Will D.C. Taxi Industry Become a Cartel Like NYC?
WASHINGTON EXAMINER -- The District’s open, all-are-invited taxicab industry is so saturated with drivers that the entire enterprise is threatened, according to a D.C. Council member who has filed a bill to cap the number of cabs allowed on city streets. Councilman Jim Graham introduced legislation to limit the number of taxicabs in D.C. through either a medallion system, like ones used in New York City and Chicago, or a certification system.The soaring number of taxicab operators in D.C. -- roughly 8,000, most of whom own their own cars -- is a "pressing and urgent problem," Graham said. There are more licensed drivers in D.C. per capita than any place in the world, he said, and new applicants continue to take the required class, giving them access to the driver exam administered by the D.C. Taxicab Commission. A glut of drivers could jeopardize the chances of any cabbies making an adequate living, Graham has said.
New York City's medallion system, established in 1937 during the Great Depression in response to a ballooning number of unregulated taxis, artificially capped the number of cabs on the road, to what is now about 13,000. The medallion program, however, made it very difficult for the average New Yorker to join the industry as an owner: The May 2009 price for an individual medallion, those held by owner-operators, was $568,000. The cost of a corporate medallion was $744,000 (see chart above, medallion prices have more than doubled since 2004).
MP: Isn't this an example of a "pressing and urgent problem" that would easily solve itself without government intervention, and a problem that will probably be made significantly worse with government intervention? That is, if there really is an excess supply of taxis in D.C. relative to the demand for taxis, that surplus will be automatically corrected and eliminated by firms/drivers exiting the industry in response to low prices and low/negative profits.
Just like a shortage of taxis would be automatically corrected by firms entering the industry, attracted to the "smell of profits" created by the high prices. As long as the taxi industry has easy entry for new firms, and easy exit for existing firms, which seems to be the case, any surplus or shortage of taxis will automatically be eliminated.
By restricting the supply of taxis with costly medallions, that regulatory action will create a government-enforced taxi cartel, with an artificially low number of taxis and artificially high prices. Membership fees to join the cartel will became extremely expensive (more than half a million dollars to join the NYC Taxi Cartel), and the average person will be priced out of the cartel.
HT: Coyote Blog
Posted @ 4:56 PM Post Link
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30 Comments:
You are making good points prof. that make sense but is seems around the world for some strange reasons taxis industry is a cartel. These reasons include:
(1) Security (elimination of potential opportunists)
(2) Use of taxi drivers by police as informants
(3) Artificial creation of wealth
(4) Unions and political influence
This is a great question for thought where the obvious answers (regulated vs. Free market) may be inadequate.
Yes, I agree that in a market without profits there will be exit. But there might a constant supply of new entrants doomed to failure if anyone can slap a sign on their vehicle.
I saw this happen in Kosovo after the Serbs were driven out (no pun intended). There was a glut of both taxis and new gas stations. There was no control over safety and many taxis took you someplace to be robbed or sold into slavery. Otherwise, the gypsy cabs (literally gypsy in this case) were mostly patient people who got by with whatever they made. So there were pros and cons to a completely unregulated system.
You'd be impressed though. There was such a great entrepreneurial spirit even if they didn't quite know what they were doing. People picked up odd jobs any way they could. 2000 people lined up outside Camp Bondsteel on the mere rumor of new jobs. Workers expected no tips for their services - their paycheck was their tip.
On the other hand, when it became known the US government was going to pay people who had owned land on what is now Camp Bondsteel, not a day went by without someone filing a claim. People would squat in the offices of abandoned factories and claim to be the new owner/operator.
With no street lights or signs, and roads filled with potholes, people still managed to get through intersections without directions. There were lots of accidents though and speeding near schools was almost a sport. The lack of public goods was detrimental, but not nearly as chaotic as some might imagine.
Back to cabs: if you're going to limit cabs, there should be an auction for the monopoly franchise and the revenues returned to taxpayers.
But there might a constant supply of new entrants doomed to failure if anyone can slap a sign on their vehicle.
