I suppose I’ve had a hard time articulating exactly why I’m so irritated at the way Uber, Lyft, and Sidecar have been allowed to bully their way into the Seattle market. But fortunately, economist Dean Baker does a much better job:
If Uber and Lyft force a re-examination and modernization of taxi regulation in San Francisco and elsewhere, they will have provided a valuable public service. However it can’t possibly make sense to have a stringent set of regulations for traditional cabs, while allowing Uber and Lyft to ignore them just because customers order these services on the Internet.
If we go the route of ending the requirement that taxies need medallions, there is also the question of what we do about the sunk costs for people like my cab driver, who is currently out $250,000 from buying a medallion. On the current path, these medallion owners will just be out of luck. Their life savings will be made worthless by young kids who are better at evading regulations than immigrant cab drivers; so much for the American Dream.
It is worth considering this issue in light of the larger issue of the growing inequality we have seen over the last three decades. Uber, like Amazon, has allowed a small number of people to become extremely rich by evading regulations and/or taxes that apply to their middle class competitors. Amazon and other Internet-based retailers have used their tax advantage to put tens of thousands brick and mortar stores out of business.
This is a pretty simple story. In a country where rules are enforced or not enforced to benefit the rich and screw the middle class, you will have increasing inequality and a middle class that is seeing few of the benefits of economic growth.
What we are witnessing is a giant transfer of wealth from tens of thousands of mostly middle class medallion owners nationwide into the pockets of a handful of clever, law-evading entrepreneurs and their venture capitalists. Uber’s gambit that local governments would not crack down on its illegal operations has paid off handsomely—it now enjoys an implicit market capitalization of $17 billion.
“This is not supposed to happen in a market economy,” says Baker:
To encourage efficiency, we would want a proper set of regulations and taxes and have them apply equally to everyone. The point is to encourage people to make profits by providing better products or lower cost services, not to get rich by finding clever ways to evade regulations.
There’s much more to Baker’s piece, and you really should read the whole thing.
Cabs are like most brick and mortar stores: an antiquated model less convenient than new offerings. Uber and Lyft are innovators. They offer greater convenience, choice and comfort for consumers than do cabs. It’s sad that cabbies may lose their investment in medallions, but that is a risk all investors bear. Cabs shouldn’t be rewarded with special protections because they fail to keep up with the market and with industry inovation. That would be unfair to innovators and consumers alike. Cabs need to catch up with reality or die like the dinosaurs they are.
Thanks for posting. I agree with this summary. ” The point is to encourage people to make profits by providing better products or lower cost services, not to get rich by finding clever ways to evade regulation”
If you work hard and play by the rules, you get screwed.
So uber and Lyft are charging too much f0or their services?
OK ,,
Why not propose that the City launch its own website to do the same fefin thing?
What does Uber get for its 30%?
For that matter, why don’t the cab companies do it themselves?
Frankly, the entire medallion idea never made sense. Why limit the market? If you want to help middle class folks compete, then restructure the medallion program into a license program with high standards. E.g have the cars pass regular tests. for mechanical and cleanliness issues. Require the drivers to have a special license that incudes passing a test on driving on ice and handling a preggers passenger.
Three cheers for Uber and Lyft!!
Uber and Lyft are not “innovators”, they are pirates. Pirates have no interest in regulating themselves or being regulated. Baker knows that; everyone else knows it also. But Baker and Goldy and some of us care about what’s happening; those who don’t care use terms like “innovation”.
They are like patent trolls. They are getting rich by cheating the system, by hacking the rules instead of actual effort.
I don’t care if they are cheaper, so long as they follow the same rules as everyone else doing what they are doing, in being a taxi service.
@1 Actually, the people and government got them to invest huge bucks in their medallions with a promise that industry was limited and regulated. That is the whole point of the medallion. Then the government turns around and deliberately doesn’t enforce the laws on the books. Are you advocating that the government should return the money given them for medallions and invested in technology based on an expectation that they would enforce the laws and regulations on the books? If not, why not?
