Open the Boston taxicab “market” to competition

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The Boston Globe‘s Spotlight team has done a great job uncovering the Kafka-esque maze of half-million-dollar medallions, bribes, and indentured servitude that we call the Boston taxicab “market.”  Oddly, little has been said in that paper’s pages on how to fix things, with the exception of a good letter, noting,

INSTEAD OF tinkering with the medallion system of taxi regulation, Boston should junk it and create entirely new regulations that foster highly competitive, innovative, state-of-the-art taxi services

and Jeff Jacoby’s wonderful piece that opened with

SO THE mayor of Boston, channeling his inner Captain Renault, is shocked — shocked! — to find that Boston’s taxi industry is a rigged and pitiless racket.

Yesterday’s Boston Herald included a smart piece by Con Chapman, which underscored the runaway, no more like “drive-away,” inflation in the medallion market.  In 1995

a medallion cost $95,000 on the open market. Eighteen years later the price is $625,000. Had the price of entering the Boston taxi market merely kept pace with inflation over that time, a medallion would today cost $155,157.

Obviously, something went wrong as the barrier to enter what has traditionally been a doorway to the middle class is now closed tighter than before.

What happened? In 1995 this paper editorialized in favor of a plan by John Kramer and William Mellor to open up urban tax markets that won an award in the Pioneer Institute’s Better Government Competition. Their proposal provided for taxi licenses to be issued for a reasonable fee to anyone with a safe vehicle, insurance and a clean driving and police record.

Indianapolis, Cincinnati, Philadelphia and Denver adopted the free market plan, but Boston did not. Instead, Boston held two traditional auctions of medallions in 1999 and 2000, the first since 1934. Proceeds of the first went into city coffers, and money raised by the second was used to help finance the local share of the Boston Convention & Exhibition Center in the Seaport District.

Today, all four of those cities have fares that are much lower than Boston’s, which are fourth highest in the nation.

So the net effect of failing to follow free-market principles is an oligopoly that has become further entrenched over time, while those who must use cabs are worse off than before.

Chapman is absolutely right.  The system costs users more, closes out entrepreneurs, turns our citizens to be supplicants and lawbreakers, and all the while, as Jacoby so aptly put it, our great and good feign shock.  If you happen to be a member of the ever-more-teeming team of people running for Mayor of Boston, you have my vote if you will break up the oligopoly — and double the number of charter schools in Boston.

Follow me on twitter at @jimstergios