My kingdom for a cab

by Ted on October 21, 2004

A Bangladeshi immigrant put himself in the driver’s seat by paying a record US$360,000 at a city auction on Monday for a New York taxi medallion, which is required by the city to own a taxicab. Most cabdrivers in the city work for taxi fleets or lease time from a medallion owner.

Mohammed Shah, 44, mortgaged his house in the New York borough of Queens to help finance the purchase of one of 116 new taxi medallions sold to the highest bidders.

Madre dios. I’ve never lived in New York City, but I’m pretty sure that the city isn’t drowning in a sea of cabs. You don’t need to be a blue-skinned libertarian to see that artificial scarcity has some real consequences.

I know that Mayor Bloomberg’s got a lot on his plate, and I know that it’s unfair to personalize the NYC bureaucracy in the form of one man. But, still… he’s a shrewd businessman who came to office with relatively few political debts. From my distant perspective, he seemed to spend an awful lot of capital on necessary tax hikes and unnecessary smoking bans.

He was probably the last, best hope to phase out rent control and crazy cab restrictions, wasn’t he? Damn.



Andrew McManama-Smith 10.21.04 at 8:32 pm

There are loads of unofficial cabs all over town. you can take a “black” cab for half the price of a normal cab.
It’s really a stupid system…

Christ that blue skin thing is scary.


praktike 10.21.04 at 9:18 pm

Take the subway.


lemuel pitkin 10.21.04 at 9:42 pm

Yes, we need more cabs — altho give Blomberg credit for increasing the number for the first time since the 1930s, albeit by not nearly enough.

Re the smoking ban, what NOBODY ever acknowledges is that the state passed a much stricter ban shortly after the city did, which totally pre-empts it. The fact that you can’t smoke in an NYC bar, at this point, is completely beyond Bloomberg’s control.

(Also, evidence is that the smoking ban, plus the tax, plus the city’s policy of providing nicotine patches and other help quitting free to anyone who wants them, has really reduced the smoking rate. hasn’t worked for me yet, alas…)

Finally, rent control: Why do you want to get rid of it? No, it doesn’t reduce housing costs — much — in the aggregate, but it certainly doesn’t increase them. What it does do is preserve diverse neighborhoods and protect certain vulnerable groups, esp older people, from being forced out of their homes by rent increases.


Randy Paul 10.21.04 at 9:47 pm

I’m with Praktike. I only take a cab to the airport (and only then when I have a lot of bags) or when I have something too big to take on the subway.

As for why this man spent so much, it’s because those who lease cabs from fleet owners have to pay about $120-140 (lease +gas) down at the start of a 12 hour shift and earn that much just to break even. It has become one of the worst jobs in the city to do. If you have a medallion, you get the car and the license and beat the leasing cost. it should pay for itself in a few years.


phil 10.21.04 at 10:46 pm

Rent control is set by state statute. Bloomberg can’t do much besides whine about it.


phil 10.21.04 at 10:52 pm

Rent control is set by state statute. Bloomberg can’t do much besides whine about it.


washerdreyer 10.21.04 at 10:54 pm

Nozick’s position in Anarchy, State and Utopia is that rent control is a partial expropriation of the property from its owner. His though experiment to show this is the idea of rent control, plus allowing the tenant to sublet at market price. Nozick’s idea is that this would have provide the same benefit to the owner of the property as the current system, a greater benefit to the original tenant, but people fint it unacceptable because it brings the expropriation to the forefront. This view has some merit to it.


lemuel pitkin 10.21.04 at 11:28 pm


misses the point – the goal of rent control is to preserve diverse neighborhoods, which have a strong postitive externality. not simply to allocate the economic rent between owner and tenant.

Rent regulation – “control” is incorrect ehre, in terms of NYC, controlled as opposed to stabilzied units are a tiny and declining fraction — also recognizes taht someone who has been living in an apartment for a long period has an legitimate interest in being able to continue living in it. Not an interest in claiming an income from it while living elsewhere.

There are rights in the world beside property rights….


rea 10.21.04 at 11:37 pm

Ironic you should bring up Nozick and rent control:



Don Quijote 10.22.04 at 12:36 am

Go tell the owners of the other 14,000 medallions that you want to ban them. It should be a load of fun to watch unless you intend to buy them out, in which case the rest of the population of NYC will have your skin.


lemuel pitkin 10.22.04 at 1:55 am

Anyone who is collecting an economic rent via government-imposed monopoly is going to be unhappy if you take it away. That doesn’t mean it’s good policy (or bad, either). Someone with an interest in the relation between language and politics could probably do something interesting with the way a proposal to allow more people to drive cabs becomes a proposal to ban medallions.

That said, I am not a libertarian, and the best research available suggests that simply issuing more medallions would not necessarily improve the quality of service or — even more important from my point of view — drivers’ working conditions.

