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posted by LaminatorX on Sunday November 30 2014, @01:46PM   Printer-friendly
from the rent-seeking dept.

Most major American cities have long used a system to limit the number of operating taxicabs, typically a medallion system: Drivers must own or rent a medallion to operate a taxi, and the city issues a fixed number of them. Now Josh Barro reports at the NYT that in major cities throughout the United States, taxi medallion prices are tumbling as taxis face competition from car-service apps like Uber and Lyft. The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. "I’m already at peace with the idea that I’m going to go bankrupt,” said Larry Ionescu, who owns 98 Chicago taxi medallions. As recently as April, Boston taxi medallions were selling for $700,000. The last sale, in October, was for $561,000. “Right now Uber has a strong presence here in Boston, and that’s having a dramatic impact on the taxi industry and the medallion values,” says Donna Blythe-Shaw, a spokeswoman for the Boston Taxi Drivers’ Association. “We hear that there’s a couple of medallion owners that have offered to sell at 425 and nobody’s touched them."

The current structure of the American taxi industry began in New York City when “taxi medallions” were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren’t psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor’s 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they’re fighting to protect an asset that was worth about $2.4 billion in Chicago last year. “The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset,” says Corey ­Owens, Uber’s head of global public policy.. “The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake.”

 
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  • (Score: 5, Interesting) by iwoloschin on Sunday November 30 2014, @02:24PM

    by iwoloschin (3863) on Sunday November 30 2014, @02:24PM (#121273)

    Here in the Boston area taxis are terrible. The "Greater Boston Area" actually consists of several independent cities, Boston is the largest, but many people are going to Brookline, Cambridge, Somerville, Medford, etc, all of which are within a couple of miles. If you're in Boston proper you can only flag a Boston taxi, so if they drive you to Somerville, they can't legally catch a flagged fare to take back to Boston, they have to deadhead all the way back to Boston. Then there's an artificial scarcity so there's never a taxi when you need one, because they're all driving back from some place that they can't catch a fare from.

    If the taxi industry is suffering all I have to say is too bad for them. It's a government sanctioned monopoly with "guaranteed" pricing, until capitalism knocks on the door with a rocket launcher. Yes, there should be some regulation of the taxi (or taxi-like) industry, but medallions are not the way to go.

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