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Taxi Medallions: New York's taxi system makes fares higher and drivers poorer

143 points by gruseom 14y ago

tokenadult 14y ago
Previous submission (no comments): http://news.ycombinator.com/item?id=4074668 http://news.ycombinator.com/item?id=4074668 I'm wondering why the duplicate detector isn't catching more of the recent series of duplicate submissions, and why searching for keywords on HN search isn't turning up more of the stories. (I usually use HN search before I post.) I found the previous submission of this story just now with a Google search site-restricted to news.ycombinator.com, after drawing a blank with HN search.
- gruseom 14y ago
  A little redundancy is a good thing. It compensates for the randomness with which many posts fall through the cracks. This article is an example. It's interesting and surprising (surprised me, at least) and deserves a discussion. Had it got one the first time around I wouldn't have reposted it. It has fallen through the cracks again though (edit: or so it seemed). Perhaps somebody else will figure out how to repost it in a few days :)
- olog-hai 14y ago
  The previous submission also never showed up in my RSS reader.
  - zotz 14y ago
    I've noticed that HN has a habit of filtering links and comments.
- graywh 14y ago
  different URL
  - uxp 14y ago
    Yep. This article links to the paginated story, the previous one links to the single page article.
juan_juarez 14y ago
New Mexico does the same thing with liquor licences. The worst part is that the state's biggest liquor distributor now owns the vast majority of the licenses. "You have to buy all your shit from me AND give me a percentage of your profits" - sounds like the mafia but it's every day business in NM.
- refurb 14y ago
  That's actually a by-product of prohibition. When they reversed prohibition, a regulation was put into place that the manufacturer, distributor and seller of alcoholic beverages all had to be separate (not owned by the same company or individual). The gov't decided to step in and do all three after prohibition and it's been a VERY slow move back into the private model since then.
juxta 14y ago
I find this line pretty interest: "Because Murstein's company owns a bank, it’s able to take advantage of the Fed’s low interest rates to borrow money for 0.35 percent and loan it out to striving young cabbies who want to own a medallion. The cabbie borrows at around 5.5 percent, with 25 percent down. “If a borrower doesn’t pay, we send out somebody,” Murstein said. “Literally, they can pop the medallion off the hood of the car and bring it back to our office and, bingo, the guy is out of work.” " He basically has no risk on his end. Looks like he found a pot of gold!
- MichaelGG 14y ago
  If it's really so risk-free, then others would provide competition with lower rates, less down, payment-free period, etc.
  - smsm42 14y ago
    For that, they have first to get a supply of medallions. And current owners won't sell them unless they are given some serious money to replace that 5.5%-0.35% income stream. One of the reasons why the price of medallions skyrockets. Of course, I imagine it's not completely risk-free. It is a strictly regulated business. Which means you need a lot of friends in key places - otherwise somebody who does have a lot of friends would put you out of the lucrative business and take it for himself. And there's some measure of competition - 5.5% is not a super-high for a loan with a collateral. Higher than mortgage rates but substantially lower than unsecured loan rates. About 1% over common HELOC rates and about the same as home equity loan rates. Of course, repossessing a home is much harder than repossessing a medallion, so probably medallion business is better, but the rate is not totally outrageous compared to similar loans.
protomyth 14y ago
Is there somewhere where a government created scarcity of licenses actually works? The only things I can think of is resource specific activities (e.g. hunting licenses).
- crazygringo 14y ago
  Well it makes sense to limit the number of NYC cabs -- except for the hour of handoff (~5pm) and in particular neighborhoods at night (Theater District, Greenwich Village, etc.), the number of cabs seems pretty good. If anyone could drive a cab, the profession might only barely pay a living wage, as each driver would get less passengers, and you'd get a race to the bottom -- and the streets would be more congested too. To me, the biggest question with taxis is scheduling and demand -- how to get extra cabs to the places/times people need to take cabs from, and the fact that this isn't really compatible with people who want to drive a cab on a predictable block schedule.
  - deleted 14y ago
    [deleted]
  - gruseom 14y ago
    "If anyone could drive a cab, the profession might only barely pay a living wage" According to the article, it hardly does that now: shortly after the most recent fare raise in 2006 [...] an independent consulting company found that drivers’ take-home pay for a 12-hour shift averaged $158. (Last year the NYTWA calculated it at $96.) By all accounts, it’s slipped since. So, something around $10 per hour. I don't think that drivers' quality of life is motivating this policy.
    - jacobolus 14y ago
      Basically, all the surplus that was supposed to go to drivers via the license restriction has instead been sucked off by a rent-seeking financier class.
      - gruseom 14y ago
nih 14y ago
There's an NPR money episode on NYC cabs @ http://www.npr.org/blogs/money/2011/10/20/141546717/the-million-dollar-taxi http://www.npr.org/blogs/money/2011/10/20/141546717/the-mill...
arjunnarayan 14y ago
What I don't understand is if the government is going to go to the trouble of creating a giant class of rent-seeking assets, why does it then sell them out permanently? If, for some reason, the government wanted to limit the market to just X cabs, it should auction out X medallions annually, and thereby accrue the producer surplus as rent, instead of the rent accruing to the medallion owners. Obviously, I believe that there shouldn't be a limit without an obviously proven tragedy-of-the-commons scenario (which in this case is unclear if it even exists). But if it does, it's better for the government to accrue the rent. Ugh. I can't wait for the Google cars to gut this entire industry to pieces.
- WiseWeasel 14y ago
