If you’ve ever been to Brooklyn, you’ve almost certainly seen firsthand the shortage of taxis that has been created by New York City’s licensing restrictions, known as the “medallion” system. Under this system, only a limited number of licensed cabs are allowed to run in the city. You’ve probably also seen how the locals get around these restrictions: through the use of unlicensed taxis, known as “gypsy” cabs, and car services, which are technically limo services which you have to call for pickup.
I’ve used car services and have found them a good solution for getting around Brooklyn quickly, but having to call for a car and wait for it is nowhere near as fast or convenient as simply flagging down a passing taxi. Gypsy cabs face a competitive disadvantage in that they have to operate more discreetly than do licensed cabs, which can pick up passengers at high-traffic points like hotels, airports, and train stations. This all makes a New York taxicab medallion highly desirable, but acquiring use of one can be extremely expensive.
Taxicab medallion restrictions result in artificially high entry costs for new drivers and lower quality service for passengers. Yet, two District of Columbia city council members, Jim Graham and Muriel Bowser, are trying to impose a similar system in the nation’s capital. The idiocy of such a proposal almost defies belief. The only sensible explanation for it would be that cab drivers who face less competition would support medallion proponents. But yesterday, the cabbies said, “No, thanks.” The Washington Post reports:
About 1,000 taxi drivers went on strike Tuesday in response to a D.C. Council bill aimed at establishing a taxi medallion system or a taxi vehicle certificate system, organizers said. If passed, cabdrivers fear, the bill could substantially increase the cost of operating a taxi in the District.
“The problem we’re facing right now is the increasing number of people trying to enter this system,” said D.C. Councilman Jim Graham, D-Ward 1, who chairs the Public Works and Transportation Committee.
I’ve long been accustomed to hear politicians utter economically illiterate statements, but to describe supply arising to meet demand for a service as a “problem” is astounding even by that sorry standard. As Reason‘s Ron Bailey comments:
Just exactly why would DC residents want to have fewer taxis? If more drivers are entering the market doesn’t that suggest strongly that supply has not yet equalled demand?
That’s a good question; I’d like to hear Graham’s and Bowser’s answers. The costs of their proposed scheme would be huge indeed. According to the Examiner:
Medallions in some major cities cost tens of thousands of dollars, and can be auctioned off for hundreds of thousands if there’s a limit on the number of cab drivers in the area. Because of the moratorium on the number of cabs in New York City, medallions there sell for more than half of a million dollars.
In fact, New York taxi medallion are so valuable, that, as CEI’s Eli Lehrer has pointed out, they are often used as collateral for loans. Leave it government to give value to something that should be completely unnecessary.