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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).

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

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.

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.

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 5768 days ago

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.

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.

jfager 5768 days ago

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.

Which in NYC, with its existing low cost subway and bus alternatives, basically translates to "helping rich people by eliminating the lower-middle-class jobs their fares currently support". You would expand the pool of people who choose cabs over the subway down from the top a little bit while pushing the actual service workers further out from the city.

As for the number of vehicles, that's an issue not primarily caused by cabbies.

Perhaps because the current medallion system restricts the number of operating cabs?

A congestion charge (levied on cabbies and drivers alike) and eliminating free parking seems like a solution to that

I'm all for a congestion charge (though my version actually wouldn't apply to medallioned cabs) and eliminating free parking. But you said the point was to lower costs for consumers by increasing competition. We're getting to the point where we actually have to do the math to see where everything falls, but if you don't tweak the parameters right, you could easily find yourself in a situation where consumers are right back to paying today's fares (because there aren't actually more cabs on the road) but instead of the money going to the cabbies, it's going to the city in fees.

it works pretty well in London.

London, where cab drivers are probably the best paid, most skilled, and most stringently regulated in the world?

http://en.wikipedia.org/wiki/Passenger_vehicles_in_the_Unite... http://www.schallerconsult.com/taxi/taxidriverreport.htm

You previously criticized me for wanting to "increas[e...] the number of vehicles". Now you are criticizing me for wanting to "eliminat[e...] lower-middle-class jobs". How can a proposed policy simultaneously increase the number of taxis and decrease the number of jobs? Will the new taxis drive themselves?

As for doing the math, scroll up. I gave you numbers, and showed that even making fairly generous assumptions, there is a LOT of rent being extracted from the current system.

Perhaps because the current medallion system restricts the number of operating cabs?...London, where cab drivers are probably the best paid, most skilled, and most stringently regulated in the world?

Fun fact: there are about 250 million cars in the US, and about 250 thousand taxis. But I'm sure all congestion problems are caused by the taxis - thank god for limited numbers of medallions.

maukdaddy 5768 days ago

Um, sorry, but I want my taxi driving making a living wage. Why? Because [s]he has more to lose by fucking me over. If he is on the edge of poverty, making only 35k/year, he is MUCH more likely to screw me over with shady tactics because he needs to feed his family.

Even after cutting the medallion fee in half, NYC would have $9000/cab to devote to policing taxis. Assuming the 4x yearly safety inspection costs $1000/inspection (at a rate of, say, $333/hour for the mechanic), that leaves $5000/year/taxi for police work.

So for every 15 cabs, the city could spend $75,000 on a dedicated undercover taxi inspector. Lets say this undercover inspector works 250 days/year, and rides 3x/day. Thus, every taxi is subjected to an undercover inspection every single day (on average, assuing 250 working days/year). Assuming an average fare of $12 and taking revenues of $90,000/year (see my previous link), a taxi driver has 30 fares/day, one of which is an undercover inspector.

Each time he uses shady tactics, his odds of being caught are 1/30. 50% of cheating cabbies will be caught before they manage to cheat even 20 customers.

Also, if you don't feel that $35k/year (higher household earnings than 37% of the US) is a living wage, then what is?

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.

jfager 5768 days ago

I suppose I don't understand how reducing congestion can be seen as a "side-effect" of the medallion system. That's one of the explicit reasons it exists: to cap the supply of cabs on the streets.

The problem isn't the number of cabs on the street; it's the number of cars on the street. So charge a congestion tax. Even if there are 10,000,000 cabs, if the congestion tax is set appropriately, they won't all be clogging the streets, since they won't be able to make a buck doing it.