  Then what's to stop entities from outbidding everyone, buying up all the medallions every year and leasing them out? What needs to happen is for passenger interests to be given weight. One way to do that might be to have the cities offer some short-term licenses for single shifts on a spot market, and some long-term (maybe quarterly or yearly) licenses with a fee inversely related to the driver's score over the last period (determined by average rating by his fares, and/or relative average tip amount for the route). Applicants for long-term licenses with good ratings and relatively high tips for their routes for the previous period would get cheap licenses, those with poor scores would get more expensive licenses, and those without a track record or filed for the benefit of non-drivers would get exorbitant fees. This would have the secondary benefit for municipalities of drivers being incentivized to declare their tips.
  - andyakb 14y ago
    The market will stop somebody from doing that. There will be a price that if the bids go above, the bidder will not profit because the required shift leasing rate would not allow the driver to make a profit. If the driver cannot make ANY profit, they will realize quickly and not lease any shifts. The market obviously isnt that perfect, but still, it should protect people from bidding way too high to control the market. If I completely misinterpreted your main point and instead you are saying that it wouldnt change the way things are currently run in practice, then you are probably right; HOWEVER [and I think this is what the parent comment was getting at], the local governments would be far, far better off, at least allowing for some good to come out of this system
citricsquid 14y ago
If the medallions are fixed to the hood of the cab what is to prevent the medallion from being stolen? Do the medallions represent permission and can be replaced easily? The option to "buy" them is making me question my assumption, are people in fact buying what they represent?
- wtn 14y ago
  "A Million Bucks Lying on the Ground! Not Exactly" http://cityroom.blogs.nytimes.com/2011/10/24/a-million-bucks-lying-on-the-ground-not-exactly/ http://cityroom.blogs.nytimes.com/2011/10/24/a-million-bucks...
- larrys 14y ago
  The physical object is not what matters. Same thing that prevents someone from stealing a license plate or counterfeiting one or putting a bogus health inspection cert in their restaurant window. Obviously if you were to affix a medallion (or license) to a vehicle at some point that would be discovered and you would be in hot water. Obviously. You are not buying the medallion. You are buying the right to operate a taxi. The medallion is just an easy way for a) riders and b) enforcement to at least attempt to judge who is legit and who isn't. And as the financial people noted they can remove the medallion if someone is in default. If all you had was a number painted on the side of a taxi that wouldn't work the same (someone could say "oops" and still pickup fares.)
chris123 14y ago
Just asking for disruption.... (P2P taxis, ride-sharing apps, etc.).
- delinka 14y ago
  I think you're right. But you probably shouldn't call your disruptor a "taxi" and you certainly can't just pick up random people off the street without the license to do so. Uber is in NY and they cost more than a cab, but I haven't heard how they're doing in that market. I think I'd pay the premium to hire an Uber driver over a random smelly cab any day.
  - viscanti 14y ago
    Uber is also in Chicago, offering both a black car and cab service. So there's definitely movement there to bring lower cost options. They're working through regulatory issues in a number of other cities. The taxi business is extremely over regulated. It will be interesting to see how companies like Uber start to disrupt it.
  - fab13n 14y ago
    My understanding is that Uber does 2 things at once: (1) they create a legal business to compete with the current taxi one, which is corrupt beyond repair; (2) they secure the high-end segment of that market to themselves. Point #1 is quite brilliant, but could be expected from many groups of hackers at ease with statistics and software. Point #2 is pure genius, though: they cannot keep the whole market they create to themselves, because as soon as all legal challenges will have been removed and the business model will have been polished, there will be no way to prevent copycats from stealing their lunch. Instead of preparing to fight a lost battle, they firmly anchor themselves in the upper segment of the market, hoping that copycats will fight for the low margin entry level market. Therefore, Uber's market share is much lower than it could be: they're after the patrons they'll be able to keep for the long term, not after every taxi patrons. I believe that copycats preying on the whole taxi industry's patronship will soon come and storm the market, though, unless lobbyists manage to kill the legal loopholes fast enough.
nchuhoai 14y ago
I think we should seriously rethink regulation within the cab market. Yes, we need to ensure some sort of standards for security reasons, but shouldn't the cab market be prime for the traditional free market theories? I don't get this whole licensing deal, fixed tariffs and medallion system
cynicalkane 14y ago
One thing that's usually missing in discussions of New York taxi medallions is how congested the city is and how many of the vehicles on the street (especially in Manhattan) at any given time are taxis. Once a certain point is reached, adding taxis will increase the travel times of taxigoers. There's been economic analyses of this. I don't recall too many details about the optimal number of taxis (it's probably higher than the current number), nor are taxi medallions a particularly effective way of regulating congestion, but surely bald deregulation is not optimal.
- mrkurt 14y ago
  The most irritating thing about the number of taxis on the streets is how many of them aren't allowed to pick up passengers at any given time. It's amazingly annoying to have empty-taxi after empty-taxi fly by without picking you up...
- glenra 14y ago
  > surely bald deregulation is not optimal. "optimal" is not one of our options. The relevant question is whether "bald deregulation" is better than what we've got now, and the answer to that is pretty obviously YES. Sadly, "bald deregulation" is also not one of our options, but at least it's more likely than achieving something anywhere near "optimal".
iamgilesbowkett 14y ago