@mirror,
The city has long had the ability to release another 207 city taxi cab licenses/medallions but has not in order to keep the medallion values inflated (which also means fewer cabs on the streets). When was the last time that yellow cab or any current operators lobbied hard for those additional medallions to be released, before this past year and a half of TNC-legislation ?
http://clerk.seattle.gov/~publ.....314_1a.pdf
@7: I am absolutely not advocating that the government return their money. Government policy changes all the time. Anyone who bets on government policy and then loses when that policy changes is taking the risk any investor takes, and bears the burden for losing after betting the wrong way. Cabs are no different. I feel badly that they chose to invest in an outmoded business model. But cabs are like print newspapers: a dying, outmoded form whose time has come and gone. It is sad that cab drivers might lose jobs or investments, but their model is not what the market demands. If cabs want to survive, they should step up and offer the convenience and functionality offered by Uber and Lyft. If they cannot or will not, then there is no reason government should prop them up. Knowingly trudging on in an outmoded business model does not deserve any support or encouragement. Just because the cab and medallion system has been around for decades does not justify keeping it around.
If regulation is the concern here, then government should not ban new modes. Instead, government should reasonably update regulation to permit and encourage innovation, and make sure new forms meet safety, insurance, and other requirements for the public good. Here, favoring an outmoded form to the exclusion or detriment of an explosively growing new mode is not good policy, and is not even the reasonable application of existing policy. Even if Uber and Lyft are regulated out of existence or severely capped, other apps – which will probably be even harder to regulate – will spring up like weeds. Innovative ride services are here to stay. Burying our heads in the sand in denial of reality is not going to help consumers.
Throw open the market — to amateurs, part-timers and the underemployed (and whatever they drive) — and medallions lose their exclusivity. Without which, they lose their value, too.
“As soon as you do away with limited access, over a period of years, the taxi industry will wither away and die,” says Michael Shakman, a Chicago attorney who is suing the city on behalf of investors and companies whose business would not exist without medallions.
http://www.washingtonpost.com/.....?tid=sm_fb
Uber and Lyft aren’t just evading regulations. They’re also evading the idiotic cost of being allowed to drive a cab in the first place.
In New York, taxi medallions have topped $1 million. In Boston, $700,000. In Philadelphia, $400,000. In Miami, $300,000. Where medallions exist, they have outperformed even the Standard & Poor’s 500-stock index. In Chicago, their value has doubled since 2009.
Has the value of a cab ride in Chicago doubled since 2009? How much less competitive are cabbies due to their need to service the debt required to purchase a medallion?
As with similar limited items such as seats on the New York Stock Exchange, a market develops, and can be manipulated, for things in short supply. Open the market and the value of the items falls. Open the market and the consumer benefits.
Goldy, are you defending the cab drivers, or those who own and control the medallions?
Amazon and other Internet-based retailers have used their tax advantage to put tens of thousands brick and mortar stores out of business.
There is a tax advantage in some aspects. In others, there is not. A Washington-based customer ordering from Amazon pays full sales tax. I believe, as well, that use tax is owed on out-of-state purchases by Washington residents, and is paid to the state by the purchaser. You don’t expect Amazon to shoulder the blame for criminal acts committed by its customers after the sale is completed, do you? I suppose you could if Amazon sold a .45 pistol that was subsequently used in a crime. But what if it sold Charmin?
The true advantage is having a very large selection of items, and warehouses or supplier relationships rather than brick-and-mortar stores staffed with pimply-faced young adults soon to be paid $15/hour to demonstrate last year’s models still languishing on the shelves. Best Buy, call your office.
When Amazon comes in 25% lower than the store price, it isn’t because it doesn’t have to charge you the 9.5% sales tax. It’s because its business model has streamlined inventory and delivery.
If you want to claim that Amazon enjoys an advantage because people try stuff out at the stores and then order from Amazon, feel free. You just can’t use that to support your contentions in this post.
@11 I had to buy a new modem/router. I checked prices and Newegg was cheapest. I put it in my cart and when I went to put the order through they had jacked up the price. So I checked the price at Staples, got in my car and bought it. With tax, it was just a few dollars more, and I knew if there was a problem I could just drive down the street and exchange it.
I rarely find items that are 25% cheaper, unless Amazon is trying to dominate a market and put the competition out of business.
