Government permission to drive a taxi now costs $1 million
Author: Timothy Sandefur
I start The Right to Earn A Living with a discussion of taxi licensing, and how the government’s restrictions on the taxi industry make the legally required “medallions” cost a ton of money. This hurts consumers, who end up paying more for taxis than they otherwise would, but it hurts workers even more, since it dries up the economic opportunities they might otherwise have. Since taxi drivers can’t afford the medallions, they end up working most of the week just to pay the cost of leasing the permission to operate the cab, and then get to keep what’s left over afterwards. And this whole cartel scheme is policed by anti-competitive bureaucrats who ensure that nobody goes out there and gives someone a ride without the government’s permission.
The New York Times now reports that taxi medallions have reached the $1 million price tag. That means, permission to operate a single cab now costs $1,000,000. And note this part:
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.)
The owners objected to allowing freedom of competition because, by making it illegal for consumers to get the taxi services they need, the politically well-connected few who enjoy a cartel position are able to charge way above the market rate. It’s not that scarcity keeps the value high—it’s that the artificial scarcity keeps the prices high, and keeps economic opportunity low.
And when you consider that this is opportunity for precisely those people who need it the most—often immigrants, or workers whose experience and education don’t afford them many alternatives to support themselves and their families—you can see what a travesty this government-run oligopoly really is.