TheAgitator.com
More City Regs
Wednesday, April 28th, 2004Speaking of oppressive city regulations and regulatory capture, New York City’s annual taxi medallion auction this year brought the price of a driving a private cab in the Big Apple to well over $300,000.
That doesn’t include the cost of the actual cab. Or the myriad of inspections it needs to pass before it can be used for business.
Folks struggling to get a financial foothold — as cabbies often tend to be — then must go nearly a third of a million dollars into debt and deal with the hassles of monthly payments and interest before New York will allow them to drive patrons in their privately owned vehicles from point A to point B.
Of course, independent cabbies tend to be immigrants with little political pull. Certainly they don’t have the pull the big cab companies have. So making them pay a third of a million dollars apiece for the “right” to earn a living is pretty easy pickings.
I’ve yet to see a good libertarian version about how a cab market should operate in a major metro area. I do agree that there is no need for a government monopoly on the service. However, it is not practical to completely deregulate the market. The problem is that there is no efficient way for a consume to price shop. Nor is there a way to prevent them from getting gouged.
sorry…”…for a consumer…”
Maybe the city could allow taxi competition, but force them to display their rates in large letters on the outside of the cab? Then customers could choose to flag down a high-priced cab or choose to wait for a low-priced cab.
MP writes:
“However, it is not practical to completely deregulate the market.”
Why is that, MP? What would the problem be?
And there simply aren’t enough cabs in New York, a purely government-created problem. It took me almost an hour to get a cab during rush hour when I was up there last September. And yes, I stood there on the sidewalk cursing the gubmint of NYC for hyperregulating the taxi industry!
I suspect the limosine liberals who dominate the place don’t take cabs and therefore don’t need to evaluate the situation logically.
Radley, there are no independent cab drivers in NY. The thought that there are individuals out there buying hack licenses is just not accurate. The people buying these things are all rich people purchasing them as investments.
Most of the cabs in NY belong to large companies that have hundreds of these licenses. I wonder if the fact that the politicians create a scenario where this can happen has something to do with getting re-elected, as large companies and rich people are much more helpful in that regard than a single immigrant.
But cabs have gotten much better over the years, a decade ago you could not even find a cab with air conditioning in the middle of a hot and humid day.
Doesn’t it seem a bit of a conflict of interest that the bid advisor is also lending the money? Why did the NYT reporter almost ignore the bit about bid inflation?
Why did the NYT writer blow off the handicapped protesters?
He’s taking on an enormous, non-real-property debt in order to save $90/week?
I guess you have no idea why the high prices for the medallion exist in the first place. The reason is, as suggested by public bureaucratic theory, to prevent the entry of cheaper alternatives, as this would lead to increased congestion on city streets when a viable alternative, the subway, remains unutilized and stagnant. It would also result in increased pollution due to the insane amount of smog resulting from entry into a cheap market that would eventually have a race to the bottom in terms of prices. In the least, the number of taxicabs would double (as would pollution), subways would be under-used, traffic would drastically increase, and consumers would be left worst off.
Neil, maybe cab customers (and other drivers) would be worse off (except for all the money they are saving on cheap, competitive cab fares), but subway riders would have a less crowded commute and a better chance to find a seat. Of course, in bureaucrat reverse-logic, subway fares would probably INCREASE as ridership decreased to cover their loses, rather than stay price competitive with the transportation alternatives.
In a totally deregulated taxi market, the consumer would have no way to know the price of the taxi until they hailed one. Even if all taxis clearly displayed the price on the outside, including prices for airport service and night service, one could not evaluate all options efficiently. There is no practical way for a person to be able to evaluate multiple options, because a taxi is either there or it is not. This also puts the taxi driver in a position to set arbitrarily high rates on a per passenger basis, because the passenger may never interact with that taxi driver again.
Aren’t some cab companies “computer dispatched”? You could call for a cab from a cheap, reputable cab company instead of relying on one “off the street”.
This post is a little unclear on exactly how cabs in NYC work, and unless you are familiar with the system you can’t understand the problems with it.
As stated, there is a shortage of cabs in NYC and that is done intentially. If the city were to issue hack licenses to anyone who wanted it then the value of the current licenses would decrease tremendously. It is this artificially limited supply that keeps the prices of the licenses up.
The restult is that the majority of licenses are concentrated in a few very large cab companies, that own hundreds of them. These companies rent out the cab and license per day to taxi drivers. About ten years ago this rental price was $100 per 12 hour shift, and I assume it is probably somewhere near $150 now.
