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Medallion Madness
Townhall.com ^ | November 8, 2011 | Jeff Jacoby

Posted on 11/08/2011 4:03:03 AM PST by Kaslin

Here's one for the Guinness World Records people: Two New York City taxi medallions were sold last month for $1 million apiece. That's the highest price ever paid for the right to operate a car as a taxicab in The City That Never Sleeps. It's also an expensive lesson in the harm caused to consumers and would-be entrepreneurs by overregulation and the strangling of competition.

By law, every cab in New York has to have an official medallion -- the numbered metal plate nailed to the hood -- but the number of medallions is fixed at 13,237. When the city first issued taxi medallions in the 1930s, they cost $10 each. But before long the demand for taxi ownership had outstripped the limited supply of medallions. Since City Hall wasn't issuing new ones, the only way to get a medallion was to buy one from an existing owner. Over time the value of those metal tags went through the stratosphere.

In the years after World War II, a New York City taxi medallion could be had for $2,500. By the mid-1970s the going price was $50,000. In 1985, when a medallion changed hands for $100,000, it made the front page of The New York Times. That sale was arranged by a "taxi financing specialist" named Nat Goldbetter, a one-time cabdriver who discovered he could make a better living arranging medallion sales on the secondary market. By coincidence, it was Goldbetter who arranged the sale of the million-dollar medallions last month, landing him again on Page 1. "Nobody ever thought the medallion would get to this point," he marveled.

In a rational market, Goldbetter's industry wouldn't even exist. A taxi medallion, after all, has no intrinsic value -- it is merely the government's permission to use a car to transport passengers for a fee. Acquiring a medallion isn't like acquiring a dental practice or some other going concern: It doesn't come with a built-in customer base or first dibs on popular routes. It doesn't include the price of gas or insurance, let alone a car. A medallion represents nothing but official approval to be in the cab business. No one has to invest a fortune to get the government's OK to sell tacos or put out a newspaper or practice podiatry. Why should anyone have to invest a fortune -- or hire a "taxi financing specialist" -- to get the government's OK to own a cab?

The medallion system is a classic illustration of what economists call "rent-seeking" -- manipulating the political system to gain economic benefits without providing any additional value to society in exchange. Imposing caps on the number of taxis enriches existing owners with windfall profits. But by making the cost of cab ownership obscenely high, it prevents countless would-be cabbies from going into business for themselves. And by stifling competition, it drives fares through the roof while lowering the quality and availability of service.

New York isn't alone in blighting its taxi market like this. In Boston, which also adopted a medallion system in the 1930s, the little metal plates now sell for $400,000 and cab fares for most rides are the highest of any big city in North America. The number of cabs is limited to 1,825, which is why trying to get a taxi in the city's outlying neighborhoods can be so tough. Cabbies -- most of whom can't afford a medallion of their own and instead must pay stiff fees to lease somebody else's -- naturally gravitate to the most lucrative routes.

Even more obnoxious is the government-protected monopoly in Milwaukee, which in 1991 imposed a citywide cap of just 321 taxis, yielding a ratio of 1 taxi for every 1,850 residents. (By comparison, the ratio in Boston is about 1 to 340; in Washington, DC, where the number of cabs is not artificially limited, it's 1 to 90.) The cost of a taxi permit has soared from $85 to $150,000, which is well above the price of an average Milwaukee house.

"In the classic story of entrepreneurship, someone starts a taxi business in order to save up enough money to buy a house," says attorney Anthony Sanders. "In Milwaukee, you need to save up enough money to buy a house just to start a taxi business." Sanders works for the Institute for Justice, a public interest law firm that litigates around the country in defense of the right of individuals to earn an honest living. The institute, which successfully defended reforms that ended a taxi cartel in Minneapolis, recently filed a lawsuit challenging Milwaukee's cap on taxi permits as unjust and unconstitutional.

Can you imagine City Hall trying to fix the number of shoe stores or web designers or CPAs allowed to operate in town? Arbitrary limits on the number of taxicabs should be considered just as ridiculous. The government has no right playing favorites, or crushing competition. The Institute for Justice describes itself as advocating for fairness and economic liberty; what it really seeks to protect is the American Dream. In Milwaukee today. In New York and Boston, perhaps, tomorrow.


TOPICS: Editorial
KEYWORDS: dnccorruption; dncrico; taxirico; typicaldnccommunism

1 posted on 11/08/2011 4:03:04 AM PST by Kaslin
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To: Kaslin

The liberals amongst us will offer this up as “proof” of the “value” of government regulation. I kid you not.


2 posted on 11/08/2011 4:06:13 AM PST by mo
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To: mo

There is a rationale for licensing businesses. There is no rationale for stifling competition.


