The NYTimes yesterday had a piece on how New Yorkers had made inroads on the Chicago taxi industry.
To recapitulate the Times' previous articles on taxis in NYC:
- to operate a cab you need a medallion, issued by the city. IMO medallions are a way to limit entry, by restricting entry you're able to manage the prices/rates charged and limit turmoil. That's very similar to supply management for tobacco in the US and dairy and eggs in Canada; also it's similar to the marketing co-ops for things like cranberries
- NYC had a bidding war for the medallions, which savvy investors used to manipulate prices and make exploitative loans to individual drivers hoping to gain an asset for their retirement.. With Uber and Lyft hitting, medallion prices have plunged, and drivers are unable to repay the loans, forcing them into bankruptcy.
- in yesterday's article the same pattern was followed in Chicago by wised-up guys from NYC.
I've noted the parallel with agricultural supply management already. While the medallion program likely worked reasonably well for many years, as did the tobacco program, with time smart people with money found a way to exploit the rules and make money, gaining their returns at the expense of those with fewer smarts and/or less money.