Easy answer: not our (or anybody's) problem.
There was no control over safety and many taxis took you someplace to be robbed or sold into slavery.
What does this have to do with regulating the supply of taxi drivers? Please explain how limiting the supply of taxi drivers will have any effect on whether the drivers commit such heinous crimes.
> But there might a constant supply of new entrants doomed to failure if anyone can slap a sign on their vehicle.
I think the experience of others will help reduce this as a problem. Knowing that there's not enough money to be made is a rather adequate pressure to not "hop on the bandwagon"
> Easy answer: not our (or anybody's) problem.
Even better answer.
> There was a glut of both taxis and new gas stations. There was no control over safety and many taxis took you someplace to be robbed or sold into slavery.
Oh, gimme a break. How is this even vaguely relevant here, where, at the least, one must obtain a commercial driving license and so on, just to be a taxi driver?
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Remember that old saying: 'follow the money'?
The medallion program, however, made it very difficult for the average New Yorker to join the industry as an owner: The May 2009 price for an individual medallion, those held by owner-operators, was $568,000. The cost of a corporate medallion was $744,000...
Hmmm, seem like yet another grab for the wealth of the productive by the parasitic in government...
I mean let's just as a thought experiment say that DC passes this nonsense and caps taxis at 8,000 vehicles...
Let's just say the DC government decides to charge $100K per permit (or whatever) to drive...
There's an interesting chunk of money there for the politicos to waste...
Just like health care. Government regulates the number of health care providers.
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Easy answer: not our (or anybody's) problem.
Well yes, it's a lot of peoples' problems. It's a severe overallocation of resources which is not self-correcting, i.e. market failure.
At first blush I agree with you, but take a look at the coordination failure among home builders who over-built and you'll understand that there are indeed cases where markets fail to properly allocate resources.
If I suspected for a moment that eventually the stream of new cabbies would dry up from word of mouth, I'd heartily agree. But I've seen too many restaurants set up shop in places where other restaurants failed and they thought they'd have better success. City planners do indeed have a role to play in preventing continuous business failure and protecting public safety.
What does this have to do with regulating the supply of taxi drivers? Please explain how limiting the supply of taxi drivers will have any effect on whether the drivers commit such heinous crimes.
For the same reason you would likely eat in a restaurant with a business permit and a health inspection but might be less likely to buy from a guy on the corner selling burritos out of a "cooler". Some mistakes happen only once.
The medallions ensure that cab drivers understand the laws concerning taxi service. The removal of the medallion is a punishment for violating those laws.
Nothing prevents a "legit" business man from doing terrible things, but the process of becoming legit is also a barrier to entry for people whose sole intent is criminal enterprise.
Flying into DC, I only take Washington Flier - the only authorized cab company. I wouldn't dare get into one of the gypsy cabs no matter how low their rate is.
If a stranger sees you on a street corner and pulls over to offer you a ride, you'd be foolish to get in the car. But paint the car yellow and slap lights, signs, and meters on it and it has an air of legitimacy. The medallions are a recognizable symbol of a legitimate business and the cost of the medallion is a barrier to entry for people who only have ill intent.
Becoming "legit" creates too much evidence for you to think you'd get away with your crimes for very long.
I did, though, take a serious risk with a friend in Skopje, Macedonia. We hired a cabbie to show us around town. Later, he invited us to his home. Since we had chosen him rather than him choosing us, we felt a little more assured, but as we got farther out of town we got concerned. It turned out he was totally honest and we had a great adventure eating dinner with his family and visiting a church in the mountainous hillside near a beautiful dam. I wouldn't have taken that risk in DC. :)
Ya rolls ya dice, ya takes ya chances.
"City planners do indeed have a role to play in preventing continuous business failure and protecting public safety"...
Amazing!
City planners and government have NO role (unless stated in the city/village charter) in preventing continous business failure...
I sense 'creeping stimulus syndrome' at play here...
At first blush I agree with you, but take a look at the coordination failure among home builders and you'll understand that there are indeed cases where markets fail to properly allocate resources.
