D.C.'s taxi drivers supported Vince Gray -- and now they want payback
The worries that some of us had about D.C. mayor-elect Vince Gray were never really about Vince Gray. They were about the constellation of interests that had converged behind his candidacy -- many of which were angry about common-sense reforms made under Adrian Fenty.
One of those groups were the city's taxi drivers, who'd been forced out of D.C.'s inane zone system -- where your fare was based on how many arbitrary boundaries your cab driver managed to touch in the course of a single ride -- and into meters, like the ones that exist in every other city. They're not happy about that, but they realize no one will let them restore the zone system. So they're going for the next best thing: Taxi medallions, which force down the number of cab drivers so it's harder to get a cab but more lucrative to run one. Donald Marron explains:
I love taxi medallions.
As an example for my microeconomics students, not as policy.
Just last week, I used New York City’s medallion system to show how an entry barrier — the requirement that each yellow taxi have one of a limited number of medallions — could create profits in an otherwise viciously competitive industry.
How much profit? Well, according to the most recent data from the city’s Taxi and Limousine Commission medallions for independent cab drivers traded at between $610,000 and $620,000 in October. If you figure 8% as a reasonable rate of return of this asset, that translates into almost $50,000 in pure profit each year from driving a cab, thanks to the entry barrier.
That's bad policy, but sometimes bad policy is good politics. City Paper quotes Derje Mamo, a taxi driver who was active on transportation for the mayor-elect’s campaign, who says, "He’s got one year, that’s it." And no one knows better than Gray what happens when the city's established interests turn against you.
| November 15, 2010; 9:00 AM ET
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