Monopoly

Put the Taxi Cartel in the Rearview Mirror

21st-century technology and entrepreneurial ingenuity are opening up the market for hired cars.

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If driving a taxi in Chicago is your dream job, have I got a deal for you. You get to fight traffic, deal with drunks and deadbeats, work long hours and breathe exhaust fumes nonstop. And I can get you into it for just $360,000.

That's what you can expect to pay for the city medallion required to operate a cab. First, though, you have to find someone who wants to sell: The number is currently fixed, and the city generally holds auctions only when it reclaims existing medallions.

If that actually sounds like a terrible deal, it is—for aspiring drivers. But it's sweet for some people. In recent years, an investor who bought New York taxi medallions would have done far better than someone who put money into the stock market.

In Chicago, most medallions are owned by cab companies like Yellow and Checker, which rent them out to drivers. For the most part, the taxi companies got the hood ornaments cheap years ago. In 1991, medallions sold for about $28,000. In 2006, the price was less than $79,000.

The reason they cost so much is that the city's curbs on competition foster handsome returns. The number of medallions has been capped at the same level since 1997. By restricting the supply, the city assures the income of medallion owners—at the expense of consumers and drivers.

But that venerable business model is in peril. Today, in Chicago and many other cities, the established cab industry has to contend with on-demand "ride-sharing" services like Uber, Lyft and Sidecar that let drivers and passengers opt out of the hyper-regulated, supply-starved taxi system.

Customers can use a smartphone app to request a ride, or order online. Someone with a private car and affiliated with one of the companies will show up, with the fare and tip charged to the user's credit card or PayPal account.

Though the price is often lower than what taxis charge, the services add surcharges during busy periods, which can greatly elevate the cost. But customers are notified of the boost in advance, so they can avoid it.

Critics call it price gouging. Economists call it market equilibrium. Higher fares bring more drivers out in rainstorms or on New Year's Eve to meet the demand. Passengers who prefer a lower fare can take a cab—if they can find one.

The innovation has worked well enough for ride-sharing firms to attract plenty of customers. So Chicago Mayor Rahm Emanuel has proposed to accommodate them with regulations less stringent than those on cabs. They would have to do checks on drivers for criminal as well as traffic offenses, carry liability insurance and get vehicles inspected annually.

But the taxi industry sued, demanding that the city shut down the "Unlawful Transportation Providers." The industry claims it's looking out for the interests of poor and minority passengers, whom Lyft and Uber are not obligated to serve. Amid the crocodile tears, you might forget that cab companies are infamous for dodging that obligation.

One of my editors, who lives in a safe, middle-class, largely African-American neighborhood on the South Side, has never, in over 30 years, been able to get a taxi to come to her house. Uber says (though it does not document) that 40 percent of its Chicago trips begin or end in underserved areas.

The company had to apologize when The Chicago Tribune reported that one driver had a felony conviction for burglary. But taxi regulation isn't foolproof either. In 2005, a driver killed in a fight with a passenger was found to have a battery conviction that should have barred him from operating a Chicago cab. A 2012 Tribune investigation found the city consistently has failed to enforce laws to keep dangerous taxi drivers off the road.

At the heart of the opposition is naked self-interest, not consumer protection. Permitting competition, the lawsuit says, "threatens seriously to devalue more than 6,800 medallions currently in use in Chicago."

Yes, it does. Breaking up a cartel is bad for the cartel participants. Having pushed for and profited from a system that artificially limits the supply of cabs, the medallion owners now argue that it must be preserved for their benefit.

But 21st-century technology and entrepreneurial ingenuity have demonstrated the value of opening up the market for hired cars. The industry has had its way for decades. It's time to put consumers in the driver's seat.

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  1. Hell for me is driving in a major city.

    1. You just need to learn the tricks and secrets, dude.

      1. I prefer anti-Traffic Missiles. Even if you don’t hit, it gets the people to vacate the road pretty darn quick.

        1. Too messy. I prefer to find the routes that most people don’t know about. A favorite of mine was getting into and out of Manhattan using the Willis Avenue and Third Avenue Bridges. It gets you in and out, no traffic (because so few people use them), no tolls, no Triborough, no bullshit. Tricks and secrets.

          1. But that requires more time and effort in the blighted cities than anyone should be required to endure. These cess pits are to be avoided at all reasonable cost.

        2. One of these would be cool.

          1. But the traffic ram requires more fuel than an ATM, even where there is no traffic to clear.

          2. Slug Bug blue! Or do we not play that anymore?

  2. You know who else was all Uber this and Uber that?

  3. You know who else was all Uber this and Uber that?

  4. OT, ridiculous labor law in action:

    Workers at VW’s TN plant voted to not join the UAW. Ze Germans are pist (which, if the mountains of video available on the internet is any indication, they enjoy). One VW board member went so far as to threaten to not open another southern plant unless it has a works council.

    http://www.freep.com/article/2…..-labor-UAW

    Buuuuuuuuuuut “under U.S. labor law, a works council cannot be established without union representation.”

    1. WTF is a “works council” and why should such a thing have any power to demand policies that would deliberately harm the business?

