wkmac
Well-Known Member
Noting the economy’s “bumpy ride” over the past few years, the segment spotlights one “sure thing” in these tough times: Taxi medallions. Due to the high price, most drivers must take out loans to own them, giving the lender a security interest — or “mortgage” — in the glorified pieces of tin. “A taxi medallion,” the story explains, “is a physical object that gives the bearer the right to pick up rides for hire; it turns out, it’s also a good investment vehicle.”
That’s because the price of medallions has skyrocketed in recent years, with at least a couple fetching more than $1 million each. The medallion owner featured in the story, a New York cabbie who bought his for about $215,000, watched it more than triple in value in eight years.
The high price of medallions is, of course, a corollary of their scarcity, of the fact that they have the practical function as the only inroads into owning a legally operating cab. Once barriers to market entry are erected around cab driving, or any other worthwhile economic activity, those who control access to that activity can collect tolls at the entryways.
This is the way artificial — as against naturally-occurring — scarcity works, coercively precluding competition in order to allow rent-seekers and established market actors an unfair, unearned windfall. The mortgages attached to worthless pieces of metal are directly analogous to the economic rents presently embedded in virtually all other areas of economic life.
Medallions and Monopolies
or How the State Creates the 1%!
