Why Taxi Medallion Owners Don't Deserve a Government Bailout

Innovation, not government policy, is transforming the taxi industry.


Andrew Murstein (right), with his father Alvin. |||

Who's going to shed a tear for Andrew Murstein, the wealthy founder and president of the investment firm Medallion Financial, if his net worth plummets because the high-tech car services Uber, Lyft, and Sidecar obliterate the traditional taxi industry? Among other things, Murstein's firm is a holding company for taxi medallions—transferable licenses to operate cabs that in New York City sell for over $1 million a piece. Mediallions are now losing value because Uber and its competitors—whose drivers don't pick up hail passengers off the street and therefore aren't required to hold medallions—are luring drivers and passengers from the traditional cab industry.

But how about New York City's independent cabbies whose retirement savings are tied up in medallions they borrowed to purchase and have spent years paying off? Or the "40 young Ghanaian men" featured in Emily Badger's recent story on Chicago's taxi industry, "mostly in their 20s," who in the past two years bought medallions in the Windy City with "little or no money down?" As Badger notes, these investments are probably already underwater, since a recent city auction of medallions apparently drew no bidders.

In an article in Truthout, economist Dean Baker recounts how he caught a ride from a worried Pakistani driver in San Francisco who saved for years to buy a medallion, and is now spending $2,300 in monthly mortgage payments on the purchase. Baker argues that his driver's losses should be viewed "in light of the larger issue of…growing inequality:"

On the current path, these medallion owners will just be out of luck. Their life savings will be made worthless by young kids who are better at evading regulations than immigrant cab drivers; so much for the American Dream.

In last week's episode of Russ Roberts' podcast EconTalk, Duke University political scientist Mike Munger mused about whether medallion holders deserve a government bailout:

Suppose that we don't take any action and the value of these medallions falls to zero. Are we obliged to offer compensation, because we in effect made a regulatory decision that is a taking? This property right, this medallion, had significant value. We made a choice, without due process, that said we are going to reduce the value of this medallion to zero…There is a difference between private property and…rent-seeking…[But] I'm not as sure as I was that the difference is as clear as I thought.

Here's why medallion owners shouldn't get a bailout, and why the issue is far more clear-cut than how Munger and Baker frame it

||| Source:

: As I mentioned above, medallions are only for cars that pick up hail passengers, not for car services, which were never required to hold these exclusive permits. Uber, Lyft, and Sidecar aren't  "evading regulations." Several states have enacted new laws to insure that their drivers carry commercial insurance, but medallioned cabbies still hold a monopoly on picking up hail passengers off the street.

By introducing great mobile apps, Uber and its competitors simply made car services more convenient for many customers than stepping off the sidewalk and sticking an arm in the air. In other words, it's technological innovation not a policy change that's transforming the cab industry.

As Emily Badger notes, taxi medallions have "been the best investment in America for years," outpacing the S&P 500 by a longshot (see her chart above); with great reward comes great risk. Even small investors shouldn't be protected from the consequences of their investment decisions.

In this recent Reason TV video, I looked at how Lyft is transforming D.C.'s taxi market:


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  1. Rent seekers deserve nothing.

    If the medallion was taken by the government, then they should get compensation. If the rents the medallion brings them goes to zero, tough shit.

  2. Here’s a crazy idea: New York City should be required to buy back the medallions at market rates. Maybe it will teach them not to do stupid things like this in the future.

    1. Sure, but they can wait until the market rate is zero.

      1. True.

    2. Who does that really screw? And I don’t think the government learns lessons the same way an individual or corporation does.

    3. New York City is the people propping this asshole up. You think they would hesitate to give him a few million taxpayer dollars to relieve his “distress?”

    4. Only if by “New York City”, you mean the politicians out of their personal savings.

      Otherwise, New Yorkers get screwed twice: first by the introduction of the taxi medallions, then by having to buy them back.

      (Of course anybody who chooses to live there really has to expect to get screwed)

    5. Only if by “New York City”, you mean the politicians out of their personal savings.

      Otherwise, New Yorkers get screwed twice: first by the introduction of the taxi medallions, then by having to buy them back.

      (Of course anybody who chooses to live there really has to expect to get screwed)

  3. Cartel cabbies have a special place in my heart. Right there with policemen, union teachers and the Westboro Baptist Church.

    Fuck em.

  4. I like what my city, Minneapolis is doing. They are letting Uber, Lyft, etc. operate in the city, but in the spirit of fair competition, they are somewhat deregulating the taxi industry.

    Council committee approves new rules for ride-sharing services

    1. Frey’s new TNC ordinance was paired with a series of deregulatory measures for the taxi industry sponsored by Ward 6 City Council Member Abdi Warsame.

      Under the revised taxi cab rules, cab drivers would no longer have to carry a safe, physical map, fire extinguisher, Department of Transportation medical card, emergency triangles, fill out trip sheets or pay $200 for a downtown cab stand permit. Drivers would also be allowed to park in residential areas and be able to use their cabs for personal use, which are both currently illegal.

      Cab companies would no longer be required to go through the government for driver training and vehicle inspection, maintain a physical dispatch office or advertise in the yellow and white pages. The number of cabs required to start a taxi service would be reduced from 15 to five, and a complex annual fare adjustment formula mandated by the city would be scrapped.