3 posted on 11/08/2011 4:07:17 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: goldstategop; mo; Kaslin
It's a racket!
4 posted on 11/08/2011 4:10:18 AM PST by OddLane (If Lionel Hutz and Guy Smiley had a lovechild together, his name would be "Mitt Romney." -KAJ)
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To: Kaslin

“No one has to invest a fortune to get the government’s OK to sell tacos or put out a newspaper or practice podiatry”

For now.


5 posted on 11/08/2011 4:13:22 AM PST by Christian Engineer Mass (25ish Cambridge MA grad student. Many conservative Christians my age out there? __ Click my name)
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To: Kaslin
No one has to invest a fortune to get the government's OK to sell tacos or put out a newspaper or practice podiatry.

Try practicing medicine without a state license, try selling a taco without the state health department's approval and I'm sure there are government hoops to be jumped through to publish a newspaper. Everything is regulated and taxed by government from the smallest local government to the fed.

6 posted on 11/08/2011 4:17:06 AM PST by Graybeard58 (Of course Obama loves his country but Herman Cain loves mine.)
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To: Christian Engineer Mass

See #6.


7 posted on 11/08/2011 4:18:04 AM PST by Graybeard58 (Of course Obama loves his country but Herman Cain loves mine.)
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To: goldstategop

” There is a rationale for licensing businesses. There is no rationale for stifling competition. “

One often seems to lead to the other...

“Just as ‘Democracy can only survive until the populace discovers it can vote itself largesse from the public coffers’, ‘Capitalism can only survive until businesses discover they can coopt the power of Government for competitive advantage’....


8 posted on 11/08/2011 4:18:33 AM PST by Uncle Ike (Rope is cheap, and there are lots of trees...)
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To: goldstategop
There is a rationale for licensing businesses.

There is no rationale for having to get permission from the government to make a living.

9 posted on 11/08/2011 4:18:47 AM PST by BfloGuy (Even the opponents of Socialism are dominated by socialist ideas.)
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To: Graybeard58

We have crony capitalism. Which protects established businesses from any upstarts. And they pay the politicians a handsome fee for “protection.”

One hand washes the other in America.


10 posted on 11/08/2011 4:19:57 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Kaslin
Can you imagine City Hall trying to fix the number of shoe stores or web designers or CPAs allowed to operate in town?

Yes, easily. If the operators of such business at point X bought enough politicians, it would suddenly become a major public safety issue to limit the number of shoe stores. And the supply of accountants is limited by the cost of CPA licensing, rather than by market forces.

11 posted on 11/08/2011 4:20:31 AM PST by Tax-chick (I'm sure your dog likes you.)
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To: BfloGuy

What about health, safety and customer service requirements? The government has a role to play to ensure businesses are honest and serve the community.

What it doesn’t have the right to do is to make requirements so prohibitive that no one can make a living.


12 posted on 11/08/2011 4:22:58 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Tax-chick
The point behind crony capitalism is to distort market forces for political ends. It goes beyond legitimate goals into corrupting every one for reasons no one can quite fathom.

In Latin countries, you have la mordida but at least its done in the open. Payoffs just make things regular. Here the corruption is concealed by the hand of government interfering in the market to ensure winners and losers. Its far from being a free market.

13 posted on 11/08/2011 4:28:05 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Kaslin
The number of cabs is limited to 1,825, which is why trying to get a taxi in the city's outlying neighborhoods can be so tough

Though I agree with the sentiment of the article, this statement is not exactly true. Car Services (radio dispatched) have filled this nitche for decades.

From wiki; "While medallion taxicabs in New York are always yellow, car service vehicles may be any color but yellow, and are usually black. For this reason, these taxi operators are sometimes called “black car” services. Despite the de jure prohibition on picking up passengers who hail on the street, some livery cabs nevertheless do so anyway, often to make extra money. When a livery cab engages in street pick-ups, it becomes known as a "gypsy cab." They are often found in areas not routinely visited by medallion cabs, and authorities tend to turn a blind eye to the practice rather than leave sections of the city without cab service."

14 posted on 11/08/2011 4:28:40 AM PST by Roccus (Obama & Holder LLP, Procurers of fine arms to the most discerning drug lords (202) 456-1414)
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To: Roccus

In crony capitalism, just like in Communism, the authorities can’t regulate everything. There will always be a black market and eliminating it is impossible. Jailing people for making a living is usually more of a warning not to encroach on official turf. Apart from that people engaged in illicit economic activity can do as they please.


15 posted on 11/08/2011 4:34:57 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Kaslin

I don’t see how someone can pay a million dollars for a medallion and on top of the costs of operating a cab, make a living. It doesn’t compute


16 posted on 11/08/2011 5:14:26 AM PST by paul51 (11 September 2001 - Never forget)
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To: paul51

I could see it if the medallion would have been made out of Platinum, but Aluminum? Noway


17 posted on 11/08/2011 5:20:53 AM PST by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: Kaslin

If NYC can put these puppies on the market and even get away with charging 500,000 bucks for one, NEVER, EVER AGAIN will I listen to ONE SINGLE WHINE about NYC running out of cash!!!

