[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.

[jfager]

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.

[tptacek]

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.

[jfager]

You don't have to solve a problem in one fell swoop with one technique. Medallions aren't the only way to reduce congestion, and they aren't a complete solution, but they certainly do at least partly address the issue as an explicit goal, not a side-effect.

I would welcome a separate congestion tax levied on certain other kinds of traffic to complete the solution. You want cabs in the city, and you want them running all the time - they're doing the useful work of moving people around, and should certainly be preferred to traffic that congests the city during rush hour just to cram into a parking lot for eight hours.

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.

I'm deeply suspicious of this kind of reasoning when it's unaccompanied by an explanation of how the tragedy of the commons would be avoided. You're a cab driver with rent and your kid's tuition to pay, are you the one staying home today?

[yummyfajitas]

You're a cab driver with rent and your kid's tuition to pay, are you the one staying home today?

If congestion charge + other expenses > expected revenues, yes. Actually, things should equilibrate roughly at expected revenues - congestion charge - other expenses = average low skill wage.

The real trick is to set the congestion charge somewhat higher for taxis than for regular vehicles, since taxis spend more time on the road. The proper ratio would be (taxi charge/regular charge) = (taxi time on road / regular time on road), presumably this could be estimated using sat photos.

[jfager]

People don't always make optimal, rational economic decisions. If driving a cab is what you've always done and is all you know, it's not as simple as plugging the numbers into the equation each morning before deciding to go to work. You know there are fares out there, and that if you don't take them, someone else will. What motivates any individual cabbie to acknowledge that they should be the one to give that fare up rather than someone else? And what job do they take in its place? You're certainly correct that the decision would get made one way or the other, but there's a human cost that cold, superficial economic reasoning has a hard time accounting for.

The real trick is to set the congestion charge somewhat higher for taxis than for regular vehicles, since taxis spend more time on the road.

Commuter vehicles deliver less value to the city, though. They spike congestion in the morning and the evening, waste time looking for parking, and take up valuable real estate just sitting around during the day. That's the traffic you want to discourage, not cabs, delivery trucks, and other actual economic contributors.