Your average taxi driver has to pay for the rental of the car, plus gas which is another $50 a shift, plus tolls back and forth from the taxi stand, which are $7 round trip. This brings up another problem, the majority of taxi shops are located outside of Manhattan, so that means that for a 12 hour shift a cabbie can be expected to spend two of those hours commuting to work and back to his shop. Plus between getting gas and eating we can easily add another hour of off time, so a cab is actually only active 3/4 of the time it is leased at best.
Added to this problem is that most shops work on somewhat similar schedules, so when the shifts are starting and finishing a large proportion of all the cabs are not in service. If you have ever noticed there are hours in the city where you will see lots of cabs with the out of service light on. They will stop for you and if you are going somewhat in their direction they will pick you up but if not you are out of luck.
So basically you have a system where a cab driver has to cover around $200 of costs in a nine hour period, with anything above that being his wages.
Now the real problem arises in the fact that cab fares are just too low in NY, and a cabbie can not make a good enough living to even consider buying his own license. The cost of living in NY is obscene, so logically so should the cost of cabs. But this is not the case. Plus the traffic makes it even harder. How can a hack make a decent living when he might have a fare that goes across midtown and take 45 minutes to go four miles, and for that he pockets $9. Do the math, it does not work well.
Basically what you have is an industry that has invested a lot of money in keeping the industry as it is. Large companies like the prohibitively high prices of medallions because it keeps individuals from competing with them. Furthermore, the low rates make driving a cab an undesireable job, left to immigrants and the bottom rung of society, and since this is abundant in NYC it keeps cab companies with an ample supply of labor they can mistreat.
The argument that people should take the subway more is impractical. There are no cross town subways, and if you have to take a cross town bus from East End Ave to Broadway it can take you an hour, while a cab can get you there in ten minutes and cost $7.
Now also add in the fact that livery cabs are not allowed to pick up passengers in most of Manhattan, so that is not a viable alternative. The funny thing is that livery cabs do work with little regulation uptown and in the outer boroughs. You just hail the guy, tell him where you are going and negotiate a price. No one complains about how that system works, so why can’t it work in Manhattan. If you are a big investment banker going uptown in rush hour traffic and you hail a cab why should you only pay $15, that trip is worth well more than that. If you called a black car service the ride would be $45 bucks.
So why is this happening? The first reason of course is that politicians gain control by these measures. This is done through the large cab companies, who fight to keep hack licenses limited, thus keeping the value of their licenses higher. Now remember, most of these large companies did not buy these licenses for 300k, they got them decades ago for 5k, now they do not want to allow others the same opportunity. Of course the net result is that I am sure these cab companies are greasing the politicians to keep prices and licenses low. And of course politicians are all too happy to accept bribes from anyone.
The end result is that the citizens of NYC get the shaft. Lousy cab service, drivers who do not speak english and don’t know their way around the city, shortages during peak demand times, and worse of all, some of the smelliest cabbies in the world.
Why expect anything else from the biggest left wing city in the country.
Peter,
The “S” and the “L” go crosstown. And with the exception of rush hour, many of the crosstown buses are really not that bad.
Considering how many working poor need the subway to get to jobs, I don’t see the subway being under-utilized any time soon. $2 to go anywhere in NYC is still one of the best deals around.
Supergenius:
You can only go crosstown on the subways below CPS/59th and even that is pretty inconvenient.
I love the NYC Subway, it’s the best way to get around the city, no doubt, but there are times where it is not practical, it is also not under utilized in the least.
NYC does need new subway tubes without a doubt but the city does not have the money to do that because they waste so much money in so many countless areas and are beholden to unions at every corner. One line runnig up and down the east side is crazy. No lines to get acrosst the park. How can a city that is so rich not have a new subway in decades?
What we are talking about is freedom to choose our own form of transportation, and the bottom line is NYC politicians do not want us doing that.
Agreed.
Peter: Great stuff. On the matter of new subway tubes, my pal Seth Farber, aka The Talking Dog, is a lawyer with long years of construction business experience in NYC, who knows quite a lot about underground Manhattan. He says there’s a lot less room for new construction down there than you might think, that the city below ground is pretty much “full up.”
I hate to say it, but if we do the math, $300k ain’t that much:
http://the-idea-shop.com/index.php?id=65