The LA taxi laws are insane too. A lot of LA actually consists of semi-independent sub-cities like Hollywood and Beverly Hills. They were once suburbs but are now part of LA the city for all intents and purposes. It's not like New York or Chicago where the vast majority of the city is one legal unit. There are also weird quasi-cities like North Hollywood, which is technically just a neighborhood but is really an entirely distinct municipal entity, and is only a few pieces of paperwork away from becoming so under the law as well. A taxi company has to be licensed on a per-city basis and multiple-city licenses are basically unheard of. You can take your passenger to a city you're not licensed in, but if you pick up a passenger in a city you're not licensed in, you could pay thousands in fees and get shut down for 30 days or more. Since just about every neighborhood in Los Angeles is technically an independent municipality, this basically means it's legally impossible to hail a cab. At any given time, the majority of cabs are going to be passing through a "city" (neighborhood) in which they are not legally able to pick up passengers. Most cabs you see cannot pick you up without breaking the law.
droithomme 14y ago
It seems like the basic design problem is that one driver can only work 8 hrs a day but the medallions are valid 24 hours a day. This means that one driver can never bid himself for their worth unless he intends to hire two others to work in tandem with him. And if he is doing that, why not hire three drivers and just become a passive income generating medallion owner? And so that is what happens.
michaelochurch 14y ago
This is reminiscent of New York's abominably badly-structured rent control system, which costs the vast majority of New Yorkers an immense amount in increased rent, and will probably never go away because there's a powerful asshole lobby that works overtime to keep it in place. The idea of rent control isn't so bad. If done properly and fairly, it could make New York a lot better, but the insane legacy system is an unmitigated disaster. Since RC rents aren't even allowed to go up with inflation, there are a lot of people paying ~$200 for apartments that would rent for 10-15 times that. Technically, RC can only be passed within families, but the rules are broken all the time, and there's a common (if morbid) practice whereby people seeking rent control stalk obituaries and try to get themselves named as relatives of the deceased, usually in an arrangement involving paying "key money" to non-NYC resident legitimate relatives of this person. It has created a class of parasitic, law-breaking New Yorkers who will never leave, because they're locked in to an arrangement strictly better than ownership (landlord pays maintenance costs and taxes, which are higher than RC rent) and even if they only visit the city for 4 weeks out of the year, holding on to their RC apartment is cheaper than a hotel-- especially because they can sublet their RC apartments at market rent, which is also illegal but happens all the time. Now, here's the kicker. The system was developed in 1947 to benefit working-class people. In 2012, almost all of the rent-control holders are upper-middle to upper-class people who have no legitimate claim to needing it. Unfortunately, they're well-connected to the city council and therefore, like cockroaches, will never leave. Disgusting.
- stfp 14y ago
  Hate to be that guy but citation needed?
  - stephengillie 14y ago
    Can I cite an economics professor whose name I've forgotten? He discussed how rent controls prevent both raising prices and selling the controlled property, so the owners can't make money from the property in any way. Thus, many of these buildings stand abandoned and unsafe for decades.
    - 14y ago
lhnn 14y ago
It seems most people here accept that NYC should, or has the right to, limit the activities of consenting private parties. Why should the government keep a couple from paying me a fwe bucks to shuffle them down the road? Oh ya, NYC and select parties don't get millions of dollars in fees. Every time I think about NYC, I think of Tammany Hall, and wonder how little has changed.
ajays 14y ago
I have always wondered about this. In San Francisco (aka "The City"), a driver typically pays $200+ for a 12-hour shift on weekends. Then they go around in a mad dash, trying to pick up as many lucrative passengers as possible; sometimes resulting in deaths[1] There are 2 rent-seekers in this system. One is the City, which uses these taxis as a revenue stream. Why? We are all paying taxes anyways; why should we pay the City for the privilege to ride a car? And then there's the medallion owners. In the old days, the politically connected got these medallions for peanuts, and are just sitting on them, collecting rent (corruption, anyone?). And surrounding this system is a parasitic bureaucracy for "managing" everything: medallion rentals, credit card transactions, etc. (and we, the taxpayers, pay for this bureaucracy again). A better solution, IMHO, is the following. Auction off 20% of the medallions every year, using a Dutch Auction. The participants in the auction must be licensed drivers with N years of experience, and must pass a test about familiarity with the City. A driver can get only 1 medallion. The City, as a favor to drivers, can bring banks to the table, who can finance drivers. Each medallion is for 5 years; after that period, the medallion goes up for auction again. [1] There was a case recently where the driver was headed to the airport with passengers. He was speeding so he could get back there as quickly as possible (there's a weird rule that if a cab leaves the airport but comes back within 30(?) minutes, it can come back to the front of the line). He had a mechanical malfunction, and the cab caught fire. He survived, but his 2 passengers burnt to death. http://abclocal.go.com/kgo/story?section=news/local/san_francisco&id=7497183 http://abclocal.go.com/kgo/story?section=news/local/san_fran...
- larrys 14y ago
  "why should we pay the City for the privilege to ride a car?" To the government it's an indirect form of taxation that is more desirable than "raising taxes" which will prevent you from getting elected. Plus much of it (like hotel taxes) is paid by tourists or people who will not view it as a tax in the traditional sense.
- voisine 14y ago
  I see so many "why don't they just do X, it would make more sense" arguments about all kinds of government programs. The reason that don't in every case is because from the government's perspective the program is working great! The existing medallion owners very much like being able to charge monopoly prices. The city politicians very much like that the medallion owners lobby them to keep the system in place and support their campaigns. Why would they want to mess with something that works just fine? You are not the government. It doesn't serve your interests. It serves it's own interests.
alister 14y ago
> All that began to change in 1979. That year, New York’s Taxi and Limousine Commission changed its rules to allow medallions to be leased out for 12-hour shifts. The implication here is that the transferability of the medallions caused this big mess. We need a discussion of why medallions--which he says started simply as licenses--are being limited. This is the obvious question that is not addressed. After all, normal drivers' licenses and normal cars are not limited by the government in US.
