The Globe’s multi-part Spotlight series on the staggering dysfunction (and worse) within the Boston taxi industry is well worth reading. According to the Globe’s reporting, the system is rife with petty bribes and corruption, and heavily stacked in favor of the owners of the 1,825 highly-prized “medallions” – an individual medallion is now worth about $600,000 – that authorize the owner to operate a taxi, and against both drivers and passengers.
Why should there be only 1,825 medallions available? I’d think that anyone who has ever tried to hail a cab in Boston would be in favor of getting more cabs on the streets. What would be so wrong with deregulating the system by removing the artificial cap on the number of cabs in Boston? I’m all for requiring operators to pass background checks, have safe driving records and a safe vehicle, carry adequate insurance, etc. But why shouldn’t anyone who meets those qualifications be able to drive a cab?
It’s hard to see how the medallion system as it exists in Boston serves the interests of anyone other than the medallion owners. Why shouldn’t it be scrapped?
Allowing unlimited numbers of taxis could mean way more cars on the streets, causing more traffic, perhaps not even making it much faster to get around at all.
Perhaps instead of scrapping medallions, increasing the number available would be better, and leaving a certain portion of them for small businesses.
Again, that’s me playing devil’s advocate. I don’t know anywhere near enough about the topic or problems to come to definitive opinions.
An unlimited number of taxis is not obviously a good thing. However, there clearly aren’t enough in Boston today.
Increase the number. Use the revenue from the auction to fund proper inspection and regulation of the taxi businesses. And, of course, when a medallion owner is “unfit” (read the Globe piece), take the dang thing away. The others will clean up their act, you can be sure.
P.S. I’m intrigued by Ryan’s small business suggestion. I’m not sure how to implement it, but it is intriguing. I’d like to see a sort of owner-operator system.
P.P.S. I’m pretty sure that (a) a taxi from any city or town can pick you up anywhere *if you call them to schedule a pick up*, but also that no taxi can troll streets looking for someone hailing outside of that taxi’s home city or town. That includes [well, prevents] Boston based cabs trolling Cambridge looking for fares. This system, by the way, is asinine. It makes perfect sense for taxis in Boston, Cambridge, Somerville, and Brookline to be able to pick up anywhere in the four communities. After all, if I take a taxi from Brookline to the airport, it now has to go back to Brookline empty. Similarly, when I take a cab from Somerville to downtown Boston, it’s got to drive back to Somerville empty — passing by folks who want a taxi on the way. Setting up a regional system would be so much more efficient for both drivers, owners, and passengers. The medallion system effectively precludes this kind of arrangement.
Theoretically, an unlimited number or *possible* cabs would have the effect of finding the actual *optimum* number of cabs: simple population studies (if you consider taxis/fares analagous to predator/prey, heh) would suggest that a burdensome number of cabs could make the choice (as you allude) not even worth it, and so, the extra cabs would go out of business as the fares/prey seeks alternate, less painful, means of travel.
Also, the finite number of medallions has the effect of artificially inflating the price of a taxi ride: aside from the obscene price of a medallion (already in addition to the high “natural” overhead of owning, fueling and maintaining a fleet of cars) the limitation on the overall numbers of cabs doesn’t exert any downward pressure on prices… it’s all upwards; the smaller the number of cabs the less likely any given cab is to be found anywhere but in the most expensive districts… then they start charging extra go to the poorer districts. (Though they don’t call it that… They just redefine their area of operation as the rich areas and charge ‘out of area’ fees. Don’t even get me started on whether or not this is a deliberate part of the implementation of the medallion system… What, you thought a black man having trouble getting a cab was an individual problem?).
Again, an unlimited number of *possible* cabs will have the effect of finding the *optimum* number: too many cabs will drive prices through the floor and below that which can sustain a fleet of cars, or even one car for individual operators, and some will go out of business. Prices will then rise as the number of cabs dwindles until they get too high and people take taxis less.. then they’ll fall again… rinse lather repeat. There must be a ‘sweet spot’ between too many cabs and a low price. I say we scrap the medallions and find that spot.
I just think this issue is a lot more complicated than it looks at first glance.
For example:
-If almost anyone could jump in their car and call it a taxi, what would that do to the ability of professional cabbies to make a living? The quality of the ride? Traffic?
-There’s a difference between what is economically viable and what’s best for a city. More taxis may be able to keep themselves afloat than the city can handle for reasonable traffic patterns, end result being you’re paying more cabbies to keep you in traffic longer, perhaps missing that important business meeting, lunch or interview.
As I understand it, there reaches a point in traffic patterns where a few more vehicles on the road makes a very large difference in how smoothly traffic operates. That’s data I’d like to see, and to see how it would fit in with considerably more cabs.
-We also have to think about climate change. Let’s say you were 100% right, the taxi industry could ‘self regulate,’ and cabs became much cheaper and it wouldn’t even hurt traffic. Would that make people more or less likely to use public transportation or hop on their bike or even attempt to carpool before taking a taxi?
Honestly, my gut is to expand the number of taxis by a sizable margin or even to do as David says and eliminate the medallion system. I’m just presenting some questions, because I think there’s more that goes on in making these decisions than meets the eye.
All in all, I say let’s follow the data and try to find a system of best practices that takes into consideration price, convenience, quality, the environment, general fairness and the avoidance of large monopolies.
