Williams: The Struggle for Economic Liberty

Here's my taxi question. If a person is law-abiding, has a driver's license, has a car or van that has passed safety inspection, and has adequate liability insurance, is there any consumer-oriented reason he should not be able to become a taxicab owner/operator? Put another way: If you wish to hire the services of such a person, what right does a third party have to prevent that exchange?

Many cities have granted monopoly power to taxi companies — the right to prevent entry by others. Sometimes this monopoly takes the form of exclusive government-granted rights to particular individuals to provide taxi services. In other cases, the number of licenses is fixed, and a prospective taxi owner must purchase a license from an existing owner. In New York City, such a license is called a taxi medallion. Individual medallions have sold for as high as $700,000 and corporate medallions as high as $1 million. In other cities — such as Miami, Philadelphia, Chicago and Boston — taxi licenses have sold for anywhere between $300,000 and $700,000. These are prices for a license to own and operate a single vehicle as a taxi.

Where public utility commissions decide who will have the right to go into the taxi business, a prospective entrant must apply for a "certificate of public convenience and necessity." Lawyers for the incumbent taxi owners, most often corporate owners or owner associations, appear at the hearing to argue that there is no necessity or public convenience that would be served by permitting a new entrant. Where medallions are sold, the person must have cash or the credit standing to be able to get a loan from a lender, such as the Medallion Financial Corp., that specializes in taxi medallion purchases. Medallion Financial Corp. has held as much as $520 million in loans for taxi medallions.

So what are the effects of taxi regulation?

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