A better solution would be not an unregulated taxi market, but one that doesn’t rely on the “fictitious capital” of medallions. IIRC in London there is a very strict licensing system that effectively limits the number of cabbies on the road, but doesn’t create medallion-like assets (and ensures that drivers are highly qualified.) Something like this would probably be the best model. Failing that, a medallion system needs to be combined with support for collective bargaining by drivers to to maximize their share of the rents. (Which would, yes, lead to capital losses for medallion owners. Cry me a river.)


schwa 10.22.04 at 3:18 am

IIRC, London has no less than three taxi markets: the official ‘black’ cabs (ironically, the white market); the minicabs (the grey market); and assorted hives of black-market solo operators.

The black cabs are by far the best and, I believe, the only ones who can legally do pickups from the kerbside or taxi ranks (it’s been a while since I was in London and I made a point of avoiding all three cab types while I was there) — to take a minicab you have to find one of the dispatching centres dotted around the city, but it will then take you anywhere you want to go. (Any Brits want to correct me?)

If you’re shopping around for a system to license taxis, London’s is not, I would suggest, it. Admittedly I live in a much smaller city than either London or New York, but I can’t see what the problem is with a more-or-less free market, with licensing used only to control for criminal or otherwise dodgy drivers, and fare-gouging.


schwa 10.22.04 at 3:25 am

For “best” read “highest quality and by far most expensive.” Liquid lunch.


wcw 10.22.04 at 5:17 am

In re: smoking bans, if you’re a non-smoker (as two-thirds of us are), smoking bans are beautiful things — approximately the only legislated morality that I really believe works, like a charm.

Before I experienced it, I didn’t care one way or the other. Then California passed it, and suddenly I could go out for a beer with my friends, and not come home stinking of ash. I went out more, I socialized more, I saw more rock shows in dingy-but-now-smoke-free clubs, I was happier. And then, a mixed blessing: my wife got a nice, tenure-track offer in a nice city in another state that lacks a smoking ban. Last night we went out, just for a late meal because we were both beat. There was smoking. We enjoyed our meal less, we rushed home early, and our clothes smell now.

Unnecessary, my ass. Smoking bans in public places are my favorite law ever.


washerdreyer 10.22.04 at 7:00 am

I read Brad’s post when he posted it, and found it 100% non-responsive to the argument. I e-mailed to ask him about other anti-Nozick arguments, and he sent interesting links. As far as I can tell, the linked argument would only persuade people who don’t reason properly. The facts that X says a certain regulation shouldn’t exist but X takes full advantage of that regulation while it does exist is not any sort of argument in favor of that regulation.
I didn’t say rent control has no value, just gave a possible answer to a question about why someone would be against it. I have no idea why Ted is actually against it. Also, I am not a Nozickian, but I do believe arguments of the type he brings up tend to not get enough weight. For instance, the positive externality of diverse neighborhoods should be weighed against the negative of the partial loss of proptery rights, rather than just assuming the externality must be good no matter what the negatives are.


Ray 10.22.04 at 9:06 am

Dublin, up to a couple of years ago, had the same taxi system. There are/were an unlimited number of ‘hackney’ cabs, which you could book over the phone, but there were a fixed number of normal taxis, that could queue in ranks and be waved down from the street.
The problem was that, as in NY, taxi plates had become a very valuable commodity, so every time a politician hinted at increasing the number of cabs, the drivers went on strike, or blockaded the streets.
Eventually the government opened up the system, and made an unlimited number of plates available. Inevitably, the sob stories about widows and orphans who had mortgaged their houses for taxi plates that were now their sole source of income meant that the existing drivers got a lot of compensation. (In some ways, this was fair enough – the drivers weren’t to blaim for the artificial shortage that created the market in plates)
My solution would have been to announce that there would be more plates issued every year, not an unlimited number, but an extra 5%. The shortage of cabs would have eased off, and eventually disappeared, and the value of the plates would have depreciated gradually, not in a puff of smoke.


ArC 10.22.04 at 11:33 am

If memory serves, DeLong passed along the anecdote later that that story was more convincing to more people as a refutation of Novick’s argument than the rational ones.


Ben Hyde 10.22.04 at 2:26 pm

How would you folks suggest that the we regulate the that market? There isn’t an infinite amount of road space in NYC, and the land those roads rest upon is extremely valuable, and that system is a club good managed by the city government. That price, $360K, seems likely to be almost exactly what that many square feet would cost in large parts of Manhattan. Square fee that can’t move!


David Salmanson 10.22.04 at 3:25 pm

It’s been years since I lived in NYC but the on-the-ground realities are more complex than are being presented here. NYC has an interest in keeping traffic moving, esp. in Manhattan, an unregulated cab market would bring a lot more cabs onto the street, lowering prices somewhat but increasing travel time as roadways clogged up. Clogged roadways mean emergency services take a lot longer to get where they are going. Yellow cabs are the trasportation of last resort by design for this reason, among many. Keeping people walking, on busses, on subways, and yes, using dial up car-services (which park between runs, unlike cabs, and thus create less congestion than a cab would). The solution is not more cabs. It is to ban cabs altogether and go to a strict dial-up service only system. Let the toursists take the subway like everybody else.


lemuel pitkin 10.22.04 at 9:47 pm

I’m still kind of curious why Ted’s against rent regulation, and what he thinks we should do about the cabs. But it seems he’s moved on to bigger and better things….

Comments on this entry are closed.