State Taxi Monopoly Vs Uber

This story is interesting.  Uber is a taxi service that lets people book rides via text message.  Instead of hailing a cab, you send a text message to Uber, and a car service is dispatched to your location.

What’s the problem?  It’s so easy and convenient.  The State taxi monopoly sees it as a threat.

In most states, only licensed taxis are allowed to pick up passengers on the street.  Car service is also allowed, but you have to book the ride in advance.

In NYC, the taxi medallion licenses are worth $1M.  The medallion owners earn economic rent because the State restricts competition.  In NYC, some policemen do nothing but crack down on “illegal taxi businesses”.  In effect, those policemen are working to protect the profits of the taxi cartel.

Due to the taxi monopoly, you can only get a cab at an airport or in the busy parts of Manhattan.

Before cell phones, “you must book a ride by phone” was enough of an obstacle to protect the taxi monopoly.  Now that everyone has a cell phone, services like uber become much more viable.

In many states, the taxi monopoly is suing to block uber.  They may lobby for law changes that ruin uber’s business.  This is an excellent example of a monopoly using the State to block competition.

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