Bad Reasons to have Taxi Medallions

The good folks of Priceonomics have an in-depth discussion of taxi medallions, which is correct in pretty much all particulars.

People who are hilariously committed to the defense of pretty much any regulation system you can imagine typically advance the following arguments for taxi medallions:

  • We need to regulate the pricing of taxis, lest customers take a trip and then be gouged by the driver for an unreasonably high fee afterwards!
  • We need to regulate who drives cabs, lest rapists and murderers use them to troll for victims!
  • We need to regulate who drives cabs, lest bad drivers become a public menace!
  • We need to regulate who drives cabs, lest drivers not know how to get from point A to point B!
  • We need to pay for the costs of the above regulation!

And all of those points have merits (and flaws).  But none of them are reasons to have taxi medallions.

Taxi medallions limit the total number of taxis on the streets of a city.  You can license cab drivers (and prevent “bad” drivers on any number of axes from getting the license) without limiting the total number of cabs.  You can regulate cab fares without limiting the total number of cabs.  And you can charge a licensing fee (indeed, potentially a high one!) to defray the costs of administering the program without limiting the total number of cabs.

There are only two real reasons for limiting the total number of cabs in the city:

  • You believe that absent such regulation, your streets will fill up with cabs to the extent that traffic drops to a standstill or something.
  • You are corrupt.

That first reason is a hell of a stretch.  It presupposes that the taxi business is either incredibly lucrative, or that cab drivers are insensitive to demand changes.  Notably lacking in every discussion of taxi medallions I’ve ever seen is any kind of argumentation for the first reason.

The second reason is the truth.

Disclosure:  I work for Flywheel, which makes a smartphone app for hailing taxis.  My opinions do not necessarily reflect those of my employer.

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3 thoughts on “Bad Reasons to have Taxi Medallions

  1. I agree that taxi medallions are supported by corruption to some extent. However, I think there is a legitimate concern about regulation which your post did not address. If the number of taxis on the street was only limited by the number of potential passengers the driver could pick up, what’s to stop them from all congregating at the airport and making traffic impossible? How will we regulate safety for the consumer?

  2. Airports are separately regulated: taxis must form a queue and pay a separate fee to pick up passengers at the airport. They aren’t allowed to just hang around the curb. In many airports, cab drivers spend hours in the queue already. It just doesn’t seem likely that thousands of additional cabbies are going to line up for every smaller slices of the same pie.

    And in general, that’s the answer to congestion issues. Being a cabbie is hardly a route to fame and fortune. The idea that absent artificial scarcity, our streets would be choked with taxis has a high bar of proof that nobody really seems to approach.

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