I'm not sure what you're talking about here.
But I've seen too many restaurants set up shop in places where other restaurants failed and they thought they'd have better success.
Lots of people think restaurants are easy to run. They aren't. Again, not our problem and not any politician's business.
For the same reason you would likely eat in a restaurant with a business permit and a health inspection but might be less likely to buy from a guy on the corner selling burritos out of a "cooler".
I've bought plenty of tacos from a guy on the corner. I doubt half of them were licensed. Some of them even had ... bacon.
The medallions ensure that cab drivers understand the laws concerning taxi service.
Licensing doesn't ensure quality or competence. Any cabbie contemplating kidnapping a passenger isn't likely to care about losing their license. The stiff prison sentence they'll get for kidnapping and rape/murder is should be adequate deterrent.
Tell me, how many instances can you point to in the united states where cab drivers without very expensive medallions sold a person into slavery?
Disagreeing with the medallions/limitation on supply does not imply no government regulation. Plenty of towns get by with unlimited numbers of taxis that are registered.
The brands then have an incentive to hire trustworthy drivers. Furthermore the state can and does dictate who can operate for hire vehicles, ie, no criminal element.
Quote from Robert Miller: "Well yes, it's a lot of peoples' problems. It's a severe overallocation of resources which is not self-correcting, i.e. market failure."
How is it an over-allocation of resources and how is it not self-correcting?
The whole premise of your argument is meer opinion. Who decides what is over-allocation? Who decides what is the correct allocation?
Under your system (a government system) it would be some politician or bureaucrat who will undoubtedly first consider his own interest. And if he gets the allocation wrong, there will be no consequences for him, only continued power and benefits.
In the early 1970s I was a teaching assistant in a course that used a reading about the New York medallions as an example of regulation gone bad, of government-created monopoly. The question was how could one undo the status quo without causing serious capital losses for those who had bought medallions. It is amazing not only that the system is still intact, but also that others want to emulate it.
I live in NYC for the last 27 years. During that time the price of Taxicab medallions are up at least 500+%. Taxi drivers have not seen much of that increase, since the market clearing price for drivers remains unaffected by the endless fair hikes and surcharges; the additional cash flows have simply raised the capital cost of the medallions (the right to run a taxicab). Currently I’m the admisntrator for the estate of a 26 year old killed by a NYC taxi last summer. Insurance coverage is limited to $300K per occurrence and $75k per person, each cab is separately incorporated to prevent any further access to assets for additional liability; these are shocking numbers in a society in which middle class parents will spend probably $500k raising and educating a child through college. You might ask how NYC came to such a state of affairs, after all this is a city where million dollar compensation package are not unusual. The answer is that the value of NYC taxi medallions is closing in $750k, so these medallion owners creates a powerful constituency of rent seekers who are busy buying from the political class a long list of favors. Thus when your local DC council person proposes to institute a system like NYC they know quite well that this will create a lucrative source of new tax revenues, but even more important a powerful source of campaign contributions, new bureaucracy patronage jobs with regulators, a medallion brokerage business along with finance, and finally out right bribes an kick backs as this business is increasingly controlled by governmental affairs regulators (one of Jim Graham’s bailiwicks). In short, this proposal is all the evidence anyone would need to know that Ward 1 Councilman Jim Graham is quite willing to be corrupted.
The question was how could one undo the status quo without causing serious capital losses for those who had bought medallions.
The answer is: they lose money without compensation. You have no property rights in a government-created monopoly. It is inevitable that those who benefit from bad law will lose money should we move to better law. Nothing to do but say "sorry" and move on.
You are all so thoroughly screwed up about this I need to explain from the beginning.
Federal, State, and Local governments have the specified power to regulate commerce under their respective Commerce Clauses.
Local governments have zoning laws. These laws determine how particular parcels of scarce land will be used. In my example, the city has (in its bad judgment) designated a parcel of land as commercial space. It has also issued a permit for a restaurant. It has been built to fire, health and safety codes to be a restaurant.
