Forbes Blame Restrictions on Medallions for Ultimately causing Suicides

Last weekend the New York Times reported another suicide within the ranks of New York City taxi drivers.  And while it’s likely that many factors played into this most tragic of acts, the Times indicated that the driver had purchased a once-coveted “medallion” that gave him the right to own and operate a taxi in the city.

 Crucial here is that a medallion which once fetched up to $1.3 million has plummeted to $175,000, and sometimes less.

The Times’ article inferred that the rapidly declining cost of the medallion led to the driver’s suicide.  Having gone into debt to purchase that which had historically risen in value thanks to its scarcity, this driver was suddenly deep in debt.

By now readers are likely aware of where this is headed.  The narrative offered up by the Times is that bareknuckled, disruptive, Schumpeterian-style market competition in the form of Uber, Lyft and other private transportation services has wiped out the once prosperous taxi industry in New York.
  For individual medallion holders who followed the rules in buying a commodity that legalized their work in the City, market forces have viciously erased the livelihood of some.  That suicides are the end result of unregulated market activity is supposedly another reminder of the life-ending cruelty that often comes with free markets.

Except that free markets are not the cause of the misery.  Though it’s surely true about Uber and other transportation services upending NYC’s taxi industry, and it’s surely true that the latter correlates with plummeting medallion prices, let’s not be foolish and pretend that Uber’s existence is causing the suicides.  Assuming the relation between crashing medallion values and Uber is true, the real culprit is government.

The reason why is obvious.  Since 1937 Yellow Cab-style taxis had to have a “medallion” or license to operate in New York City.  The New York Taxi and Limousine Commission (TLC) limited the number of medallions that could be sold.  In short, a false market born of governmental barriers to entry was created in New York.  This barrier to trade was all to help the medallion holders, not the consumer.

Consumers logically want as much competition for their dollars as possible.  NYC medallion-holders obviously felt differently.  Precisely because their market was protected from entry, medallioned cab drivers could maintain messy cars, and often drive in ways inimical to passenger comfort.  What they charged was dictated by the TLC, as opposed to market forces.  Why not? For the most part they were the only game in town.

Worse is what Jared Meyer noted in his 2016 book, Uber Positive.

  Even though New York City’s population had risen quite a bit since 1937, the number of medallions didn’t increase to reflect the population growth.  Instead, the number of circulated medallions for the not-so-ubiquitous Yellow Cabs has declined from 16,900 to 13,437.

And while it’s unlikely that he was the first New York mayor to favor medallioned drivers, Meyer adds that socialist leaning Mayor Bill De Blasio attained campaign funding from cab moguls wedded to the medallion system.

 They were as one would expect not fans of Uber and others like it. De Blasio's calls to slow Uber's growth were meant to protect the established taxi cartel to the detriment of consumers.

Source: FORBES