Several weeks ago, PLF attorney Timothy Sandefur wrote about how Government permission to drive a taxi now costs $1 million. In New York City, as in most cities across the country, drivers are not allowed to pick up rides for hire unless they bear a medallion. In other words, medallions are “cartel scheme . . . policed by anti-competitive bureaucrats who ensure that nobody goes out there and gives someone a ride without the government’s permission.”
Sandefur was commenting on a New York Times article on the new exorbitant price tag, which explained, in part, how prices got so high:
There are 13,237 medallions in the city; new ones, when issued, are sold at auction. But the medallion pool is rarely expanded, creating a scarcity that helps keep values high. (Many owners have objected to a city proposal that would allow livery cabs to pick up street hails outside busy parts of Manhattan, saying such a plan would lower the value of their medallions.)”
These monopolies hurt consumers, who end up paying more for taxis, and hurts workers, because economic opportunities that otherwise might exist simply disappear.
It turns out that NPR’s take on the story is quite different. Yesterday NPR reported:
It’s been a bumpy ride these past few years for investors looking for easy ways to make money. Stocks, bonds and real estate have all seen wild swings or simply delivered disappointing results.
But a taxi medallion is one investment that keeps going up in value: Two of them recently sold for a record $1 million each. . . . It turns out it’s . . . a great investment vehicle.
So not only are government cartels investments now, but they are sound investments too? NPR certainly seems to imply as much, noting that since 1980 medallion prices have increased by more than 1,000 percent. During that same time frame, gold gained 181 percent.
The problem, however, is that there is a fundamental difference between the free market on one hand and a government backed oligopoly on the other. Gold is a finite resource, as demand increases scarcity keeps its prices high. With taxi medallions however, it is artificial scarcity that keeps the prices high and economic opportunity low.
Many outsiders – usually immigrants or other workers whose lack of education and experience make finding other jobs difficult – could make more money and charge passengers less if they could obtain medallions without paying artificially inflated prices. As it is, government restrictions are what allow the politically well-connected few who enjoy a cartel position to get rich at the expense of the many by charging far above market rates. Must be nice work. If you can get it.