      “I believe that the taxi cab industry is overregulated and that the market is saturated, and with the entrance of the TNCs I saw an opportunity to deregulate some of the issues taxi cab drivers were facing,” said Warsame. “This work was collaborative, but no one is going to be satisfied 100 percent.”

      1. They had to carry a SAFE? WTF?

        1. Maybe some sort of dropbox safe to put the fares in so the taxis are less tempting robbery targets?

    2. the spirit of fair competition

      Andrew Murstein’s head just exploded.

    3. Mostly awesome.

      But this part…

      If the new ordinance passes TNCs will have to pay $35,000 annually to the city and up to $10,000 in fees if they do not offer handicap-accessible vehicles, which would go toward creating a fleet of vehicles to meet the needs of handicapped citizens.

      $35,000 each year plus another $10,000 if none of their private drivers have a handi-van?

      1. Never said it was perfect…

      2. Ah, the ADA… has there been a single piece of legislation in American history that is more akin to throwing money out the window?

  5. Mylan’s moving offshore.…..blogs&_r=0

    This tax-rate arbitrage among global companies creates a race to the bottom as countries try to outcompete one another until the rate becomes zero, a number that many shareholders might be thrilled about, but would be unlikely to produce enough money for the Treasury’s coffers.

    tough shit.

  6. Their life savings will be made worthless by young kids who are better at evading regulations than immigrant cab drivers; so much for the American Dream.

    The American Dream? is apparently A. govt protectionism, B. socialized risk, and C. stagnant industry.

    Thank you, Dean Baker, now kindly unfuck yourself on this subject.

  7. Reason that lost its reason…

    Cities around the world welcome investors and encourage them
    to invest in their infrastructure which includes public transportation systems.

    Investment done into regulated transportation – benefits the city.
    It’s 100% municipal revenue.
    Just like municipal bonds that municipalities are selling.
    In fact, the legal framework underneath both is similar if not identical.

    Now – out of the woodwork – come few who are against municipal
    revenue, against public transportation, against cities building
    more schools, improving local roads, and paying pensions to
    its retirees. And guess what they support ?

    Profits. Profits for foreign offshore-based private corporation.
    Refreshing, isn’t it?

    Realize – that ride-“sharing” corporations that are located
    offshore in famous tax-heavens, not only evade taxes, they literally
    privatize revenues generated by regulated transportation by de-facto
    running their own network of cars that follow no laws, pay not taxes,
    have no business permits to operate.

    It’s a 100% municipal loss.
    And that 100% municipal loss is now that offshore foreign corporation’s profit.

    It’s shame that no serious analysis was done before posting this
    article. If you want to promote private foreign corporation’s
    interest then join their ranks and work for your new overload
    dodging thousands of court orders.

    Other than that I enjoy reason… .but this article is totally
    and completely reason-less.

    1. Given the demographics of the cabby community, I’m pretty sure most of the cab wages are leaving the country anyways.

    2. Drink! Twice!

    3. BTW, Big Mike, this is a ridiculous hash of fallacies and talking points. Fuck off until you can at least make a coherent argument.

    4. Hah, you’ve seen nothing yet.

      Uber still has a CEO, and a recognizable corporate structure. If municipalities really want to fight it, they can impound vehicles, arrest drivers.

      When more automated and anonymous systems start coming online, there won’t be a head to cut off, or drivers to arrest.

      Good luck.

  8. I have said for decades that a workable compromise is to have a “stock split” whereby every medallion owner now owns four medallions, to keep or sell as they wish. That solves the near-term problem of a taxi shortage, and reduces the ethical problem of unfair restriction to market entry. Existing medallion owners can get back at least part of their investment. You could say that nothing they bought was actually taken from them. The split medallions could later be re-split to the point where they are moot, or phased out entirely over time.

    1. I proposed exactly the same thing. But that’s all superseded now by the e-revolution in car services.

  9. I have to use cabs quite a bit now due to work and such (getting a vehicle cannot come soon enough) so I have a great deal of experience with Tampa’s cabbies. Their companies are run by rent-seeking assholes and I for one am tired of the bullshit of waiting an hour or more for a fucking cab when I’m trying to get home. I’m also tired of the shit I get from cabbies cause I use my Debit card. If I could get cash all the time, I wouldn’t NEED a goddamn cab as I would have a vehicle. As it is, I’m checking into Uber and Lyft.

    Piss on bailouts. If the government made the goddamn medallions worthless, let the cabbies take it out of their goddamn rent-seeking asshole employers’ hides.

  10. I could have made this article much smaller:

    Why Taxi Medallion Owners Don’t Deserve a Government Bailout
    Because it isn’t the Government’s role to BAIL OUT any PUBLIC or PRIVATELY owned business.


  11. If you pay a thief to steal something for you, are you entitled to your money back if the thief fails to deliver?

    If you pay the government to give you an exclusive monopoly, are you entitled to compensation if the government decides not to be corrupt after all?

  12. I love it how Munger calls it a “taking” to let the medallion lose value, as if the medallion system itself was not a taking.

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