Let the garbage pile up past the first floor! They have control of their destiny!


18 posted on 11/08/2011 5:26:23 AM PST by djf (http://www.freerepublic.com/focus/f-chat/2801220/posts)
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To: Roccus
No one in New York wants to call for a cab - unless we're going to the airport. We want to go out on the street, find a yellow cab in a minute that isn't “off duty” and has proper lights so we can see whether it's “off duty” or on. (Is that dimming of lights on the hood a green initiative, Bloomberg?!)

The cab scene in Manhattan is a wreck.

19 posted on 11/08/2011 5:29:27 AM PST by miss marmelstein (Let's have a Cain Mutiny!)
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To: Kaslin

The power to regulate, tax, or license is the power to destroy. How does regulating taxis benefit the public? Barbers and hairdressers are licensed in many states. As are nail technicians, massage therapists, and daycares. Is the public interest being served by all this “oversight”? Or is it just a modern form of the guild, and a revenue generator for bureaucrats?


20 posted on 11/08/2011 5:48:00 AM PST by IronJack (=)
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To: Kaslin

New York City is the cesspool of corruption, “jack-booted” political self-serving mandates and Union power bestowed on the residents who once enjoyed the liberties and freedoms most of us still enjoy (for now). Free markets simply don’t exist there due to the overbearing regulations, fees and downright quelling of competition for the “favorite ones.”

You can’t feel sorry for any of the residents however since, over the years, they voted every bit of this upon themselves.


21 posted on 11/08/2011 6:15:30 AM PST by DH (Once the tainted finger of government touches anything the rot begins)
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To: djf

These medallions are privately owned. If I had one and wanted to retire. I’d sell it.


22 posted on 11/08/2011 6:23:48 AM PST by bjorn14 (Woe to those who call good evil and evil good. Isaiah 5:20)
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To: djf

These medallions are privately owned. If I had one and wanted to retire. I’d sell it.


23 posted on 11/08/2011 6:25:24 AM PST by bjorn14 (Woe to those who call good evil and evil good. Isaiah 5:20)
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To: goldstategop

In addition to the items you noted, there is the question of numbers.

Are consumers being adequately served by the allocated number? Apparently. But we hear of “ Car Services” . The requirement for taxis apparently has been circumvented by the approval of car services. They provide a ride in a car, for hire. Do they have medallions? I wonder.

In boston it appears there are not enough medallions and one suspects political corruption, even organized crime. but since there is nothing worth a damn in Boston, Who cares?


24 posted on 11/08/2011 6:26:24 AM PST by bert (K.E. N.P. +12 ..... Crucifixion is coming)
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To: miss marmelstein
Since the 70's, except for airport runs, yellow cabs for the most part operate as if NYC's borders are 110 St., the Battery and the rivers.

We want to go out on the street, find a yellow cab in a minute...

Ya gotta learn to separate yer "wants" from yer "gots". :)
I hacked part time in the 70's and 80's and that's just the way it was. Both the garage I worked out of and I resided in Queens, but if you wanted to make any money, Manhattan was the place. You starved if you worked the outer boroughs.

PS, don't know if they're still around, but Skull's Angels used to be radio dispatched, medallion-ed yellow cabs.

25 posted on 11/08/2011 6:36:08 AM PST by Roccus (Obama & Holder LLP, Procurers of fine arms to the most discerning drug lords (202) 456-1414)
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To: Roccus

Good point. I’m pretty Manhattan-centric.

You drove during the 70s and speak English?!!! LOL. I can remember a cabbie not knowing where Grand Central Station was in the late ‘70s.


26 posted on 11/08/2011 7:35:36 AM PST by miss marmelstein (Let's have a Cain Mutiny!)
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To: DH

Gee, jack-booted is a little strong! It’s a stupidly run city but I still feel pretty free. And the restaurants are great, the theatre can be magnificent and the museums - wow!


27 posted on 11/08/2011 7:38:23 AM PST by miss marmelstein (Let's have a Cain Mutiny!)
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28 posted on 11/08/2011 7:43:11 AM PST by TheOldLady (FReepmail me to get ON or OFF the ZOT LIGHTNING ping list)
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To: miss marmelstein
You drove during the 70s and speak English?!!!

I was a dieing breed. It was blood money....but I needed it.

29 posted on 11/08/2011 8:25:22 AM PST by Roccus (Obama & Holder LLP, Procurers of fine arms to the most discerning drug lords (202) 456-1414)
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To: Roccus

My husband, too, was a New York City cabbie. Hated it.


30 posted on 11/08/2011 8:32:16 AM PST by miss marmelstein (Let's have a Cain Mutiny!)
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