In 1997, city officials capped the number of medallions. Here's what subsequently happened to the cost of a medallion:
1991 $ 28k
2006 $ 79k
Over the course of 13 years, that's a whopping 1286% increase!
So, what's going on in the The Motley Monk's hometown of the Windy City?
To purchase a medallion, a would-be taxi driver must find a current cab driver who is willing to sell his. If the city reclaims a medallion, the city sells it at auction.
Okay. The Motley Monk gets the math. By limiting the number of medallions, the city guarantees cab drivers income. The city is happy. So are the cab drivers. Both make money on the sweetheart deal.
However, for anyone who has an iPhone, taxi cabs are becoming somewhat of a relic of the past. New modes of transportation have emerged. Just call for a car, receive a quote, pay with a credit card--oftentimes for less than the cost of a traditional taxi cab--and a driver and car will come to the designated location. Prices change depending upon the hour and customers are free to decide whether to to use the service or not when the price is quoted.
A nice, entrepreneurial, free market solution, no?
Not surprisingly, the cartel is suing its competitors...claiming, of course, to be looking out for poor and minority passengers who, the cartel alleges, are "underserved" by its competitors.
The truth is that those new modes of transportation--operating with less-stringent regulations--threaten to devalue the 6.8k+ medallions currently in use. According to Steve Chapman who exposed the cartel in a Reason Magazine article:
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
So, what's going on in the Windy City?
Why, it's nothing more than "business as usual" in Rahmville!
Let the discussion begin...
To read the Reason Magazine article, click on the following link:
"Put the Taxi Cartel in the Rearview Mirror"