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> I can see why they needed the system though, to prevent a flooding of taxi drivers. And they were proven right, because now with gig economy drivers, the floo

> I can see why they needed the system though, to prevent a flooding of taxi drivers. And they were proven right, because now with gig economy drivers, the floodgates have been opened and the market has been flooded with drivers in a race to the bottom. I'm not convinced this is true, except in the short term. Plenty of service industries maintain a reasonable number of providers, and many even pay reasonable wages to a lot of those providers. Uber flooded the market as part of an attempt to break through artificial scarcity; they needed on-demand service to attract customers, and massive scale to fight regulators. And they got their flood of drivers by burning VC money to ensure that the basic "rider -> driver" transaction happens at unsustainably low prices. So what we're seeing isn't a race to the bottom - it's a race to well below the bottom. Uber rides can't stay so cheap forever; either prices go up and riders leave, or prices stay low and drivers leave. The taxi/driver market in Cleveland or Omaha isn't going to be destroyed by a lack of artificial scarcity. There is a secondary problem, where even rational markets for services don't function in expensive cities. It may be that rides normal people can afford simply aren't viable in NYC or SF. But that's not a problem with market rates, it's a problem with housing prices that make lots of totally normal jobs unlivable.

emodendroket 9y ago
A bunch of empty cabs looking for fares affects everyone in the city, though.
- Bartweiss 9y ago
  That's actually a really good point, and obviously I didn't get into it. "Medallions are good because they keep wages high" is a position I thoroughly disagree with, but "medallions are justified as a traffic control system by the people who own the roads" is much better. Congestion and road wear aren't meaningfully priced into taxi fares, and it's possible that the socially-optimal number of cabs in circulation is well below the number a driver/rider market would generate. Already we see a lot of complaints about Uber drivers circling blocks and stopping in traffic, especially since they're most active in high-demand areas. (This also justifies the gap between low-density cities without medallions and high-density ones with them.) I still object to the medallion system. It's inflexible, doesn't scale automatically to demand, and creates ludicrously overpriced bearer instruments - with predictable consequences whenever supply increases. But I can definitely accept that cities have a good reason to keep the cab count lower than consumer demand would. I just wish they'd do it by taxing rides or something similar. We've got perfectly good tools for fighting externalities that scale with demand, so why are we still using medallions?
sokoloff 9y ago
> Uber rides can't stay so cheap forever; either prices go up and riders leave, or prices stay low and drivers leave. I think there's plenty of market for an Uber-like experience at $1.00-$1.75/mile. That's well above covering the all-in cost of the car and well within the range of what riders will pay. I see no reason to think that Uber can't make a profitable business, where drivers are also making a profit, and riders are willing to pay in a range of amounts near the current rates. I wouldn't be surprised if Uber is already profitable in cities where they have achieved scale.
- Bartweiss 9y ago
  I do expect Uber (or Lyft, or...) will turn a profit eventually. There's a substantial gap between Uber prices and cab prices at the moment, and while prices probably have to rise I expect demand will be inelastic enough to keep some ride service alive. The unique mechanics of ride-hailing apps, like having a demand-responsive workforce and not relying on dedicated vehicles, seem like basically sustainable cost reductions. The non-unique mechanics like having a good app are also sustainable, but Uber has already provoked most taxi companies to catch up on that. And we'll see how the regulatory bit shakes out - either crackdowns on ride hailing drive prices back up, or cabs lose out because they've got much higher government-imposed costs.

emodendroket 9y ago

A bunch of empty cabs looking for fares affects everyone in the city, though.

Bartweiss 9y ago
That's actually a really good point, and obviously I didn't get into it. "Medallions are good because they keep wages high" is a position I thoroughly disagree with, but "medallions are justified as a traffic control system by the people who own the roads" is much better. Congestion and road wear aren't meaningfully priced into taxi fares, and it's possible that the socially-optimal number of cabs in circulation is well below the number a driver/rider market would generate. Already we see a lot of complaints about Uber drivers circling blocks and stopping in traffic, especially since they're most active in high-demand areas. (This also justifies the gap between low-density cities without medallions and high-density ones with them.) I still object to the medallion system. It's inflexible, doesn't scale automatically to demand, and creates ludicrously overpriced bearer instruments - with predictable consequences whenever supply increases. But I can definitely accept that cities have a good reason to keep the cab count lower than consumer demand would. I just wish they'd do it by taxing rides or something similar. We've got perfectly good tools for fighting externalities that scale with demand, so why are we still using medallions?

sokoloff 9y ago

> Uber rides can't stay so cheap forever; either prices go up and riders leave, or prices stay low and drivers leave. I think there's plenty of market for an Uber-like experience at $1.00-$1.75/mile. That's well above covering the all-in cost of the car and well within the range of what riders will pay. I see no reason to think that Uber can't make a profitable business, where drivers are also making a profit, and riders are willing to pay in a range of amounts near the current rates. I wouldn't be surprised if Uber is already profitable in cities where they have achieved scale.

Bartweiss 9y ago
I do expect Uber (or Lyft, or...) will turn a profit eventually. There's a substantial gap between Uber prices and cab prices at the moment, and while prices probably have to rise I expect demand will be inelastic enough to keep some ride service alive. The unique mechanics of ride-hailing apps, like having a demand-responsive workforce and not relying on dedicated vehicles, seem like basically sustainable cost reductions. The non-unique mechanics like having a good app are also sustainable, but Uber has already provoked most taxi companies to catch up on that. And we'll see how the regulatory bit shakes out - either crackdowns on ride hailing drive prices back up, or cabs lose out because they've got much higher government-imposed costs.