The 1st restaurant fails and the space changes lessors. It is costly to have the space re-zoned for another use, so the most likely next occupant will be another restaurant. That restaurant fails, and the next, and the next. It turns out there is not enough demand to support another restaurant, no matter how good the owner is.
The problem is NOT the failure of the free market. The problem is the failure of GOVERNMENT. They have misallocated scarce land in a way that creates incentives for successive business failures. Until the city changes the zoning, the problem seldom goes away.
If you think I'm crying tears for the failed business owners, you're wrong, but this is everyone's problem. The successive failures result in loan defaults. There are negative externalities to adjoining businesses. There is an overallocation of resources to restaurants - a market failure (caused by government).
Overallocation is evident whenever there is excess supply. If the market were at an optimum, all businesses in operation would be sustained at normal profits. The mere observation of successive failures of new entrants tells us there is a problem with the price/profit information mechanism.
I'm not trumpeting the praises of government. Quite to the contrary I'm pointing out its utter FAILURE.
Back to taxis. If there is a continual problem of hack owners failing to make a profit, there is a problem with the price-information mechanism.
In a free market with no market failure, only supra-normal profits cause entry. In the dysfunctional taxi market, there is entry even though there are no additional profits. This leads to an inefficiently high allocation of resources to taxis.
Market entrants (or existing suppliers) are misinformed about the actions of competitors and enter only to find there is not enough demand.
Home builders do exactly the same thing. They see an increase in demand for houses and so they build more houses, but they don't take into account the building of their competitors. The guardians of the gates- government - issued too many permits for not enough demand. This leads to a systemic failure in the market.
The problem is that you guys don't believe in market failure. This is a well understood body of microeconomic thought that you need to embrace.
The gypsy cab problem in New York was huge. Gypsy cabs were robbing people through intimidation, forcing people out in places where they'd be robbed by associates, and refusing to take fares with long turn-around times.
I am not arguing in favor of medallions nor am I defending the way New York implemented it. Medallions are just a visible symbol of a legitimate operator just like a business permit and health inspection on the wall of a store.
Like Cap-and-Trade, medallions are an efficient system if and only if government selects the optimal level of production. Government seldom, if ever, precisely measures the externality.
Like I said, you would likely not climb into the car of a person who pulled over and offered you a ride. If you would do the same just because the guy painted his car yellow and put a taxi light on top, you're a fool!
> you'll understand that there are indeed cases where markets fail to properly allocate resources.
... as opposed to the perfect record of central planning systems?
LOL.
The argument doesn't hold merit because any other system is consistently, with time, far worse.
> Becoming "legit" creates too much evidence for you to think you'd get away with your crimes for very long.
Absolutely stupid as an argument for "medallions".
All you've done is evinced a justification for unlimited business licenses for taxi drivers, nothing more.
Total fee? $100, maybe $250.
Such licenses fix every single concern you've used to argue in favor of medallions, which have ONE SINGLE PURPOSE -- to introduce a government-sanctioned monopoly privilege.
Under "free market systems" see "classic techniques used to thwart".
> Federal, State, and Local governments have the specified power to regulate commerce under their respective Commerce Clauses.
Thank you for the lesson, Mr. Civics!!
This is a perfect excuse for unfettered regulation of pretty much everything that people do for a living, isn't it?
Oh, wait, that idea absolutely sucks.
-------------------------------------=====
This "power to regulate commerce" was never intended by the founders to lead to unrestricted control over property usage, much less the degree of misuse/abuse it's attained in the last 50 years.
> The 1st restaurant fails and the space changes lessors. It is costly to have the space re-zoned for another use, so the most likely next occupant will be another restaurant. That restaurant fails, and the next, and the next. It turns out there is not enough demand to support another restaurant, no matter how good the owner is.
The problem is NOT the failure of the free market. The problem is the failure of GOVERNMENT. They have misallocated scarce land in a way that creates incentives for successive business failures. Until the city changes the zoning, the problem seldom goes away.