Are there comparable cities that have eliminated medallion systems or have considerably more taxi cabs per resident? How well do they work?
These are the kinds of situations where noble pursuits can sometimes lead to bad policy. Let’s see if what seems most fair here will actually make things work better or worse.
for taxis, what would that mean? It doesn’t have to mean that anyone could operate a vehicle and call it a taxi. After all, different things, such as general contractors and plumbers are licensed to insure that certain standards of skill and knowledge are met. That license system doesn’t limits for numbers of participants, the marketplace handles that. Couldn’t there be enforceable standards for taxis and drivers and let the marketplace sort out how many a community could support? Also, how does the current “Livery” license tag system work? That looks like little more than a work around to the limited number of taxi medallions available. I see them doing what looks like taxi service with only the most luxurious of them acting as formal limousines. It sounds like this is a problem that should be tackled by more than individual cities, but statewide.
If the Globe is to be believed, and I see no reason not to, then the ability of professional cabbies to make a living is already a trial.
Then end result, however, might just as easily be less non-taxi vehicles on the road in the face of increased use of taxis. If we return to the predator/prey model we can see that terrain/geography/etc can play a part… so there’s always more variables for which to account. One such variable here is non-taxi vehicles which is also a choice.
I think this is laudable. And I think the fact that the medallion system quite deliberately does not do any of these things is reason enough for it’s demise. We agree, I think.
They hate these things, and there are other weird rules like Cambridge based cabs can’t pick up Boston passengers but the other way around is ok.
Why can’t we do the same for liquor licenses?
We should regulate the operation, not allow a market that creates bad results and only really benefits entrenched incumbents.
are there cities without taxi medallions?
IIRC, Washington DC is the largest in the country without medallions. I’d also add that many smaller cities with really weak regulations don’t have medallions (like New Orleans).
Good regulations on taxis&operators and a medallion system are entirely independent. A community could have neither, one, the other, or both.
All the current system is doing is keeping taxi fares artificially high and blocking market entrants like Uber and other innovators. Anyone who can meet required standards should be allowed to drive a cab, just like anyone who can meet required standards should be allowed to start a company.
Fares are set by a regulatory agency, based on cost of operations. A medallion system *may* result in fewer taxis in circulation than Adam Smith’s hand would have, and this seems to be the case in Boston.
The societal cost of the taxi system in Boston is service shortage, not artificially high fares.
… besides the fact that there is a lot of wiggle room in ‘cost of operation’, the Boston Police Hackney Unit, the ‘regulatory agency’ that sets the rates does so with a great deal of input from the medallion owners: setting rates is not the reason the BPD regulates taxis, preventing crime and seeing to the safety of the street is… So the ‘input’ from the medallion owners is probably the controlling variable since the BPD Hackney Unit doesn’t have much money in the budget for economists, city planners or, apparently, mathematicians.
To be sure the rates are regulated, but this does not mean that they ARE NOT artificially high. To be sure, the cost of medallions are artificially high and if this impacts at all on the ‘cost of operations’ (duh) then of course the cost of operations is going to be artificially high. And, if you think about it, who would chase such high priced medallions if they didn’t think they could have some control of the fares?
Consider rental property in a Town. Relatively fixed, with some change at the edges. So, what about
Rent is market based. Sure, the owner can charge “whatever he wants” provided he’s got a tenant, but loosely speaking, the market determines the rent. Owners can’t influence the going rent in the market in any appreciable way. Yet, investors still buy housing with the intention of renting it out. Lots of different reasons. It’s an asset which generates some cash flow in the immediate sense, and there’s an idea that the value of the asset itself will appreciate faster than inflation. One need not be able to influence the cash flow the asset generates in order to make it a good investment, be it real estate, stocks, or taxi medallions.
As for the ‘input’, you don’t think that the Mayor’s office would be sensitive to increased taxi fares, given that loads of people in Boston — including bidnessfolk — ride taxis? I can assure you, the regulators have about 625,000 reasons to try to keep the fares as low as they think they can be. Finally, if the market (or, at least, the individual investor) believes that the value of the medallion will appreciate faster than inflation, there is no “cost of operations” associated with the purchase price of the medallion.
… rents appreciate over time and, only under special circumstances, do they depreciate. All that is required for ownership of rental property is, in fact, patience. I once had a landlord tell me rent was going up $200 dollars/month. When I refused to pay and moved out he ended up raising it another $300 over that. And he got it.
So that’s a huge difference from taxicabs, the cars of which are used depreciate as you drive them out of the lot… after which you drive them 24/7 and have to replace them annually. Taxi medallions are an entirely different species from housing units.
I don’t think so, else why would they invest the power to set rates with the police? Whatever else you want to argue you definitively cannot say that setting transportation rates forms ANY PART of the core competencies of the BPD. I don’t go to the plumber when I need dentistry and I wouldn’t buy a hamburger from a hardware store. I suspect that neither you nor Hizzoner does likewise…
If the Mayors office was all that sensitive to the outcome they’d use a more finely honed tool to get the job done.
The medallion system is like the airlines before Jimmy Carter deregulated them (except for the current subsidies to places like Nantucket and the Vineyard).
Airfare was expensive – and only the 1% traveled on vacation.
Get rid of the Medallions – keep a simple licensing system – and we would have a taxis system the envy of any city.