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USA Today has an article about how the value of taxi medallions have been dropping because of the entry of services like Uber that connect fares to drivers while bypassing licensed taxi drivers. Such services are winning over former taxi customers who prefer the ease with which apps like Uber allow them to use their smart phones to hail a ride, and the other features it offers, like seeing who your driver is, being able to pay outside of the cab without the involvement of cash, and so on. Some of these features are innovations. Others are possible because the services can operate outside onerous government regulations of the taxi industry.
Those regulations, while limiting quality and the choice for consumers, have been a boon for the taxi industry, which can operate lucrative rackets in many jurisdictions. The most visible evidence of this boon is the taxi medallion, a license sold by local governments that permits a driver to operate a taxi. Drivers still have to go through whatever process the local government has set up for becoming a taxi driver—the medallion doesn't represent the privilege, or cost, of going through that process, but just the privilege of being allowed by the government to enter a controlled market. Unsurprisingly, such medallions have become an investment by people betting on the arc of government bending ever toward bigness.
USA Today reports:
Until recently in America's big cities, purchasing a taxi medallion—the city-issued license to operate cabs —was about as sound of an investment as they come. But with the rise of Uber and other ridesharing services, the value of taxi medallions are plummeting, leading cabbies and fleet owners throughout the USA worried that their industry will be decimated if local and state government doesn't intervene. "I have had a pretty successful thing," said Gary Karczewski, 65, a Chicago cabbie who inherited his medallion from his father 28 years ago and earned enough to purchase two homes and help send his two daughters to college by driving the equivalent of 80 times around the world. "My hope was to wind down soon and give whatever I could sell the medallion for to my mother. But I am not confident there's a market now." In Chicago, which has the country's second biggest fleet with roughly 7,000 taxis, the median sale price for a medallion hovered around $70,000 in 2007 before reaching a median sales peak of $357,000 in late 2013.
And how much is the medallion in Chicago going for now? About $270,000. Karczewski's father acquired his taxi medallion more than 28 years ago, when it went for far less. And Karczewski inherited this medallion, this piece of metal (or paper?) that permitted him to be one of just 7,000 licensed taxi drivers in a city of 2.7 million. Sounds very caste-systemish, and brought to you by government. Karczewski wants sympathy that the government-created bubbled for taxi medallions has appeared to end with him holding the asset. Worse than sympathy, others in the wider taxi industry want government to do something about it. The taxi industry spent a lot to create the intricate cronyist relationship between local governments and taxi businesses and wants to protect their lucrative business. Via USA Today:
Ancillary industries are also feeling the pain. Carriage News, a New England industry newsletter closed shop in March, as medallion financing agencies slowed issuing loans, making advertising unnecessary. "The demise of Carriage News can be laid directly at the feet of the TNCs [transportation network companies] and the do-nothing politicians who allow these … operations to continue to erode the taxi industry," publisher Bob Keeley wrote in a front-page editorial announcing the 45-year-old publication's demise.
Do-nothing politicians "allow" you to participate in the voluntary exchange of currency for services (a ride) and aren't protecting the service providers they created a monopoly backed by force for, according to someone who covered the taxi industry for the taxi industry.
Worse for the taxi industry, the governments to which they've locked themselves into are preventing taxi companies from working on the most modest innovations. New York City, for example, wants to be able to approve any app taxi drivers in the city might use to let customers hail a ride from them the same way they can from services offered exclusively on apps. USA Today:
In New York, the Taxi and Limousine Commission is weighing a proposal that would create an agency that oversee the implementation of smartphone apps used in the taxi industry. Under the proposal, the smartphone app operators would be required to approval before modifying their apps or face fines—a regulation that a powerful coalition of Silicon Valley companies told New York City Mayor Bill de Blasio would stifle innovation. "While we do not develop software for transportation providers, we are gravely concerned by the unprecedented decision to subject software available around the world to pre-release review by a city agency," wrote the Internet Association, the tech coalition that includes Facebook, Google and Twitter.
Karczewski, the Chicago cabbie, is resigned about the taxi industry's "race to the bottom" but wonders what younger cabbies "who have a lot of skin in the game" are going to do. The battles against Uber, Lyft, and services like it are largely led by those seeking to protect the taxi cartels. Big, meddling governments, have put themselves in the position to skin a lot of people looking for an in on that cartel, and can still do a lot to thwart innovation in the rides industry. What would governments like today's have done if they had this kind of power a hundred years ago, when the auto industry was placing death at the door of the horse-drawn carriage industry—quite literally for many of the horses, who survived the innovation of trains but not automobiles.
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