Philip Greenspun’s Weblog

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)

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I’ve drafted a new article on preventing runway incursions: http://philip.greenspun.com/flying/runway-incursions/. Please comment by clicking the “add a comment” link at the bottom. If you have a typo or correction or short-term comment, feel free to make that here.

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If you liked my April 23 posting on cooking economic numbers, you’ll like this article by Bill Gross, which concentrates on the inflation numbers alone and this time from the perspective of an investment manager. Gross is a bond fund manager, whose Wikipedia page lists his personal fortune at $1.3 billion. It sounds as though he is going to short bonds.

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Deval Patrick has been in the headlines for misuse of State Police helicopters for personal transportation. He has also been in the news lately for trying to impose a sales tax on aircraft used by his subjects. I learned today that Patrick has been shopping for a private jet to be paid for by the taxpayers. Patrick has his eye on an $11 million Lear 45. Deval Patrick was elected governor of a state that can be traversed north-south in about 1 hour by car and east-west in less than 2 hours. Why would he need a transcontinental private jet? To go to New York City to see the bankers from whom the state will have to borrow money to pay for his expanded spending programs? There are commercial flights every 30 minutes that leave from Logan Airport, just a 10-minute ride by limousine from the State House. To go to Washington, D.C. to hobnob with his fellow Democrats? There is a commercial flight every hour Monday through Friday.

[Folks: I had no idea that this posting would generate so much interest. I’m going back to my source for more info. I learned about this while flying with a jet pilot buddy. My friend is connected to all of the jet brokers and jet pilots at Hanscom Field. The plan that he heard about was for Governor Patrick to lease one of these jets, which costs more than buying but would not require an appropriation of all $11 million at once. Anyway, shopping for a jet can be a long and involved process due to the long backlog of orders for new jets (typically 3-5 years). Someone who wanted to lease or buy an existing airplane would need to contact a lot of different brokers.]

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Eclipse Aviation, the company that brought Microsoft ambition to the very light jet market, is in the news again. Apparently the engines on a new Eclipse got stuck at full throttle and the pilots were lucky to get it back on the ground in one piece. Note that Eclipse, contrary to the New York Times article on the incident, uses the same engines as many other very light jets and they are not the cruise missile derivative that Eclipse attempted to use back in the late 1990s. One difference between the Eclipse implementation and the other VLJs is that Eclipse wrote its own engine control software. Everyone else relies on Pratt and Whitney’s old-school engine control system.

Full story: http://www.nytimes.com/2008/06/13/business/13air.html

[Note the implication of this story is that if you own one of these airplanes it is not useful for anything other than soaking up hangar rent and insurance premiums.]

[Saturday update: It seems that the New York Times, as they do with most aviation stories, got the significant facts wrong. The AD does not ground the Eclipse fleet, but only requires a paperwork addition to the checklists, requiring the pilot to check the thrust levers somehow. It is apparently pretty simple. In its early years Eclipse did great managing the press. The stories were always much rosier than the reality. Now as the Eclipse market implodes the newspaper articles are darker than reality.]

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Back in the 1990s I used to wonder, often in public forums, why the phone companies didn’t offer location-based services such as were available in Japan. For example, I thought that it would be nice for a phone to show a traveler nearby available hotel rooms and allow the handset user to book one. It seemed that all of the pieces were there. The phone company, through tower triangulation, knew where you were to within a few miles. Services such as Expedia maintained a list of available hotel rooms in the U.S., sorted by location. The business infrastructure was there to make it pay for the phone company, with hotels accustomed to paying commissions to booking services. Why wouldn’t the phone companies hire a couple of programmers to connect up the last few feet of wire and deliver a service that would save consumers time and hassle?

The other thing that I wanted was a service to notify me that a friend was hanging out in a nearby coffee shop and/or that a stranger with similar interests had some free time.

Has Apple delivered these basic services with the new iPhone? Have the other American phone companies truly done nothing in these areas for all of these years?

[In http://philip.greenspun.com/panda/money, most of which was written in 1998, I wrote

It may take the full 50-year horizon of this chapter to come to pass but eventually there will be a usable wireless Internet. When that day comes imagine Joe Traveler, getting tired after a long day of sightseeing, pulling out his cell phone and saying “show me the nearby available hotel rooms for tonight”. The phone company knows approximately where you are, based on which tower your handset has connected, and they ought to have enough marketing clout to establish links with hotel chains’ room reservations systems.

We still don’t have a usable wireless Internet, so maybe we need another 40 years…]

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Massachusetts State Senator James Marzilli, a Democrat representing Arlington, just north of Cambridge, has been a tireless advocate for increased taxation and spending, notably for higher taxes on corporations, apropos of an earlier posting. He may also have joined Governor Deval Patrick in trying to impose a new sales tax on aircraft in Massachusetts.