- untog 14y ago
  We need a discussion of why medallions--which he says started simply as licenses--are being limited. Manhattan's streets already heave with traffic. Allowing unlimited cabs would make that worse, and there's no free market trigger that would solve the problem.
alister 14y ago
Perhaps it's not worth mentioning, but it's not the first time I've seen a reporter made this same kind of math "error" because it helped make his case: > taxi drivers have asked for a 20 percent hike in fares. How much would the MTBT like to increase lease rates? Why, it thinks 20 percent is only fair. The author leaves the false impression that the poor drivers won't make any more money at all -- that all the extra revenue will be grabbed by the medallion owners. But if previously the driver made $100 a day and paid $50 for the lease, then after the fare increase he'll make $120 a day (assuming demand doesn't fall) and pay $60 for the lease. So his profit goes from $50 to $60.
pbreit 14y ago
This article provides almost no support for the headline.
robomartin 14y ago
I'm sorry, but this is yet another example of what happens when governments stick their paws into the economy. They interrupt the natural forces of a free market and everyone suffers for it. Nothing good ever comes out of their actions. What's worst, the laws they pass never have a sensible termination date or a built-in mechanism for sensible adaptation to changes. The more fundamental question here is: Why does the government have the right to regulate and interfere with taxi services in this fashion? Imagine if you had to own a "medallion" to do whatever it is you do. And, imagine that the government tightly controlled these. Imagine that you have to lease medallions just to be able to work. If you are in any tech related field your reaction is probably one of disgust. Virtually none of the innovation we have had over the last several decades would exist today. It would be nearly impossible for truly competitive forces to develop. Nothing would be the same. Well, that's exactly what your government and, to be fair, the way some of you are voting, is doing to our country. Do us all a favor: Stop voting as a tribe and start voting as individuals with brains. If we don't devolve out of our current path and evolve into a strong free-market, low taxes, low government, pro-business, low entitlement society you will live to see this country destroy itself from the inside out. Then what? Use your brains.
- underwater 14y ago
  "Why does the government have the right to regulate and interfere with taxi services in this fashion." Because taxis couldn't exist without the roadways which is paid for by public funds. A completely unregulated system would mean we end up with a bunch of gypsy cabs could rob riders, overcharge, refuse fares and clog the roads. Government involvement doesn't necessarily make something a bad idea. In this case the implementation obviously leaves a lot to be desired.
  - deleted 14y ago
    [deleted]
  - dotnetchris 14y ago
    No. Government meddling in a free economy is doomed to failure. The only protections a free economy needs with the government is protection from cartels/monopolies and from market manipulators. Also said manipulators are likely foreign nations or atleast entities. Like when the US Steel industry was destroyed for us rebuilding Japan with better steel mills than our own country's and not introducing tariffs to make Japanese steel higher cost than American.
f0untain 14y ago
If Medallion simply represent a permission to drive a taxi, it should be virtualized. It mean replace the physical object with a soft-state of a taxi. By doing that drivers can form a team of taxis that roam around the city and assume "medallion" state only when they provide service to the customers. It would increase the utilization of the medallions to 100%. (more like threads competing for the processor) That way, for example 5 drivers can lease 3 medallions and pay less to gain the same profits.
f0untain 14y ago
Toxic Pattern: 1. Government Restricts the resource artificially 2. Sells the rights to that resource to private owners permanently. 3. The resource owners exploit the population by the scarcity and protects the laws that protects their interests. How many such patterns can we find in the US ? It should be cataloged.
mtgx 14y ago
It also makes sure only the very wealthy companies survive there, and that there are no start-ups to threat them.
dotnetchris 14y ago
This inarguably shows the fallacy of "central planning." The government cannot ever out smart a free economy. When the government refuses to allow the free economy: illegal black markets arise and legal fiefdoms are spawned both at the expense of the regular citizen. Who benefits from centralized planning? There's only 2 classes that benefit, the government class and the criminal class. The simplest solution is just end absurdity like this. Let the free market dictate how many cabs should exist and what fares should exist. Might people become overzealous, overfill supply then strangle themselves from it? Sure. Is it that a bad thing? No. The market will correct, suppliers will leave and supply and demand will resolve the imbalance as it always does.
user49598 14y ago
Seems like a lot of people here are complaining about the system without giving much thought to it's actual effects. There are a metric shit-tonne of cabs in NYC. We don't need more. Maybe we need regulation on how they have to be spread out, but we certainly do not need more. Also, compared to other US cities, cabs here are very reasonably priced. Also, they all take credit cards, have touch screens, and the new ones have outlets to charge your electronics. It may be a bit corrupt, but it really is a good system for the consumer. And it's all completely standardized across the board. Your cab has to be up to code or it gets taken off the street. This isn't corruption running wild. The Taxi system in NYC is very functional. None of the problems described in the article are solved by simply abolishing the medallion system. It would take intense regulation, with or without medallions, to make a lot of those things better. Edit: What we really need to focus on is the MTA. Now theres a system rife with corruption and misspending that actually greatly effects consumers negatively.
gcb 14y ago
Really? Is it any surprise that any system that creates artificial offering scarcity instead of quality control of offerings is corrupt to the core?

