[cabalamat]

> It doesn't surprise you that cab drivers in Chicago basically never drive you to random destinations, or change fares midway through the ride? The goodness of cab driver hearts isn't what's preventing it.

A voluntary medallion scheme would prevent that; the city government could issue medallions to those who fitted whatever standards it chose to lay down.

And customers would be free to choose to use a medallioned or unmedallioned service.

[tptacek]

Don't get me wrong; the city medallion systems are evil. I'm just saying they're a necessary evil. If we could replace them with something sane, I'm onboard!

[gojomo]

You're quick to dismiss all prospects for a mobile-device-assisted reputation system based on v1; assume instead that it iterates a number of times and eventually chiefly helps the dispatchers identify bad actors, rather than customers.

With digital cameras and other low-cost person and location tracking technologies, it's not easy for drivers to take riders on any ride other than that which was contracted, nor for providers with bad reputations to borrow the identities of others. Branded quoted dispatching has returns to scale -- perhaps it's even a natural monopoly -- and incentives for self-policing. So bad actors can't just hop to another of multiple dispatchers and get the same amount of business.

Floating rates and open entry can restore service to areas that regulated rates sometimes cause to be unserved -- because they're comparatively hard to get to or dangerous, and there's plenty of business elsewhere.

And finally, for all the supposed protections provided by regulation, a city with strict regulations will also have a bunch of gypsy and counterfeit cabs -- and in SF, if local media reports here are to be believed, many of these are indistinguishable from the 'real' thing, even by most police/enforcers. You get in one -- and you get indistinguishable service as from other cabs, because the operators want to be cabbies, not robbers. And yet -- iPhone dispatching could give out a 1-time single-word-password more secure than any cab 'dress'. So if this were really something to be scared of, a branded iPhone dispatcher can provide more assuarance than the city medallion authority.

There is a valid concern at the heart of taxi licensing -- but it long ago grew into primarily a cartel, using that original justification to enrich incumbents, doing more damage than benefit. And, the restricted medaliion program is a solution from another era; let us try to get the same benefits with new tools, and see how it works.

[tptacek]

Try it out in San Francisco. San Francisco cabs are horribly broken.

Unfortunately for your argument, while the medallion system does unjustly restrict competition for cab driving jobs in Chicago and NYC, it does not in fact appear to harm consumers. Cabs work in Chicago and NYC. The potential harm of deregulating and devolving controls to unproven technology far outweighs the benefit.

[gojomo]

Totally agree SF is where this should be tried first -- it's the US city where cabs are both needed and broken, and smartphone adoption is very high. And the great thing is: that's where UberCab is in fact starting.

However, I expect that if the service becomes popular, both the cab and MUNI lobbies will attempt legislative sabotage, and the SF supervisors are so enamored of paternalistic reasoning it's a real threat to the business.

[yummyfajitas]

A very simple replacement system: unlimited medallions will be issued. The cost of a medallion is the cost of policing 1 driver (e.g., 1 random inspection per month, background check, car safety, etc) + 15% profit for the city. Prices will be set at market rates, but must be fully disclosed to passengers before the ride.

[tptacek]

How is it a win for consumers to let taxi fare rates float? Taxis are very cheap (many reasonable drives inside the Chicago Loop are within 100% of what it would cost to take the CTA). Floating rates would almost certainly rise.

If a regulatory change harms consumers, what's the point of deregulating?

San Francisco might benefit from deregulation, because there are political problems and structural breakages in their system. But the Chicago and NYC cab systems work pretty well right now as far as I can tell.

Incidentally, while I agree that medallion caps are anticompetitive and an artifact of old price-fixing schemes, they have a beneficial effect of making it expensive to operate a licensed cab, which creates incentives for cab operators to avoid some negative externalities of their business (like running people down, or operating blatantly unsafe vehicles, etc).

[yummyfajitas]

Allowing fares to float while maintaining the current artificially restricted supply will cause prices to rise. Allowing increased competition will almost certainly lower costs.

Taxi revenues are currently $91k/year in NYC. Breakdown: $18k medallion, $50k labor, the rest is maintenance/insurance. If labor costs were reduced to $35k/year due to competition (taxi driving isn't exactly high skill labor) and medallion costs were cut in half, that's a 25% reduction in taxi cost.

http://www.nyc.gov/html/tlc/downloads/pdf/presentation.pdf

I think my proposed $9k/year would be sufficient to pay for taxi inspections to get rid of blatantly unsafe vehicles. As for running people down, current incentives not to do that seem sufficient. It's no more a problem to be run down by a taxi than by a Dominos driver, who has the same incentives as a taxi driver. In fact, Michael Q. Lateforwork has even less incentive than any taxi driver to not run people down - he won't lose his job for doing so.

[tptacek]

Michael Q. Lateforwork is probably not economically marginal in the same way most cab drivers are, so the incentives are not the same.

Similarly, most people who deliver pizza are not career pizza delivery drivers. A pretty big chunk of them are students. Their incentive not to wreak havoc isn't the loss of their pizza job, it's in not screwing up their lives and bankrupting themselves.

That said, you have a good point. And I'm not HN's official advocate for taxi medallions. I just want to point out that while it certainly wasn't the intention of the medallion system, or even its primary effect, artificially-limited medallions do create a scarcity value to them that incentivizes drivers to play nice with the rest of the system.

There are plenty of unlicensed cars out there, and there is a clear difference in how reliable they are.

I wouldn't vote against any sensible replacement scheme, and yours sounds sensible.

[jfager]

So, just so I follow, your proposal is to impoverish cabbies and drive the skill level of the average driver down as low as it can go while increasing the number of vehicles on the streets in a city where it already takes an hour to go a mile?

May that you never be in charge of taxi service.

[yummyfajitas]

Yes, my proposal is to reduce the wages of current cabbies, increase the wages of future cabbies (the people currently making $25k/year, or perhaps who are unemployed, who would take jobs as cabbies at $35k/year) and lower the cost of taxis to consumers.

As for the number of vehicles, that's an issue not primarily caused by cabbies. A congestion charge (levied on cabbies and drivers alike) and eliminating free parking seems like a solution to that - it works pretty well in London.

[tptacek]

Having read 'yummyfajitas closely for awhile now, can I take the liberty of predicting that he will acknowledge the NYC congestion problem, but suggest that we should be addressing it with a market-based solution that targets it directly, instead of as a side effect of regulations?

I agree with you not him, because I don't trust the process that will generate the market-based solution, and I think the medallion system actually pretty much works in Chicago and NYC. But that doesn't make the argument much more productive.