      1. The model is basically as follows: general labour agreements are made at the national level by national unions and national employer associations, and local plants and firms then meet with works councils to adjust these national agreements to local circumstances.

        Sounds reasonable. The hilarious part is…

        In the United States, the NLRB has held that works councils in the absence of a recognized labor union are a form of company union prohibited under section 8(a)(2) of the National Labor Relations Act[3] This theory has been upheld in the courts; the controlling case is Electromation, Inc. v. NLRB (1994).

        But I bet if the vote was only to establish a works council and nothing else, then it would’ve passed.

        And this part is full of lulz:

        …there are three main views about why works councils primarily exist: to reduce workplace conflict by improving and systematising communication channels; to increase bargaining power of workers at the expense of owners by means of legislation; and to correct market failures by means of public policy.

      2. http://en.wikipedia.org/wiki/Co-determination

        With a sane union this works rather well. It wouldn’t work with the UAW slackers and thumb breakers involved.

        See the section on Germany here:

        http://en.wikipedia.org/wiki/Supervisory_board

        1. My head hurts reading those.

          How could a company even operate under such conditions?

          1. It works with sane, intelligent union officials who know something about business economics and have a view beyond the current contract negotiations.

            Some of the German unions are better than others at this. German industry works pretty well in general under this regime.

    2. pissed that they’re getting cheaper labor? dumkopfs..

      1. Based on my dad’s experiences with the german subsidiary of his employer, a large number of Germans really don’t understand the concept of businesses being sustainable only when they consistently turn a profit.

        1. I think it’s fair to say that “a large number of…[Americans]…really don’t understand the concept of businesses being sustainable only when they consistently turn a profit” either.

        2. The union reps, at least those I worked with for years, certainly understand the concept of profit for sustainability.

          The outfit I dealt with:
          http://en.wikipedia.org/wiki/I…..e,_Energie

          provided near-MBA business training for their higher level local reps. They pretty much knew what they were talking about.

      2. The screecher in the article is actually a union rep on the board, not a shareholder representative.

    3. German law seems to allow a type of worker participation which would be deemed a company union in the US. So to get anything resembling a workers’ council, nthe Krauts have to let American union officials wet their heak. At least that’s my understanding. So they cut a protection racket deal with a union, bu4 the actual workers rejected the arrange, emt, and now the workers get the blame for not being as corrupt as their bosses.

  5. Having pushed for and profited from a system that artificially limits the supply of cabs, the medallion owners now argue that it must be preserved for their benefit.

    It appears that they (cabbies) cannot compete, even with the deck stacked in their favor.

    1. I doubt many of the actual medallion owners have ever been in a cab except as a passenger.

  6. OT: Can anyone post from chrome on an android phone?

    Every time I “click” into the text box, it scrolls up to the top of the page.

    This is a reason only issue.

    That is one of many issues I have with the reason website in chrome on mobile. But the biggest. I have to fire up my laptop to post.

    1. Last time I tried I could post from Chrome in Android, but there have unquestionably been weird behaviors when using it. Kill Chrome and try again.

    2. well, you’re not alone at least. I’ve given up on trying to post comments on the go. Chrome and Dolphin

    3. How are you able to follow threads on your phone?
      I couldn’t use reason without reasonable.

      1. I read Tony and Shreek. **shudder**

        1. I read the udernames and then manually skip those posters I don’t want to hear from. Works great, no need for using substandard browsers, or configuration options.

    4. I have the same issue.

  7. Did you know minor-league BB players have “no option” but to work for nothing? “CynicalOne” claims so in the comments:
    “Baseball sued over low minor-league wages”
    http://www.sfgate.com/giants/a…..245784.php
    Slaves, I tell you!

    1. Ive always thought it questionable that there was a MLBPA, and not a PBPA.

      The union doesnt even try to represent minor leaguers. Because unlike most unions, the MLBPA actually makes money for the players instead of being a drain, and if they expanded it would be.

  8. Is there a way to see the posts I’ve made recently? I don’t always comment, but when I do I prefer dos equis….. I mean, but when I do, I’d like to see any follow ups.

    being advanced in years, I don’t always remember where I posted. For example, I asked what FYTW means… and now I can’t find it to see if anyone answered.

    Rats!

    Oh… in case it matters… I use IE8 at work. Chrome or Firefox at home.

    Thanks.

    1. I thought that I hit submit, but I must not have…

      If you download and use Reasonable, it makes the comments much easier to read. It highlights new ones and links to the most recent ones.

      FYTW means “Fuck You That’s Why.”

      1. Thank you.

      2. My best effort at finding Reasonable seems to be a link to Facebook… which I don’t have.

        So I guess I’m stuck with the default.

        Thanks anyway.

  9. I have to wonder how working in these services interacts with auto insurance. I assume that that could get kinda gnarly.

  10. “But the taxi industry sued, demanding that the city shut down the “Unlawful Transportation Providers.” The industry claims it’s looking out for the interests of poor and minority passengers, whom Lyft and Uber are not obligated to serve.”

    I fail to see the problem. Now that there are more people providing transportation services, the cab companies can spend more time serving poor and minority passengers.

    Oh wait, I forgot. These fuckers don’t ever argue in good faith.

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