143 points by gruseom 14y ago

Previous submission (no comments): http://news.ycombinator.com/item?id=4074668 http://news.ycombinator.com/item?id=4074668 I'm wondering why the duplicate detector isn't catching more of the recent series of duplicate submissions, and why searching for keywords on HN search isn't turning up more of the stories. (I usually use HN search before I post.) I found the previous submission of this story just now with a Google search site-restricted to news.ycombinator.com, after drawing a blank with HN search.

gruseom 14y ago
A little redundancy is a good thing. It compensates for the randomness with which many posts fall through the cracks. This article is an example. It's interesting and surprising (surprised me, at least) and deserves a discussion. Had it got one the first time around I wouldn't have reposted it. It has fallen through the cracks again though (edit: or so it seemed). Perhaps somebody else will figure out how to repost it in a few days :)
olog-hai 14y ago
The previous submission also never showed up in my RSS reader.
- zotz 14y ago
  I've noticed that HN has a habit of filtering links and comments.
graywh 14y ago
different URL
- uxp 14y ago
  Yep. This article links to the paginated story, the previous one links to the single page article.

juan_juarez 14y ago

New Mexico does the same thing with liquor licences. The worst part is that the state's biggest liquor distributor now owns the vast majority of the licenses. "You have to buy all your shit from me AND give me a percentage of your profits" - sounds like the mafia but it's every day business in NM.

refurb 14y ago
That's actually a by-product of prohibition. When they reversed prohibition, a regulation was put into place that the manufacturer, distributor and seller of alcoholic beverages all had to be separate (not owned by the same company or individual). The gov't decided to step in and do all three after prohibition and it's been a VERY slow move back into the private model since then.

juxta 14y ago

I find this line pretty interest: "Because Murstein's company owns a bank, it’s able to take advantage of the Fed’s low interest rates to borrow money for 0.35 percent and loan it out to striving young cabbies who want to own a medallion. The cabbie borrows at around 5.5 percent, with 25 percent down. “If a borrower doesn’t pay, we send out somebody,” Murstein said. “Literally, they can pop the medallion off the hood of the car and bring it back to our office and, bingo, the guy is out of work.” " He basically has no risk on his end. Looks like he found a pot of gold!

MichaelGG 14y ago
If it's really so risk-free, then others would provide competition with lower rates, less down, payment-free period, etc.
- smsm42 14y ago
  For that, they have first to get a supply of medallions. And current owners won't sell them unless they are given some serious money to replace that 5.5%-0.35% income stream. One of the reasons why the price of medallions skyrockets. Of course, I imagine it's not completely risk-free. It is a strictly regulated business. Which means you need a lot of friends in key places - otherwise somebody who does have a lot of friends would put you out of the lucrative business and take it for himself. And there's some measure of competition - 5.5% is not a super-high for a loan with a collateral. Higher than mortgage rates but substantially lower than unsecured loan rates. About 1% over common HELOC rates and about the same as home equity loan rates. Of course, repossessing a home is much harder than repossessing a medallion, so probably medallion business is better, but the rate is not totally outrageous compared to similar loans.

protomyth 14y ago

Is there somewhere where a government created scarcity of licenses actually works? The only things I can think of is resource specific activities (e.g. hunting licenses).

crazygringo 14y ago
Well it makes sense to limit the number of NYC cabs -- except for the hour of handoff (~5pm) and in particular neighborhoods at night (Theater District, Greenwich Village, etc.), the number of cabs seems pretty good. If anyone could drive a cab, the profession might only barely pay a living wage, as each driver would get less passengers, and you'd get a race to the bottom -- and the streets would be more congested too. To me, the biggest question with taxis is scheduling and demand -- how to get extra cabs to the places/times people need to take cabs from, and the fact that this isn't really compatible with people who want to drive a cab on a predictable block schedule.
- deleted 14y ago
  [deleted]
- gruseom 14y ago
  "If anyone could drive a cab, the profession might only barely pay a living wage" According to the article, it hardly does that now: shortly after the most recent fare raise in 2006 [...] an independent consulting company found that drivers’ take-home pay for a 12-hour shift averaged $158. (Last year the NYTWA calculated it at $96.) By all accounts, it’s slipped since. So, something around $10 per hour. I don't think that drivers' quality of life is motivating this policy.
  - jacobolus 14y ago
    Basically, all the surplus that was supposed to go to drivers via the license restriction has instead been sucked off by a rent-seeking financier class.
    - gruseom 14y ago

nih 14y ago

There's an NPR money episode on NYC cabs @ http://www.npr.org/blogs/money/2011/10/20/141546717/the-million-dollar-taxi http://www.npr.org/blogs/money/2011/10/20/141546717/the-mill...

arjunnarayan 14y ago

What I don't understand is if the government is going to go to the trouble of creating a giant class of rent-seeking assets, why does it then sell them out permanently? If, for some reason, the government wanted to limit the market to just X cabs, it should auction out X medallions annually, and thereby accrue the producer surplus as rent, instead of the rent accruing to the medallion owners. Obviously, I believe that there shouldn't be a limit without an obviously proven tragedy-of-the-commons scenario (which in this case is unclear if it even exists). But if it does, it's better for the government to accrue the rent. Ugh. I can't wait for the Google cars to gut this entire industry to pieces.

