The Market Breaks Monopolies Government has Created
It turns out that it is not a good idea to create speculation revolving around interventionist government policies. Ever since Uber appeared on the scene, the previously coddled taxi industry is in trouble – and apparently nowhere more so than in NY City.
In NYC, there is a special situation: in the 1930s, the city created the “taxi medallion”, artificially limiting the number of taxis allowed to work in the city. These medallions have become objects of speculation and have been thoroughly financialized.
As Jeffrey Tucker reports, Uber has apparently busted the taxi cartel and destroyed the medallion market in the process:
“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.
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.”
In the meantime, the “medallion magnates” (people who in some cases control hundreds of medallions) and others have come crying for a government bailout. It turns out they borrowed a lot of money using the medallions as collateral – a potentially deadly mistake as has now turned out.
Here is an interesting video by Reason TV on the topic:
It is interesting that the free market has actually found a way to undermine a cartel that up until recently appeared to be completely safe. In some cities, Uber is being fought tooth and nail to protect the sinecures of the established taxi industry. It is a microcosm of the cronyism that is the rule almost everywhere these days.
Just think about how greatly our lives would improve if all the regulations that have been designed for no other reason than to protect established businesses against competition from upstarts were rescinded.