Way back in August 2015 I wrote a post titled "Uber Shows How To Break Crony Capitalism." At the time, Uber was just getting going in New York, and the taxi medallion system was just starting to crack. As recently as the previous year (2014), New York taxi medallions, conveying the exclusive right to pick up passengers on the street, had been going for over $1 million each. But the decline had begun:
[W]ith the advent of Uber, the value of the medallions has suddenly plummeted. This article from CNN Money in July reports that the value of a medallion is off by some 40% from its peak just last year.
The post described how the medallion system imposed large inconveniences on passengers and potential passengers, but had up to then been unbreakable due to vested interests of owners and lenders in the value created by artificial scarcity. The owners and lenders (mostly the latter) then made massive contributions to local politicians to assure the continuance of the system. At the time of the post, the taxi industry had just contributed a reported $500,000 to the first (2013) election campaign of supposed "progressive" Bill de Blasio, and, to no one's surprise, de Blasio was making fighting Uber a signature issue of his first term.
Here we now are, only about two and a half years later, and the former medallion taxi industry seems to be in its end game. The New York Post has a big article in today's Sunday edition, headline "Ride-sharing apps are driving NYC cabbies into financial ruin." The article consists mostly of a series of sad stories of medallion taxi drivers, mostly immigrant and mostly Muslim, who borrowed heavily to buy medallions at or near the peak of the market, and now are facing crushing debt and financial ruin. According to the article, the number of for-hire cars in circulation is now 100,000 or more -- swamping the number of medallion taxis, which is capped at 13,587. Ridership in the medallion taxis has fallen from about 475,000 per day in 2014 to under 250,000 today. The sad stories include a number of suicides. For example:
Last week, in the fourth driver suicide since November, Nicanor Ochisor, 65, hanged himself inside his Queens home, depressed over the plummeting value of the taxi medallion he owned that was supposed to finance his home and looming retirement. The value plunged from $1 million to around $180,000 over the last five years.
How bad has it gotten for taxi medallion prices? Mark Perry of AEI collects some of the latest data:
According to the most recent monthly report from the New York City Taxi and Limousine Commission for taxi medallion sales in February, most of the medallion sales are now foreclosures (24 out of 37) and one medallion sold for only $125,000. The January report was equally as bleak — one taxi medallion sold for $120,000 and the majority (47 out of 62) were listed as either bankruptcy or foreclosure sales.
Everyone should feel sympathy for the hardworking people who are having their financial lives ruined by this economic tsunami. On the other hand, this was completely inevitable, and only a matter of time in coming. For years, even decades, the government had been holding its finger in the dike to keep back the flood that assuredly was going to come. As hard as they fought to keep the system going, all of the industry participants actually would have been better off if the system had been allowed to collapse earlier, before the artificial government-created bubble had been blown up to such a gigantic level. Every politician who kept the system going for all those decades deserves a piece of the blame.
In my 2015 post, I noted that the 13,000+ medallions valued at about $1 million each represented a value of some $13 billion, which was "a good measure also of the value of the inconvenience inflicted on people in neighborhoods where taxis have been systematically unavailable for decades due to the corrupt crony system." And it wasn't just people in the non-prime neighborhoods. Prior to the advent of Uber, even in prime Manhattan there were many times when cabs were just nowhere to be found. If you were going somewhere where the mass transit system did not provide good access, you could find yourself with no way to get there. About 80% of the time, cabs would be plentiful; and the other 20% of the time, unpredictably and with no notice or warning, there would not be a cab to be found anywhere. Now, with Uber (and Lyft and Juno and Via) you can always get a car if you need one.
Instead of looking at how these changes have affected taxi drivers and medallion owners, shall we look at the effects on passengers? A guy named Nick Lucchesi has collected data from New York's Taxi and Limousine Commission to put together this fascinating chart:
It looks like monthly taxi/car service pickups have gone from about 15 million in 2014 to about 25 million today. Over the same time, subway ridership has actually gone up somewhat, and bus ridership down a little, so overall not much change on that front. Ten million people a month -- equal to more than the entire population of the city -- now have a way of getting somewhere that they previously did not have. The politicians had been only too happy to keep these people trapped in their homes to benefit a few campaign contributors.
There are plenty of other unsustainable government-created giveaway bubbles out there. My Exhibit A would be Medicare and Medicaid. That one is going to be quite the bloodbath when it bursts, but fortunately for me, I'm unlikely to be around by the time that happens. Too bad for the kids.