WiseWeasel 14y ago
Then what's to stop entities from outbidding everyone, buying up all the medallions every year and leasing them out? What needs to happen is for passenger interests to be given weight. One way to do that might be to have the cities offer some short-term licenses for single shifts on a spot market, and some long-term (maybe quarterly or yearly) licenses with a fee inversely related to the driver's score over the last period (determined by average rating by his fares, and/or relative average tip amount for the route). Applicants for long-term licenses with good ratings and relatively high tips for their routes for the previous period would get cheap licenses, those with poor scores would get more expensive licenses, and those without a track record or filed for the benefit of non-drivers would get exorbitant fees. This would have the secondary benefit for municipalities of drivers being incentivized to declare their tips.
- andyakb 14y ago
  The market will stop somebody from doing that. There will be a price that if the bids go above, the bidder will not profit because the required shift leasing rate would not allow the driver to make a profit. If the driver cannot make ANY profit, they will realize quickly and not lease any shifts. The market obviously isnt that perfect, but still, it should protect people from bidding way too high to control the market. If I completely misinterpreted your main point and instead you are saying that it wouldnt change the way things are currently run in practice, then you are probably right; HOWEVER [and I think this is what the parent comment was getting at], the local governments would be far, far better off, at least allowing for some good to come out of this system

citricsquid 14y ago

If the medallions are fixed to the hood of the cab what is to prevent the medallion from being stolen? Do the medallions represent permission and can be replaced easily? The option to "buy" them is making me question my assumption, are people in fact buying what they represent?

wtn 14y ago
"A Million Bucks Lying on the Ground! Not Exactly" http://cityroom.blogs.nytimes.com/2011/10/24/a-million-bucks-lying-on-the-ground-not-exactly/ http://cityroom.blogs.nytimes.com/2011/10/24/a-million-bucks...
larrys 14y ago
The physical object is not what matters. Same thing that prevents someone from stealing a license plate or counterfeiting one or putting a bogus health inspection cert in their restaurant window. Obviously if you were to affix a medallion (or license) to a vehicle at some point that would be discovered and you would be in hot water. Obviously. You are not buying the medallion. You are buying the right to operate a taxi. The medallion is just an easy way for a) riders and b) enforcement to at least attempt to judge who is legit and who isn't. And as the financial people noted they can remove the medallion if someone is in default. If all you had was a number painted on the side of a taxi that wouldn't work the same (someone could say "oops" and still pickup fares.)

chris123 14y ago

Just asking for disruption.... (P2P taxis, ride-sharing apps, etc.).

delinka 14y ago
I think you're right. But you probably shouldn't call your disruptor a "taxi" and you certainly can't just pick up random people off the street without the license to do so. Uber is in NY and they cost more than a cab, but I haven't heard how they're doing in that market. I think I'd pay the premium to hire an Uber driver over a random smelly cab any day.
- viscanti 14y ago
  Uber is also in Chicago, offering both a black car and cab service. So there's definitely movement there to bring lower cost options. They're working through regulatory issues in a number of other cities. The taxi business is extremely over regulated. It will be interesting to see how companies like Uber start to disrupt it.
- fab13n 14y ago
  My understanding is that Uber does 2 things at once: (1) they create a legal business to compete with the current taxi one, which is corrupt beyond repair; (2) they secure the high-end segment of that market to themselves. Point #1 is quite brilliant, but could be expected from many groups of hackers at ease with statistics and software. Point #2 is pure genius, though: they cannot keep the whole market they create to themselves, because as soon as all legal challenges will have been removed and the business model will have been polished, there will be no way to prevent copycats from stealing their lunch. Instead of preparing to fight a lost battle, they firmly anchor themselves in the upper segment of the market, hoping that copycats will fight for the low margin entry level market. Therefore, Uber's market share is much lower than it could be: they're after the patrons they'll be able to keep for the long term, not after every taxi patrons. I believe that copycats preying on the whole taxi industry's patronship will soon come and storm the market, though, unless lobbyists manage to kill the legal loopholes fast enough.

nchuhoai 14y ago

I think we should seriously rethink regulation within the cab market. Yes, we need to ensure some sort of standards for security reasons, but shouldn't the cab market be prime for the traditional free market theories? I don't get this whole licensing deal, fixed tariffs and medallion system

cynicalkane 14y ago

One thing that's usually missing in discussions of New York taxi medallions is how congested the city is and how many of the vehicles on the street (especially in Manhattan) at any given time are taxis. Once a certain point is reached, adding taxis will increase the travel times of taxigoers. There's been economic analyses of this. I don't recall too many details about the optimal number of taxis (it's probably higher than the current number), nor are taxi medallions a particularly effective way of regulating congestion, but surely bald deregulation is not optimal.

mrkurt 14y ago
The most irritating thing about the number of taxis on the streets is how many of them aren't allowed to pick up passengers at any given time. It's amazingly annoying to have empty-taxi after empty-taxi fly by without picking you up...
glenra 14y ago
> surely bald deregulation is not optimal. "optimal" is not one of our options. The relevant question is whether "bald deregulation" is better than what we've got now, and the answer to that is pretty obviously YES. Sadly, "bald deregulation" is also not one of our options, but at least it's more likely than achieving something anywhere near "optimal".

