Reason‘s A. Barton Hinkle has a nice piece about one of the clearest examples of what goes wrong when the government steps in to manage a market that should be free:
A decade or so ago, Minneapolis (population 300,000-plus) allowed a grand total of 343 taxis to operate until Luis Paucar, an immigrant, filed suit. The city council decided to allow another 45 cabs. Then the existing cab companies sued, using the creative legal theory that they had a constitutional right not to face competition. (They lost.)
Now it’s the District of Columbia’s turn. Four members of the D.C. City Council have introduced a bill that would create a medallion system for the nation’s capital. Medallion prices would start at $250 for the most established taxi companies and, for the newer entrants, run as high as $10,000. At least initially. As time wore on, it’s likely that the price of a medallion would go up for everyone. That’s what has happened in places such as New York, where a government permission slip to drive a cab costs about $600,000. In Boston, which initially capped medallions at 1,525 in the 1930s—and more than a half-century later had added only 250 more—a medallion will cost you $400,000.
The medallions are so valuable because they create artificial restrictions on competition, allowing their owners to rake in huge profits. The medallion owners aren’t the cab drivers, of course. Sometimes they aren’t even the cab companies any more: They’re investors who bought medallions so they could rent them out to the people who do all the actual work. And of course they lobby heavily to keep it that way, which is why cities that have medallion systems stay stuck that way for decades.
Read the whole thing.
Mark is a computer programmer, website builder, photographer, and sometimes journalist in Chicago, where he also writes the long-running Windypundit blog.