowners, or for leveraged investors in local industries when their foreign counterparts get better? There isn't a lot you can do about limiting investment downside risk beyond preventing people from having too much net worth in any one thing ... which maybe they should have done for medallions (or should start doing for homes, for that matter).
AnthonyMouse 11y ago
> Taxi drivers are a form of franchisee, and they are asking for similar protections. You can't make a contract with a legislature. Exchanging anything of value for changes to the law is literally illegal. Imagine what would happen if you could bribe Congress to pass some corrupt legislation granting you untold powers and the next Congress was prohibited from undoing it. The only thing that binds Congress is the constitution. Obviously that leaves you in a tough spot if you have to rely on the state of the law, but legislatures know that. If they make huge unexpected changes to the law it tends to have a negative effect on the markets, so they try to avoid doing that, and people then rely on them trying to avoid doing that. But sometimes they have to, or sometimes they do it when they don't have to, and you take your lumps (or vote the bums out).

by qq66 11y ago

deleted 11y ago

[deleted]

SilasX 11y ago

Hold on -- there's a big difference between "the government reneged on its promise to keep squatters off your land" vs "no one wants your land anymore". If they start turning a blind eye to squatters, it's fair to criticize that government for reneging. If the other city becomes such a vibrant spot that no one wants to live near you -- different story entirely. While local governments are arguably failing to require newer livery services like Uber and Lyft to meet e.g. higher insurance requirements, they are not reneging on the medallion promise, which still gives holders the exclusive right to pick up street hails. That right is still enforced, and the Uber/Lyfts of the world are not infringing on it. The situation is much closer to "street hail pickup rights aren't valuable anymore" than "governments enable encroachment on the right to pick up street hails". And before you dismiss "arranged hire" (livery) vs "street hail" as a technicality, there are very good reasons to put a cap on the latter but not the former (and otherwise subject the latter to harsher regulation): - By necessity, street hails require clogging of "Schelling points" where drivers can expect to get line-of-sight to a potential fare, and vice versa. That doesn't happen with livery, where they go only where requested, not significantly different from a private car. - Street hails create a risk of fighting over fairs, livery doesn't. - Street hails enable you to pressure naive passersby/tourists to take your rate, livery requires you to ask for the fare from a central service. - Medallion holders get use of the scarce privileges to use taxi stands and bus-only lanes, livery doesn't. - Livery creates a central, auditable record of the event, while street hails can rip you off without showing up on an audit. To be sure, Uber/Lyft are flouting even some of the requirements of livery services ... but the medallion case looks more like "street hails are becoming obsolete in the information age, so of course they'll lose value".

elektromekatron 11y ago
Street hails work when my phone battery dies.
mistermann 11y ago
Everything you say is technically correct, but when something has been valuable for a very long time primarily due to government regulation only, and then it suddenly loses most of its value in the span of just a few years, I don't think it's fair for people who just recently entered the market after years of waiting to suffer all the loss (while their predecessors, purely by chance, made their investment back many times over). At the very least this loss should be spread around in some way - Uber and Lyft drivers could bear some of the load, recent purchasers of medallions could be bumped to the front of the sales line, etc. Many different options. I don't want to live in a society where government regulation leads to financial disaster for individuals, and the society and government response is "tough luck".
- rohansingh 11y ago
  Why should the loss be spread around? There are a number of rights and privileges you can purchase from the government, which are an investment risk. You go into them with a hope of profit and accept a risk. For example, if I pay for rights to drill for oil somewhere and oil becomes obsolete, should I be reimbursed by my competitors? The upside potential of one of these medallions was unlimited. After buying it once, you could use it to make an unbounded amount of money. Part of that is accepting the risk that it might make no money. Otherwise you're asking the rest of society to subsidize a private interest.
- SilasX 11y ago
  The medallions did not have value primarily due to government regulation (in terms of limiting how many). The value was equally due to the regulation and the fact that street hails are so convenient relative to the other options. Just like property value is due equally do to the exclusive usage rights to it, and to utility of using the property itself (and I'd appreciate any feedback regarding how I can better communicate the dynamic in that analogy). Therefore, it is well known that both a) regular property and b) medallions can lose value from either 1) governments not enforcing exclusivity or 2) legal alternatives becoming better. Governments never made any promise (either for property or medallions) that thy wouldn't lose value from 2). (To extend the analogy further to the car dealership case, the manufacturer makes no promises about eg Chevy demand falling because public transit gets better.) To be sure, it certainly does suck when you put all your net worth in one asset and it loses value, but it does not thereby follow that your rights were violated or that a promise was broken. Nor does it necessarily make sense for the government to spread out the losses from this, because, well, why stop there? Why not socialize the losses from tepid real estate markets for leveraged homeowners, or for leveraged investors in local industries when their foreign counterparts get better? There isn't a lot you can do about limiting investment downside risk beyond preventing people from having too much net worth in any one thing ... which maybe they should have done for medallions (or should start doing for homes, for that matter).

AnthonyMouse 11y ago

> Taxi drivers are a form of franchisee, and they are asking for similar protections. You can't make a contract with a legislature. Exchanging anything of value for changes to the law is literally illegal. Imagine what would happen if you could bribe Congress to pass some corrupt legislation granting you untold powers and the next Congress was prohibited from undoing it. The only thing that binds Congress is the constitution. Obviously that leaves you in a tough spot if you have to rely on the state of the law, but legislatures know that. If they make huge unexpected changes to the law it tends to have a negative effect on the markets, so they try to avoid doing that, and people then rely on them trying to avoid doing that. But sometimes they have to, or sometimes they do it when they don't have to, and you take your lumps (or vote the bums out).