Reason’s Jim Epstein just produced this superb video on how Uber is creatively destroying New York City’s baneful taxicab monopolization system.
A temptation is to feel sorrow or pity for taxicab-medallion owners whose personal wealth, insofar as it has been based on these medallions, is now plummeting. Do not feel any sorrow or pity for these medallion owners. The wealth they are now losing to competitive forces was the product of government-imposed unnecessary restrictions on competition – restrictions that, for 78 years now, have artificially reduced the supply of taxi services in New York City and artificially raised the prices that taxi customers had to pay. Against the concentrated pain now being suffered by these former monopolists (or, put differently, by these former willing suppliers in a monopolized system) we must weigh the dispersed pain suffered by taxi customers in Gotham from 1937 until the arrival of Uber.
This dispersed pain is much harder to see than is the concentrated pain now being suffered by medallion owners. This reality, however, does not make this dispersed pain less real or significant than it would be were it more concentrated and (hence) more visible. This dispersed pain was suffered for decades, every minute of every day, by tens of millions of ordinary people seeking surface transportation in Manhattan and New York City’s four other boroughs. Every taxi rider in NYC, from 1937 until today, paid a price higher than the forces of competition would yield. This higher price was the product of an unholy alliance between medallion owners, taxi drivers, and New York City political officials. This higher price was the bitter fruit of cronyism.
And this dispersed pain, spread out over nearly eight decades and over tens of millions of people, while much less visible than is the concentrated pain suffered now by medallion owners, is in total much greater than is the concentrated pain. The taxi-medallion system was a clever cronyish method of hourly picking the pockets of unfortunate millions in order to line the pockets of a fortunate few. And while many of the fortunate few did indeed win genuine fortunes as a result of this corrupt system, a great deal of the money picked hourly, day after day and decade after decade after decade, from the pockets of innocent people was transferred to no one: it was simply wasted on supply restrictions.
Hail Uber! (But don’t hail a cab in NYC.)
