The price for taxi cab medallions is falling across the country, reports the New York Times, as the long-entrenched system is facing stiff competition from startup car dispatch competitors like Uber and Lyft.
The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.
In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently failed to sell any medallions at its asking price of $475,000; it will try again, at $350,000.
The old regulated taxi system was one of the classic examples of the blue model system: a regulated, quasi-monopoly that seemed to many people to be the best and indeed the only way to combine the ideals of protection for consumers and a decent living for providers of services. Over time the taxi system everywhere tended to become less effective if only because of a tendency toward regulatory capture by crony capitalists—often, owners of companies who owned many of the artificially limited taxi medallions—who channeled campaign contributions and other sources of influence into focused efforts to limit the supply of medallions, raising prices for consumers and, often, leading to low incomes for the drivers who had to lease medallions at high prices from the handful of sources.Consumer discontent with the old system, plus driver discontent (many drivers report better earnings and more flexible incomes from the internet-empowered dispatch services), plus the technological advancements and creative entrepreneurial thinking that mades it possible for Uber and Lyft to replace both Manhattan style street taxis and the car dispatching services found in many other cities, is now driving the destruction of the old system.The new system won’t be problem free, and there may still be the need for some forms of regulation—cars for hire will need certain types of liability insurance and so on—but the old system is so cumbersome and so deeply corroded by cronyism that it no longer works as well as it used to work or serves the public interest as effectively as, perhaps, it once did.This is only one illustration of the wave of creative destruction now sweeping through American life. We shouldn’t be naive about it—change always brings problems, and change this big and this complex isn’t going to be easy. Not all the experiments will work out well, and companies that start out sleek and cute could well morph into gargantuan, market distorting monopolies of their own in time. But none of that changes the reality that more and more elements of the blue model have reached their sell by dates.