So, you figure, what, MORE GOVERNMNT REGULATION is the solution for what is clearly a f***ed up government policy in the first place?
Governments should generally be strongly limited in their ability to dictate how a property is used. I'll "kinda" grant that there is some social benefit to restricting it a bit -- I probably don't want to live right next door and sharing a wall with a discoteque suddenly -- but for the most part it should be limited to a half-dozen or so primary classifications, with some areas zoned for multiple uses -- "Commercial", "Residential", "Industrial-Manufacturing" are the only three that come to MY mind as legitimate distinctions. I'll assume one can come up with another three or so which might be legitimate.
THAT fixes your damned zoning problem quite adequately, since once the property fails time and again as a restaurant, someone else will figure it for something else entirely.
> Back to taxis. If there is a continual problem of hack owners failing to make a profit, there is a problem with the price-information mechanism.
In a free market with no market failure, only supra-normal profits cause entry. In the dysfunctional taxi market, there is entry even though there are no additional profits. This leads to an inefficiently high allocation of resources to taxis
It's called Free Enterprise, bub. You should ponder instead:
a) The alternatives are generally far worse, like spiraling out of control taxi prices... because once you start limiting the number of them, you can guarantee there will be massive political clout applied to both cutting back further or at least limiting expansion of the number of licenses in the face of economic and population expansion.
b) You basically bar the entry to anyone who Has A Better Idea... Suppose someone wants to start a "Green" Taxi service, which uses only Prius's as a vehicle. While I certainly think such an idea would fail as unprofitable, it's not my say that such things shouldn't be tried.
As a matter of fact, it should be subject to no one's imprimatur.
This is how innovation works in a Free Enterprise system.
And your "medallions" do nothing more than bar the entry for said individual(s) from starting such a company, by massively jacking up the entry price.
Q.E.D. -- You may grasp government, Mr. Civics, but you don't apparently grasp Free Enterprise.
Misallocations are a part of any inexact process. Central Planning is woefully ineffective at grasping where such things actually are occurring, and only manage to deal with a narrow range of such problems. And inevitably, by the power they grant to bureaucrats -- usually unelected ones -- they get twisted until they no longer fix the problems they're supposed to deal with OR the problems they naturally fail to deal with.
Government-based central planning of anything but the loosest sort is a long road, if not a short road, to mismanagement.
This is so because it lacks any effective correction methods.
Bureaucrat's don't get fired for not doing their job right, unless it's really really, really obvious. And even there, it requires a lot of pressure from outside forces to cause it to happen.
> Bureaucrat's don't
DOH!
"Bureacrats". The apostrophy gnome snuck that in when I wasn't looking.
It's called Free Enterprise, bub.
The name is Bob. Robert will do.
"Free Enterprise" does not mean systemic stupidity. Market failures are a fact of markets. Whether and how we deal with them is a matter of public policy and therefore subject to both debate and vote.
As a subject of debate, the matter needs to be explored scientifically, not dictated by your dogmatic adherence to a political-economic religion of non-intervention.
I said in my first comment, "This is a great question for thought". You aren't thinking - you're just jerking your knee in response to the mere suggestion that a centralized solution could exist.
Sometimes doing nothing is best. Sometimes doing nothing is stupid.
Government is often wrong.
The first problem with taxis is that customers can't "shop" for them, so the market is already dysfunctional. The second problem is that you have too many sharks chasing too few fish. Coordination failure is a Nash Equillibrium in a competitive game which is not Pareto Optimal.
When a solution is not Pareto Optimal, resources are wasted. A coordination mechanism, if one exists should be employed.
You should ponder instead:
a) The alternatives are generally far worse
I never said they weren't. I made quite a point that government failure is just as likely as market failure and often more destructive. I do not dispute that New York has and DC will do very badly in allocating medallions.
What I will not admit, until proven otherwise, is that there exists no system (centralized or decentralized) that can do better than no action at all.
Unrestricted auctions of medallions is one step in the right direction. Zoning of private ambulances is a method which has worked very well and is something to consider for taxis.