Rant – Amazon has the worst website. I find most things on it by other search engines rather than trying to find it directly through the site. Mostly I use Amazon to find vendors and just go to their website, cutting out the middle-middleman.
Some of the more notable blogs – Glenn Reynolds’ and Ann Althouse’s sites, as examples – serve as portals to Amazon. You click through to Amazon, buy there, and a cut goes to the blog. I’m not sure where I read it but I might have read that it’s 4%.
If you’re going to put a brick-and-mortar out of business you might as well help out the blog you’re reading while you’re doing it. It’s patriotic – if you live in WA state you’re also paying your taxes.
Unless that’s evil or shit.
Glen Reynolds and Ann Althouse are neo-liberal hacks like Bickle here.
It’s past time to end the abuses of the system by the wealthy to aid the wealthy.
Here’s a good one. An app that is used to facilitate the capture and sale of public parking spaces.
http://www.komonews.com/news/t.....93221.html
If Uber and Lyft force a re-examination and modernization of taxi regulation in San Francisco and elsewhere, they will have provided a valuable public service.
See, this is what lots of people tried to tell you, and you didn’t want to hear. The medallion/artificially restricted supply model incentivizes individual car ownership, something that has significant land and environmental costs we should all seek to avoid, by making it harder to not own one. Revisiting regulatory structures without artificial supply restriction, and the ridiculous medallion “market” that results from it is a fundamentally positive thing, regardless of how it came about. If people invested their life savings into the right to exploit others based on being part of an artificial, that’s too bad for them, but I’m not sure why I should they’re owed a bailout any more than someone who invested in the wrong company is. Evading regulations isn’t something those of us on the left should celebrate, but neither is buying a right, based not on actual capital but on buying membership cartel, to exploit the labor of others. Playing the “but some of the medallion owners are middle class” card is an emotional appeal, but not a rational reason to keep a broken system. “Playing by the rules” is a nice metaphor, but doesn’t exactly capture “purchase cartel membership and provide shitty service while stifling rational supply increases and innovations that improve service.”
Goldy, are you defending the cab drivers, or those who own and control the medallions?
He’s defending those who possess medallions. He tries to paint this as a working class position by claiming, not entirely incorrectly, that some (but how many? unclear, some are, of course.) of them aren’t rich. “Some people who make money off this ridiculous system aren’t rich” is a pretty low bar to justify keeping a system that provides terrible service, thus incentivizing individual car ownership, but it’s apparently a good enough for Goldy.
@16, @18 You know what, instead of twisting my words, just go fuck yourself. Really. I’ve written thousands of words on this topic over the past 15 months, and I don’t really feel the need to respond with any more detail than this to personal attacks from selfish pricks like you.
I wonder if the people whining that Uber and Lyft should break up the the medallion/artificially restricted supply model will mind terribly when a vastly expanded HB1 Visa program breaks “artificially restricted supply model ” for young urban professional workers, driving down costs to minimum wage levels. After all, why should regulations apply to HB1 Visas either?
@ 19
Oh, yeah. It’s the legal, educated and skilled visa holders we should be worried
http://abcnews.go.com/blogs/po.....ain-in-us/
about.
Contrary perspective: More HB1 visa holders means more customers for Lyft and Uber. And if there’s downward wage pressure they won’t be able to afford the higher cab prices.
No, I don’t think they’ll mind, terribly.
That Bickle character reminds me of W.C. Fields: “Anything worth having is worth cheating for”.
Why pay for college for US students? It costs too fucking much. Bring in those H1b guys and you can keep them under your thumb by threatening to ship them back to a slum and sweatshop in Mumbai. As an added benefit, you can bust a couple of unions and cut more city revenue and pocket that money too. Boo fucking Hoo about the Uber and Lyft
driverssuckers. As long as the VC guys get paid, that’s all that matters, ain’t it?No downside I can see. No sireee bobbeee. That Bickle’s a fukkin’ genius, he is.
Seattle does not currently have a medallion system. It isssues operator’s licenses.
The Mayor’s mirage of an agreement between the TNCs and taxis includes a conversion to medallions as a booby prize for the taxis in exchange for an unlimited number of underinsured TNCs.
Of course the medallions would be worthless.