Wednesday, November 30, 2011

Why Does a NYC Taxi Medallion Cost $1 Million?

In case it's not obvious, this podcast from Planet Money answers the question. 

8 Comments:

At 11/30/2011 3:39 PM, Blogger morganovich said...

one of the key drivers here that they leave out is interest rates.

look at the massive spike from the zero interest rate policies of late 2008.

the risk free rate fell massively and loans got cheap, upping the ability to and desirability of buying one.

 
At 11/30/2011 4:38 PM, Blogger Steve said...

Answered: http://blogs.reuters.com/felix-salmon/2011/10/21/why-taxi-medallions-cost-1-million/

"This is the real reason why medallions are so expensive: good old-fashioned interest-rate calculations. We’re basically talking about a real income stream, here, of about $75,000 per year. (Let’s assume, for the sake of argument, that the income from a taxi medallion rises at the same rate as inflation.) That’s a real yield of 7.5% on a $1 million investment — which isn’t half bad at today’s interest rates. Put it this way: how much would a bond paying a real yield of $75,000 a year cost? At the most recent auction, the 29-year TIPS cleared at an interest rate of 0.999%. At a 1% real yield, an income stream of $75,000 a year would cost you $7.5 million."

 
At 11/30/2011 7:23 PM, Blogger juandos said...

You missed the best part of why the price of a medallion is inflated steve...

You forgot the quasi criminal, socialist aspect of the New York city government: The number of taxicabs is set by law at 11,787. No new taxi licenses have been issued for over half a century, making the taxicab medallion (which is merely an aluminum plaque bolted to the hood of each cab) the central symbol of the regulatory system...

 
At 11/30/2011 8:21 PM, Blogger Robert Kafarski said...

New York City fascism in operation. If you really want to see how fascism is alive and well in New York City look into its system of regulating apartments (Rent Stabilization and Rent Control. Juandos - check it out !

 
At 12/01/2011 10:10 AM, Blogger bix1951 said...

government grant of quasi monopoly

happens all the time in other fields too such as

medicine
law
accounting
zoning laws
hurdles to overcome to get building permits
and on and on and on government habitually creates little monopolies for special interests and I wonder what the occupy movement thinks of that?

 
At 12/01/2011 11:06 AM, Blogger HarryB said...

It goes on (hat tip to the economist)....
(sarcasm)
There is significant danger from unlicensed interior designers, luckily the government is here to help:
http://www.asid.org/legislation/state_info/State+Licensing+Regulations.htm

The mind shudders at the emotional damage a bad scheme could wreak....


(end-of-sarcasm)

 
At 12/01/2011 11:17 AM, Blogger HarryB said...

This comment has been removed by the author.

 
At 12/01/2011 11:18 AM, Blogger HarryB said...

http://www.asid.org/legislation/state_info/State+
Licensing+
Regulations.htm

 

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