When 50 cabs are lined up at a given time outside the airport for only 20 passengers and 30 people are waiting on street corners for cabs which never come, you have to admit there's a problem in the market.
b) You basically bar the entry to anyone who Has A Better Idea
I barred no ideas. I am not a champion of medallions nor the foe of good ideas. In the free trade of medallions, good ideas can still buy their way in. There might be a good way to issue and trade medallions to achieve a better allocation of resources.
And your "medallions"
These are not my medallions. I'm not defending medallions as implemented by New York. I merely proposed that medallions are an easily identifiable symbol of a legitimate business operator, a useful bond for adherence to laws, and a valuable commodity for free trade of operating rights.
I fully recognize the potential for corruption and cronyism. Medallions need not be costly to the point of becoming a barrier to entry any more than business permits are.
I wouldn't trust the city governments of NYC, DC or San Francisco to operate a lemonade stand.
Q.E.D. -- You may grasp government, Mr. Civics, but you don't apparently grasp Free Enterprise.
I completely grok both civics and free enterprise. You possess no concept whatever of MARKET FAILURE - the inefficient, wasteful, destruction of consumer and producer surplus.
The more you parrot "free market" the more you sound like Benjamin's warped notion that libertarian beliefs are that of total anarchy. You cannot wish away market failures any more than socialists can wish away the failures of government.
Government-based central planning...mismanagement. This is so because it lacks any effective correction methods. Bureaucrat's don't get fired for not doing their job right.
You get no argument from me on this at all. I've been a victim of government bureaucrats my entire military career. I kill bureaucrats on sight.
When 50 cabs are lined up at a given time outside the airport for only 20 passengers and 30 people are waiting on street corners for cabs which never come, you have to admit there's a problem in the market.
I admit there's a problem. Whether there's a problem with the market is another question. Why are taxi drivers doing that? Is there some government incentive or rule you forgot to mention? Cab fares are regulated, could that cause this apparently unproductive behavior? Is it in fact the case that serving airport passengers is more lucrative despite the huge amount of wasted downtime? If so, why?
This is a perfect excuse for unfettered regulation of pretty much everything that people do for a living, isn't it?
No, it's the limited power we voluntarily GAVE government to do the bare minimum of providing public goods, addressing externalities and other market failures.
So, you figure, what, MORE GOVERNMNT REGULATION is the solution for what is clearly a f***ed up government policy in the first place?
No, I figure that government caused the problem in the first place, exactly as I said, and I made no suggestions whatsoever for more government regulation.
I simply provided an example of a failure to properly allocate scarce resources which neither the government nor the free market got right. But where the free market would continually get it wrong because of ingrained government and economic incentives, some brighter-than-average city planner in government might actually admit that he made a mistake granting one too many permits for restaurants in that neighborhood and fix it, especially when the property yields no tax receipts.
I'll "kinda" grant that there is some social benefit to restricting it a bit
Which is 'kinda' all I ever suggested. Now, please rigorously define "a bit" for us so we can all go to sleep.
You seem to think that my "bit" is bigger than your "bit". I have no interest in comparing "bit" sizes with you because we're on the same team, Sparky.
It's this simple: If the free market got it right and there was no cost to society of the misallocation of resources, we wouldn't be having this terribly interesting conversation about the number of taxi cabs in DC which none of us really cares about!
I admit there's a problem. Why are taxi drivers doing that? Is there some government incentive or rule you forgot to mention?
No, because we observe the "taxi cab problem" existing in places with no regulation. The existence of the problem is why government jumped into it in the first place (not that government has a better solution).
The problem stems from an imperfect search mechanism between buyers and sellers. Sellers don't coordinate their search areas for maximum aggregate profits. This creates a market failure where too many cabs chase too few passengers, even if sufficient demand exists for every cab. This wastes gasoline, driver search time, and passenger wait time.
The "taxi cab problem" is a classic economic problem like the "Farm Problem", the "Lemons Problem", the "Principal-Agent Problem" and the "Prisoner's Dilemma".