iamgilesbowkett 14y ago

The LA taxi laws are insane too. A lot of LA actually consists of semi-independent sub-cities like Hollywood and Beverly Hills. They were once suburbs but are now part of LA the city for all intents and purposes. It's not like New York or Chicago where the vast majority of the city is one legal unit. There are also weird quasi-cities like North Hollywood, which is technically just a neighborhood but is really an entirely distinct municipal entity, and is only a few pieces of paperwork away from becoming so under the law as well. A taxi company has to be licensed on a per-city basis and multiple-city licenses are basically unheard of. You can take your passenger to a city you're not licensed in, but if you pick up a passenger in a city you're not licensed in, you could pay thousands in fees and get shut down for 30 days or more. Since just about every neighborhood in Los Angeles is technically an independent municipality, this basically means it's legally impossible to hail a cab. At any given time, the majority of cabs are going to be passing through a "city" (neighborhood) in which they are not legally able to pick up passengers. Most cabs you see cannot pick you up without breaking the law.

droithomme 14y ago

It seems like the basic design problem is that one driver can only work 8 hrs a day but the medallions are valid 24 hours a day. This means that one driver can never bid himself for their worth unless he intends to hire two others to work in tandem with him. And if he is doing that, why not hire three drivers and just become a passive income generating medallion owner? And so that is what happens.

michaelochurch 14y ago

This is reminiscent of New York's abominably badly-structured rent control system, which costs the vast majority of New Yorkers an immense amount in increased rent, and will probably never go away because there's a powerful asshole lobby that works overtime to keep it in place. The idea of rent control isn't so bad. If done properly and fairly, it could make New York a lot better, but the insane legacy system is an unmitigated disaster. Since RC rents aren't even allowed to go up with inflation, there are a lot of people paying ~$200 for apartments that would rent for 10-15 times that. Technically, RC can only be passed within families, but the rules are broken all the time, and there's a common (if morbid) practice whereby people seeking rent control stalk obituaries and try to get themselves named as relatives of the deceased, usually in an arrangement involving paying "key money" to non-NYC resident legitimate relatives of this person. It has created a class of parasitic, law-breaking New Yorkers who will never leave, because they're locked in to an arrangement strictly better than ownership (landlord pays maintenance costs and taxes, which are higher than RC rent) and even if they only visit the city for 4 weeks out of the year, holding on to their RC apartment is cheaper than a hotel-- especially because they can sublet their RC apartments at market rent, which is also illegal but happens all the time. Now, here's the kicker. The system was developed in 1947 to benefit working-class people. In 2012, almost all of the rent-control holders are upper-middle to upper-class people who have no legitimate claim to needing it. Unfortunately, they're well-connected to the city council and therefore, like cockroaches, will never leave. Disgusting.

stfp 14y ago
Hate to be that guy but citation needed?
- stephengillie 14y ago
  Can I cite an economics professor whose name I've forgotten? He discussed how rent controls prevent both raising prices and selling the controlled property, so the owners can't make money from the property in any way. Thus, many of these buildings stand abandoned and unsafe for decades.
  - 14y ago

lhnn 14y ago

It seems most people here accept that NYC should, or has the right to, limit the activities of consenting private parties. Why should the government keep a couple from paying me a fwe bucks to shuffle them down the road? Oh ya, NYC and select parties don't get millions of dollars in fees. Every time I think about NYC, I think of Tammany Hall, and wonder how little has changed.

ajays 14y ago

I have always wondered about this. In San Francisco (aka "The City"), a driver typically pays $200+ for a 12-hour shift on weekends. Then they go around in a mad dash, trying to pick up as many lucrative passengers as possible; sometimes resulting in deaths[1] There are 2 rent-seekers in this system. One is the City, which uses these taxis as a revenue stream. Why? We are all paying taxes anyways; why should we pay the City for the privilege to ride a car? And then there's the medallion owners. In the old days, the politically connected got these medallions for peanuts, and are just sitting on them, collecting rent (corruption, anyone?). And surrounding this system is a parasitic bureaucracy for "managing" everything: medallion rentals, credit card transactions, etc. (and we, the taxpayers, pay for this bureaucracy again). A better solution, IMHO, is the following. Auction off 20% of the medallions every year, using a Dutch Auction. The participants in the auction must be licensed drivers with N years of experience, and must pass a test about familiarity with the City. A driver can get only 1 medallion. The City, as a favor to drivers, can bring banks to the table, who can finance drivers. Each medallion is for 5 years; after that period, the medallion goes up for auction again. [1] There was a case recently where the driver was headed to the airport with passengers. He was speeding so he could get back there as quickly as possible (there's a weird rule that if a cab leaves the airport but comes back within 30(?) minutes, it can come back to the front of the line). He had a mechanical malfunction, and the cab caught fire. He survived, but his 2 passengers burnt to death. http://abclocal.go.com/kgo/story?section=news/local/san_francisco&id=7497183 http://abclocal.go.com/kgo/story?section=news/local/san_fran...

larrys 14y ago
"why should we pay the City for the privilege to ride a car?" To the government it's an indirect form of taxation that is more desirable than "raising taxes" which will prevent you from getting elected. Plus much of it (like hotel taxes) is paid by tourists or people who will not view it as a tax in the traditional sense.
voisine 14y ago
I see so many "why don't they just do X, it would make more sense" arguments about all kinds of government programs. The reason that don't in every case is because from the government's perspective the program is working great! The existing medallion owners very much like being able to charge monopoly prices. The city politicians very much like that the medallion owners lobby them to keep the system in place and support their campaigns. Why would they want to mess with something that works just fine? You are not the government. It doesn't serve your interests. It serves it's own interests.

