One of those Facepalm moments in New York City

We’d not say that this following pencil sketch is the whole and only story about Uber but it’s still a useful pencil sketch.

New York City used to cap the number of taxi medallions. A number of different justifications were employed, to reduce congestion, to raise drivers’ wages and so on. The actual effect was that someone who owned a medallion could rent it out. Capital values hit, at one point, $1 million and the annual rent for 12 hours a day usage some $40,000. The restriction on supply benefited the capitalist class owning the restricted supply.

Uber drives cart and horses through this restriction, medallion prices collapse, drivers gain a greater proportion of the fee - less exploitation by the capitalists, see? - and consumers can gain a ride more easily. Technological change beat a politically imposed oligopoly, which is good right?

So, what’s happening now?

The New York Times has an article examining how a Nepalese Uber driver named Anup Baniya supports a family on $25k take-home pay.

Midway down the article, we learn a shocking fact: Baniya pays $2,400 per month to rent a Toyata RAV4 hybrid SUV. A new RAV4 costs around $32,000 for a base model. The monthly payment on a 60 month financing plan is $629. So why is this guy paying four times that?

Because NYC caps the number of licenses it grants for for-hire vehicles, so people with the licenses rent out their cars and plates to people who don't have them for hundreds of dollars per week.

Having killed the medallion oligopoly NYC has recreated it by limiting the number of for-hire licences.

No, the lesson here is not that human stupidity is always with us. It’s that there are always those looking to exploit human and political stupidity.

Tim Worstall