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Business
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Title: New York's Taxi Cartel Is Collapsing. Now They Want a Bailout.
Source: Foundation for Economic Education
URL Source: http://fee.org/anythingpeaceful/new ... psing-now-they-want-a-bailout/
Published: Sep 7, 2015
Author: Jeffrey A. Tucker
Post Date: 2015-09-07 08:57:43 by Tooconservative
Keywords: None
Views: 2000
Comments: 13

An age-old rap against free markets is that they give rise to monopolies that use their power to exploit consumers, crush upstarts, and stifle innovation. It was this perception that led to “trust busting” a century ago, and continues to drive the monopoly-hunting policy at the Federal Trade Commission and the Justice Department.

But if you look around at the real world, you find something different. The actually existing monopolies that do these bad things are created not by markets but by government policy. Think of sectors like education, mail, courts, money, or municipal taxis, and you find a reality that is the opposite of the caricature: public policy creates monopolies while markets bust them.

For generations, economists and some political figures have been trying to bring competition to these sectors, but with limited success. The case of taxis makes the point. There is no way to justify the policies that keep these cartels protected. And yet they persist — or, at least, they have persisted until very recently.

In New York, we are seeing a collapse as inexorable as the fall of the Soviet Union itself. The app economy introduced competition in a surreptitious way. It invited people to sign up to drive people here and there and get paid for it. No more standing in lines on corners or being forced to split fares. You can stay in the coffee shop until you are notified that your car is there.

In less than one year, we’ve seen the astonishing effects. Not only has the price of taxi medallions fallen dramatically from a peak of $1 million, it’s not even clear that there is a market remaining at all for these permits. There hasn't been a single medallion sale in four months. They are on the verge of becoming scrap metal or collector’s items destined for eBay.

What economists, politicians, lobbyists, writers, and agitators failed to accomplished for many decades, a clever innovation has achieved in just a few years of pushing. No one on the planet could have predicted this collapse just five years ago. Now it is a living fact.

Reason TV does a fantastic job and covering what’s going on with taxis in New York. Now if this model can be applied to all other government-created monopolies, we might see genuine progress toward a truly competitive economy. After all, it turns out that the free market is the best anti-monopoly weapon ever developed.

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Begin Trace Mode for Comment # 10.

#1. To: TooConservative (#0)

"After all, it turns out that the free market is the best anti-monopoly weapon ever developed."

Not necessarily. We busted up the airlines in 1978. 150 new airlines sprouted into existence ... and 150 went bankrupt.

Before deregulation 10 major airlines controlled 90 percent of the market. Today, 4 control 85 percent.

misterwhite  posted on  2015-09-07   9:29:43 ET  Reply   Untrace   Trace   Private Reply  


#2. To: misterwhite (#1)

Your numbers don't tell the whole story. There are many other factors that have conspired to cause fewer airlines. One major one is that we are running out of air crews. In coming years, the smaller commuter jets are going to sit idle and then get sold around the world because we simply don't have enough American air crews to fly them.

Tooconservative  posted on  2015-09-07   10:10:34 ET  Reply   Untrace   Trace   Private Reply  


#9. To: TooConservative (#2)

The aircrew problem is fairly simple: pilot training is difficult and expensive. The military is probably the best place to learn to fly and get a lot of hours, but do you know what happens when military pilots get out and look to fly in the airlines? Sure, they can find work. There is a need for pilots. But the hours are long and capricious, and the pay is bad. There is a lot of pressure, and there is not much reward unless you're flying with the big airlines, and even there the rewards are scanty.

A trained military pilot with a few thousand hours of experience can do better for himself, with far less stress, going to law school or business school than continuing to fly.

It's the perennial American problem: Americans really do hate labor. They just hate it, and they act that way. Labor is a "cost", a commodity treated pretty much like cooking oil in a fast food restaurant. Instead of finding a balance between labor and management and shareholders that improves the lot of the former while moderating the pay and benefits of the middle and distributions to the latter. That makes things sustainable in the long haul, unless people are too greedy.

The problem in the US is that people really are far too greedy. The take at the upper level management level is obscene - but management doesn't get treated like the rest of labor. So the bottom is beggared, the payout to the executives is obscene, and shareholders get a good cut until the place goes bankrupt. Then when it does, everybody grouses about pay and benefits for workers, and further ratchets down job security and pay for labor.

In most industries, workers don't have a choice, but in aviation they do. Every pilot is pretty smart, can handle himself, has an education. Retooling for something else produces better outcomes for yourself down the road than continuing to fly. Every commercial pilot I knows hates it and wishes he had done something else. wishes he could get out. It's gotten worse and worse, and will continue to do so BECAUSE OF the American business mentality.

You shouldn't, but you CAN run low skilled workers as a sweat shop. But you cannot sustain a model that treats highly skilled professionals as "just labor" and tries to push them down into the sweatshop while the executives take more. They leave. And then you end up with a shortage. And you rely on the fact that middle aged men with families can't easily transition, and on the naivete of young men right out of the service to fill the ranks. But it's not enough.

The whole American model needs a serious rethink that aims at making being a worker more humane and more secure. THAT is why the Republican Party cannot get any purchase over time, why the party has had to rely on rah-rah nationalism to try to grab the ring, but why even that is no longer working. The problem is that working life in America is getting worse, and the Republicans are always the party that resists making things better for workers, as a matter of principle (the principle being an economic model, in which Republicans firmly believe, that commoditizes labor). Republicans see workers as cooking oil, and act that way. And over time that ends up being a race- to-the-bottom. And loses the political base. You end up with managers and investors as your base, and there are not enough of them anymore, because mid-level management has been slashed too, on the same model, and pushed down into the working class.

Vicomte13  posted on  2015-09-08   7:21:57 ET  Reply   Untrace   Trace   Private Reply  


#10. To: Vicomte13 (#9)

Hating to interrupt your usual rants against the loathsome country club Republicans (unless it's Donaldo I, king of the country club Republicans), this was an article about the Uber revolution.

I don't suppose, having used 3,451 keystokes comprising 610 words to bash Republicans not named Trump, that you actually have any comments on the Uber destabilization of the taxi cartels.

Tooconservative  posted on  2015-09-08   9:36:47 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 10.

#11. To: TooConservative (#10)

I don't suppose, having used 3,451 keystokes comprising 610 words to bash Republicans not named Trump, that you actually have any comments on the Uber destabilization of the taxi cartels.

You don't suppose correctly. Uber is just a fact. The pattern is what is interesting.

Republicans suck, but if they changed, they wouldn't suck. So I'll keep suggesting they change.

But hey, look at the bright side, when Trump is the nominee, I'm going to vote for your party this time - and if he asks me too, I'll even vote for your Republican whack-jobs down ticket. So Trump is a big win for you in our debates - you get a bunch of Republican votes from me just for having the guy on your ticket.

That should make you happy. Why aren't you happy?

Vicomte13  posted on  2015-09-08 13:23:04 ET  Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 10.

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