alister 14y ago

> All that began to change in 1979. That year, New York’s Taxi and Limousine Commission changed its rules to allow medallions to be leased out for 12-hour shifts. The implication here is that the transferability of the medallions caused this big mess. We need a discussion of why medallions--which he says started simply as licenses--are being limited. This is the obvious question that is not addressed. After all, normal drivers' licenses and normal cars are not limited by the government in US.

untog 14y ago
We need a discussion of why medallions--which he says started simply as licenses--are being limited. Manhattan's streets already heave with traffic. Allowing unlimited cabs would make that worse, and there's no free market trigger that would solve the problem.

alister 14y ago

Perhaps it's not worth mentioning, but it's not the first time I've seen a reporter made this same kind of math "error" because it helped make his case: > taxi drivers have asked for a 20 percent hike in fares. How much would the MTBT like to increase lease rates? Why, it thinks 20 percent is only fair. The author leaves the false impression that the poor drivers won't make any more money at all -- that all the extra revenue will be grabbed by the medallion owners. But if previously the driver made $100 a day and paid $50 for the lease, then after the fare increase he'll make $120 a day (assuming demand doesn't fall) and pay $60 for the lease. So his profit goes from $50 to $60.

pbreit 14y ago

This article provides almost no support for the headline.

robomartin 14y ago

I'm sorry, but this is yet another example of what happens when governments stick their paws into the economy. They interrupt the natural forces of a free market and everyone suffers for it. Nothing good ever comes out of their actions. What's worst, the laws they pass never have a sensible termination date or a built-in mechanism for sensible adaptation to changes. The more fundamental question here is: Why does the government have the right to regulate and interfere with taxi services in this fashion? Imagine if you had to own a "medallion" to do whatever it is you do. And, imagine that the government tightly controlled these. Imagine that you have to lease medallions just to be able to work. If you are in any tech related field your reaction is probably one of disgust. Virtually none of the innovation we have had over the last several decades would exist today. It would be nearly impossible for truly competitive forces to develop. Nothing would be the same. Well, that's exactly what your government and, to be fair, the way some of you are voting, is doing to our country. Do us all a favor: Stop voting as a tribe and start voting as individuals with brains. If we don't devolve out of our current path and evolve into a strong free-market, low taxes, low government, pro-business, low entitlement society you will live to see this country destroy itself from the inside out. Then what? Use your brains.

underwater 14y ago
"Why does the government have the right to regulate and interfere with taxi services in this fashion." Because taxis couldn't exist without the roadways which is paid for by public funds. A completely unregulated system would mean we end up with a bunch of gypsy cabs could rob riders, overcharge, refuse fares and clog the roads. Government involvement doesn't necessarily make something a bad idea. In this case the implementation obviously leaves a lot to be desired.
- deleted 14y ago
  [deleted]
- dotnetchris 14y ago
  No. Government meddling in a free economy is doomed to failure. The only protections a free economy needs with the government is protection from cartels/monopolies and from market manipulators. Also said manipulators are likely foreign nations or atleast entities. Like when the US Steel industry was destroyed for us rebuilding Japan with better steel mills than our own country's and not introducing tariffs to make Japanese steel higher cost than American.

f0untain 14y ago

If Medallion simply represent a permission to drive a taxi, it should be virtualized. It mean replace the physical object with a soft-state of a taxi. By doing that drivers can form a team of taxis that roam around the city and assume "medallion" state only when they provide service to the customers. It would increase the utilization of the medallions to 100%. (more like threads competing for the processor) That way, for example 5 drivers can lease 3 medallions and pay less to gain the same profits.

f0untain 14y ago

Toxic Pattern: 1. Government Restricts the resource artificially 2. Sells the rights to that resource to private owners permanently. 3. The resource owners exploit the population by the scarcity and protects the laws that protects their interests. How many such patterns can we find in the US ? It should be cataloged.

mtgx 14y ago

It also makes sure only the very wealthy companies survive there, and that there are no start-ups to threat them.

dotnetchris 14y ago

This inarguably shows the fallacy of "central planning." The government cannot ever out smart a free economy. When the government refuses to allow the free economy: illegal black markets arise and legal fiefdoms are spawned both at the expense of the regular citizen. Who benefits from centralized planning? There's only 2 classes that benefit, the government class and the criminal class. The simplest solution is just end absurdity like this. Let the free market dictate how many cabs should exist and what fares should exist. Might people become overzealous, overfill supply then strangle themselves from it? Sure. Is it that a bad thing? No. The market will correct, suppliers will leave and supply and demand will resolve the imbalance as it always does.

user49598 14y ago

Seems like a lot of people here are complaining about the system without giving much thought to it's actual effects. There are a metric shit-tonne of cabs in NYC. We don't need more. Maybe we need regulation on how they have to be spread out, but we certainly do not need more. Also, compared to other US cities, cabs here are very reasonably priced. Also, they all take credit cards, have touch screens, and the new ones have outlets to charge your electronics. It may be a bit corrupt, but it really is a good system for the consumer. And it's all completely standardized across the board. Your cab has to be up to code or it gets taken off the street. This isn't corruption running wild. The Taxi system in NYC is very functional. None of the problems described in the article are solved by simply abolishing the medallion system. It would take intense regulation, with or without medallions, to make a lot of those things better. Edit: What we really need to focus on is the MTA. Now theres a system rife with corruption and misspending that actually greatly effects consumers negatively.

gcb 14y ago

Really? Is it any surprise that any system that creates artificial offering scarcity instead of quality control of offerings is corrupt to the core?