This is what I'm trying to tell you guys. I'm not offering medallions as a solution here. I have no solution. I'm trying to explain why:
1. This conversation is economically interesting, and
2. Why YOU don't have a solution to this problem.
Guys with PhDs (Classical, Austrian, Keynesian, Game Theorists) have been writing about this problem for decades trying to find centralized and decentralized mechanisms to solve it.
One "enterprising" guy suggested using GPS hailing to route the closest cab to awaiting passengers who call from their phones. He's actually thinking about practical solutions to this problem, not clinging dogmatically to a quasi-religious economic doctrine.
Sputtering "free market" aint going to make this problem go away.
But where the free market would continually get it wrong because of ingrained government and economic incentives, some brighter-than-average city planner in government might actually admit that he made a mistake granting one too many permits for restaurants in that neighborhood and fix it, especially when the property yields no tax receipts
Ah, I see the problem here. You seem to think that the government should fix failures caused by itself by adjusting its policies, whereas we think the government should butt out entirely. No planner should be making mistakes in how many restaurant permits are granted, because government shouldn't be in the business of issuing restaurant permits. It's none of the government's business how many restaurants open in its jurisdiction.
No, because we observe the "taxi cab problem" existing in places with no regulation.
Which would be where? If there are too many cabs chasing airport fares, and no cabs chasing street fares, presumably there is a profitable competition-free opportunity to chase street fares. My supposition is that this market-clearing function doesn't happen because the would-be entrepreneur can't get a taxi license, such things being a scarce commodity in most cities. Licensed cabs stay at the airport because they don't have to worry about competition taking the business they don't want and either (1) they think the airport is more profitable or (2) they're just plain lazy. If licenses are cheap and easy to get, somebody will service the underserved. Even poor neighborhoods will get some kind of taxi service; witness Detroit's eternal quest to stamp out unlicensed jitney services.
No, Randian, you see nothing.
The moment you "admitted" there was a problem I thought there was hope for you, but then you digressed into your strange little imaginary world.
You conclude the restaurant discussion by saying government shouldn't be in the restaurant permit or zoning business. Apparently you've never lived anywhere where that was the case. I'm your neighbor and I decide one day to turn my house into a restaurant or a gas station. Hell, why not both. I'm doing this just because I bloody well feel like it. To make a long story short my business operations are quite disruptive to your lifestyle. You might even decide, "Hell, Rob is making money with his Eat and Gas so I'll show him- I'll do the same!"
Yeah, that's really smart. Even Oh Bloody Hell admitted the need for zoning laws but in the Nirvana of your brain dead coma the free market makes it all ok. He even gave a great example of an externality- a discoteque. You thinks it's ok to have discoteques everywhere anybody decides to put them.
Yes, government should be in the zoning business. Yes they will make mistakes. Yes, they might be idiot bureaucrats. Yes, they can and do often fix their mistakes. And no, the free market will never, ever solve the problem because there IS NO MARKET for the goods we're talking about. They are public goods and externalities. They exist. You can't wish them away. They are market failures and the loss in social surplus is unacceptable.
Where do we observe the taxi cab problem? EVERYWHERE. That's how it got a name, just like the farm problem and the principal-agent problem. These are problems people see and want solved, but the market doesn't solve it. There are long cab lines at the airport and waiting prospective passengers in the city. All the cabbies are losing money.
No, there IS NO MARKET SOLUTION to the taxi cab problem. The majority of easy fares are at the airport. If you don't go to the airport, you could get all the other fares. Oh, but then enough of your bright colleagues have the same idea and you have too many cabs searching the sparse feeding ground of the street. You all lose money. So most, if not all of you, go back to the airport. Everyone is back in the same bad equilibrium. Hacks lose money and exit. But when you reach a profitable level, there are not enough cabs for passengers. So more cabs enter the market. Same thing all over again.
There is a good reason economists have given this problem a NAME and write papers on it.
No, there IS NO MARKET SOLUTION to the taxi cab problem.
