Boston has some of the highest per-mile taxi rates in the U.S., higher than far wealthier cities such as New York. At the same time, our streets aren’t all that congested at most times of day, unlike, say, New York. The result is that people do a lot of extra driving in private cars in order to avoid using taxis.
Consider a guy who lives in the suburbs who needs to go to Logan Airport for a five-day trip. He could drive his gas-guzzling SUV and pay $100 to park at the airport. He could pay $120 for a round-trip cab ride in a gas-guzzling seven-year-old full-size American sedan, the mainstay of our taxi fleet. What is he likely to do? Have his wife drive the gas-guzzling SUV to and from Logan twice.
How could we have lower fares and brand-new hybrid vehicles at the same time? Current taxi fares go primarily to pay rent on the medallions. The City of Boston artificially restricts the number of taxis to roughly the same number that existed in the 1930s, when the city was much smaller and poorer. The consequence is that it costs roughly $400,000 to buy a medallion, 20 times the cost of a brand-new 2008 Toyota Prius (a medallion for New York City is closer to $600,000). How come your driver barely speaks English, doesn’t know how to navigate anywhere, doesn’t have a $200 dashboard-mounted GPS, looks poor, and is driving a wreck? As an economist would predict, with the supply of medallions limited, all profits from a taxi operation go to the medallion owners. The drivers earn a subsistence income regardless of the rates set by the city. They cannot be paid less because they would quit and take another job requiring no skills. They cannot be paid more because any higher salary for drivers would attract unskilled workers willing to work for less. When someone hands $40 to a taxi driver here in Boston, most of the money ends up in the hands of a millionaire or billionaire who owns the medallion.
In the old days nobody seemed to mind a system left over from the 1930s that made life in Boston more expensive and clogged our parking spaces with private cars that people used so that they wouldn’t have to pay for artificially inflated taxi fares. When gas is over $4 per gallon, though, and we’re choking ourselves and our planet, perhaps we can summon the political will to expand our taxi fleet with hybrids.
One advantage of hybrid taxis is that a taxi is operated more miles than a private vehicle, so replacing an old Ford Crown Victoria with a new Prius has a lot more impact on gas consumption if done for a cab than for a family car. Another advantage is that taxis tend to be operated mostly in stop-and-go city traffic, where hybrids perform best. Finally we have the opportunity to reduce air pollution to make Boston more attractive to people and employers who have been fleeing south and west.
Right now the politicians and bureaucrats are debating whether to approve a requested 50 percent fare increase, on the stated theory that it will help drivers pay for gas. In reality any fare increase must end up in medallion owners’ pockets. Perhaps it is time to allow anyone who is willing to meet safety and technical standards to operate a taxi here in Boston at rates that are 30 percent lower than current rates. To qualify, a driver would need to be in a vehicle that burns no fuel when stopped in traffic and that consumes, overall, no more fuel than a 2008 Toyota Prius. That should ensure a plentiful supply of efficient taxis on the road and at rates low enough to get people out of their SUVs.
Background: http://www.bostonmagazine.com/articles/fare_game/ (a 2004 article with some useful information)
How about simply requiring that the taxi be actually driven by the owner of the medallion? That should bring down medallion prices a lot, since you’d have to actually work as a taxi driver in order to get any benefit from owning one.
One question is: how to expand the number of taxis without damaging the medallion owners ? Namely if someone has just spent 400,000 $ to buy a medallion and the next day everybody is allowed to drive a taxi, then that person has basically lost 400,000 $.
There was recently one proposal by Patrick Devedjian, a French politician (there is also a taxi shortage in Paris): give every medallion owner a second medallion, for free; they can use it or keep it or sell it. Then the value of the new medallion becomes 400.000 $ /2=200.000 $ so in principle the medallion owners do not lose money, and the number of taxi can double.
Here in Ireland we had a similar system of a fixed number of taxi licenses which imposed a significant barrier to entry.
There was a court case where the courts ruled that the government had no right to restrict the number of licenses and so the market got deregulated overnight. Anyone can now pay the 5000 euro and be issued a license. Previously licenses were costing more than 100,000 euro.
The taxi fleet in dublin has expanded massively in recent years as supply has expanded to meet demand.
This is an excellent idea. The broader problem, however, may be the Boston area’s many different municipalities. A taxi operating from a suburb, even a heavily urban one like Arlington, doesn’t need a Boston medallion to take someone to the airport, but it can’t subsequently pick up a passenger at the Airport to take back to Arlington. And if you take a Boston taxi to a non-Boston destination, they’ll tack on a ~$5 fee to compensate for it being illegal to pick up a new passenger near your destination.
It seems that if some sort of reciprocity could be arranged here, it would reduce a lot of back-and-forth driving by cabs, and could put part of that savings into reduced fares.
On the other hand, the people who are making money off of taxi services probably have a strong voice in local governments. Not so for drivers, who are poor immigrants, or for passengers, who are too diffuse a group. That power structure may be the most essential issue here.
Anonymous: That’s an excellent point. We’ve come up with a system where it is actually illegal for a taxi to do anything other than drive back empty from the suburbs to Logan Airport or from Logan Airport back to the suburbs. Competitive countries such as China don’t burn up expensive oil this way. If you want to be driven a long distance in China you end up taking a series of taxis because drivers don’t go farther away than a place where they are likely to find a customer to buy a trip back to the cab’s home.
Other folks who want to protect medallion owners: The medallion owners in New York and Boston have already made literally billions of dollars in profits from the government’s restricting entry into this market. With gas prices crippling the U.S. economy it might be time to say “a few $billion for these guys is enough and now we need to do things efficiently”.
Some evidence in favor of your proposal: here in Vancouver, there’s a lot of Prius taxis on the roads. WorldOfWheels:
The debates over taxi medallions always astound me. They have to stretch further and further to explain why a monopoly helps the public — or even the small driver — here.
I think now the argument is ready for change, thanks to technology. The one tiny reasonable argument for the monopoly, in a city where cabs are normally hailed on the street, is that you can’t shop for a taxi you hail — you just want the first one. So you want assurances of price, service etc.
Today, if we wanted to, we could create a cell phone hail, and have full competition:
http://ideas.4brad.com/do-taxi-monopolies-make-sense-high-tech-world
Competition would solve almost all taxi problems. You do need to deal with the people who don’t have cell phones, or landline phones (taxi companies would have 800 numbers to get calls from any phone.) But I think it can be solved.
Some thoughts… make the taxi drivers free to charge whatever rate they want to per mile. The rate must be prominently displayed in an LED screen mounted on the car’s roof (in much the same way today that they carry ads). That way the customer will know how much they will end up paying before they get in. Wait times can be a prorated amount calculated based on the per-mile rate.
Do away with the medallion system (I know… easier said than done) and charge a flat rate tax based on the meter. Taxi cabs with medallions do not have to pay the tax for the next XX years (so the cost of the medallion can be amortized).
Allow as many taxis as want to ply the streets, and let the market figure out the right number that will survive. Additionally, with a free market in taxis, the choice of whether to drive a hand-me-down Crown Victoria, a Camry or a Prius will be dictated by market dynamics.