Yes, there is. Let cabs charge whatever they want. The reason airport fares are "easy" is because cab rates are regulated in every city I've been to, and they can't charge enough on a street fare to make up for the time and gas required to search for them. If street passengers won't pay, then they won't have taxi service. Oh well.
You conclude the restaurant discussion by saying government shouldn't be in the restaurant permit or zoning business
Who mentioned zoning? I was responding to your claim that government should reject a restaurant permit on the grounds that too many previous restaurants at that location failed. If somebody wants to start a restaurant on restaurant-zoned property, the government should have no right to refuse. It's none of their business whether it might be successful, nor is it their business to "protect" people from starting a business some bureaucrat thinks will fail.
As for zoning itself, yeah I don't like zoning. That said, the problem with zoning is that it's too hard to change and too subject to manipulation. One person doesn't like restaurants, one doesn't like retail, and in the end nobody gets to do anything with the land because politicians are cowards by nature and don't want to offend anybody. That's wrong, nobody should have their property made worthless by nosy neighbors.
Yes, there is.
No there is not. I already explained to you that the Taxi Cab Problem exists in places where there is absolutely no price controls or government rationing of licenses. Do a Google search of "too many taxi cabs".
Let cabs charge whatever they want.
Fares are not the problem. You haven't read or understood a word I said. The problem is with the lack of coordination between suppliers because of imperfect information and search costs.
The inability of customers to shop for cabs is another problem.
Why is it so difficult for you to understand that a taxi ride isn't like going to your choice of stores and picking a brand of diced tomatoes?
The first mile of taxi fares is always the most expensive, so cabbies prefer a string of short trips, NOT long drives with no guarantee of a return fare.
So why do they congregate at the airport, theaters, or bars? Because that's where they are most likely to get a fare rather than searching. There is a free market equilibrium which is not the best outcome for all the taxi drivers and customers. Resources are wasted in the process.
The same problem occurs in nature with bears fishing for salmon at waterfalls. Humans need to be smarter than the average bear.
If somebody wants to start a restaurant on restaurant-zoned property, the government should have no right to refuse.
Yes, they have the power to refuse, they can refuse, and under certain circumstances they should refuse.
As I explained, the initial decision to zone/permit the space as a commercial/ restaurant was faulty so changing it is a correction to the problem.
The space has a built-in government incentive for failure. The free market will just keep piling restaurant after restaurant into the same space just because it is economically advantageous. By re-zoning or re-permitting, you are changing a goverment restriction.
From the status quo, you are arguing in favor of preserving a stupid government decision rather than aborting it.
From a clean slate, you would allow people to build any business they want anywhere they want. This is monumentally stupid. You've never seen this in action - I have.
I've seen too many gas stations thrown up with fuel leaking into groundwater (coordination problem and lack of regulation).
I've seen forests cut down by people individually getting their own firewood (a "common pool resource" problem).
I've breathed the foul air of farmers burning stubble in their fields because it's "easy" (an externality).
I've seen "dust bowls" due to government incentives to over plant certain crops whose demand suddenly vanished (the free market responding poorly to misguided government incentives).
Go see a Third World Country where government does not control zoning and permits. Find a clue.
It's none of their business
Yes, it's very much their business. Land is not like other goods. It exists in a fixed quantity. It takes extraordinary measures to allocate it efficiently. This is precisely why government has been given the power of zoning, eminent domain, etc. These powers are specified in our Constitutions.
As for zoning itself, yeah I don't like zoning. That said, the problem with zoning is that it's too hard to change and too subject to manipulation.
I agree that zoning is a political hot potato that is abused by greedy, grasping politicians. Eminent domain is frightening, particularly given the recent Supreme Court decision.
But I enjoy having Interstate Highways built on land which used to belong to other people. I enjoy actually having cabs respond to my calls. I enjoy not seeing all the restaurants in my neighborhood going out of business because a rigid bureaucrat wouldn't change a zoning/permit plan.
You've just convinced me that talking to a libertarian about market failure is as fruitless and exasperating as explaining to a socialist that there's no such thing as "price gouging" or a "living wage".
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