This article describes the Senator Marzilli leading Lowell police officers on a”foot chase” after sexually assaulting one of our voters. The obligatory photo of the long-suffering wife side-by-side with the offender is included…

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… in price. Eclipse announced last week that they are raising the price of their original model from $1.65M to $2.15M June 2008 dollars (aero-news.net story). A Cessna Mustang ordered today would deliver in mid-2011 at a fixed $3.14M (maybe $2.5M in today’s dollars the way that inflation is going). The Mustang is a much larger plane, comes from a company with a history of meeting commitments, and is certified for flight into known icing conditions (i.e., the Mustang is useful for instrument flight).

Separately, Eclipse announced a four-seat single-engine jet that should be very fuel-efficient. They are promising to deliver the thing in “late 2011” for $1.35M (inflation from June 2008). If their company history proves to be a useful guide, the plane will be delivered in 2015 and cost closer to $2M. What about the fuel burn? The company says less than one pound of Jet-A, which is similar to diesel fuel, per nautical mile. That should be just under 10 mpg or about the same as an SUV when you consider that the jet flies in a straight line and doesn’t idle in traffic jams. Not too bad for carrying four people at nearly 400 mph.

More: very light jet comparison

[This price increase comes on the heels of Dow and Kodak announcing increases of up to 20 percent on thousands of products. Loose related to this posting on inflation in the price of luxury items, there is a New York Times story about the struggles of the no longer quite as rich.]

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Here’s a piece from New Yorker about how restricting trade to help American workers ends up hurting the poorest Americans: “The Free Trade Paradox” (May 26, 2008). The point is that keeping imported calculators (for example) out of the U.S. would be great for a handful of guys who work in a calculator factory, of little consequence for the BMW-driving professionals, and ruinous for ghetto schoolchildren who would pay $100 for a calculator that used to cost $12 (though maybe they would learn how to do arithmetic?).

Harvard egghead Gregory Mankiw argues for cutting the corporate tax in a June 1, 2008 New York Times editorial. The stated goal of the corporate tax is to rake off money before it gets into the hands of wealthy investors. Mankiw cites studies from Europe that found that 92 cents of every $1 in corporate tax came out of the hides of workers in the form of reduced wages. Mankiw argues persuasively that the corporate tax discourages economic growth. The one example that he does not cite is the massive economic boom achieved by Ireland. You could argue that the Irish are simply much smarter and harder working that their counterparts in England and Western Europe. Alternatively you could note that a company in Ireland pays half as much corporate tax as one located anywhere else in Europe. (Artists, such as musicians, did not pay any tax for a long time. When Ireland tweaked the law to exempt only the first $320,000 per year, U2 and Bono moved all of their assets into an offshore trust (story).)

In 1948 we started laughing at Wile E. Coyote, but perhaps over time we have become him. Wile E. Coyote, unable to run as fast as the Road Runner, came up with elaborate schemes that invariably backfired. A Martian looking down at the Earth might think “the only way for the U.S. government to collect more taxes is to have a larger economy from which to slice off a share; the only way for the U.S. to grow is to work harder, improve education, streamline transportation, stop paying $1 trillion every year for oil that is mostly imported, etc.” Here in the U.S., though, we can’t get organized for the tough jobs. We watch kids come out of the school system barely able to write or do arithmetic and argue over whether or not their teachers should get a 5% raise or 10% pension increase. We watch cars burn millions of barrels of imported oil sitting in traffic jams and never ask ourselves why we can’t put down a wireless Internet along our road system so that the cars would have routed themselves around the problem. We watch our money and ownership of our assets disappear overseas to fill up cars whose engines operate almost exactly the same as the engine in a 1908 Model T Ford (25 mpg; somewhat more efficient than today’s average passenger vehicle) instead of thinking about investing our oil budget in technological innovation.

Let’s look at Barack Obama’s economic policy idea page:

• he will raise the minimum wage, an action that economists find serves mostly to discourage the employment of teenagers
• he will give a mortgage credit to people who are not currently able to write off mortgage expenses, further transferring money from the pockets of renters to the pockets homeowners and further inflating the cost of buying a house in the U.S.
• he will “create a fund to help people refinance their mortgages”, i.e., more money taken out of the pockets of renters
• “ensure freedom to unionize”; our public school teachers have the freedom to unionize, but it doesn’t seem to have helped students learn anything; autoworkers in Michigan have the freedom to unionize, but it doesn’t seem to have made Detroit a vibrant growing city
• “fix NAFTA”; presumably this is cutting down on imports from Canada and Mexico
• “Obama will invest in rural small businesses”; tax people who walk around energy-efficient cities to help encourage folks to settle in places where the supermarket is a 30-mile drive away
• “Expand the Family Medical Leave Act”; companies with 25 employees will now be required to read through the fine print of this law
• “Obama will initiate a strategy to encourage all 50 states to adopt paid-leave systems. Obama will provide a $1.5 billion fund to assist states with start-up costs”; Americans who are working will be taxed to give money to Americans who aren’t working. Everyone will pay for the lawyers who draft and read these new regulations. Government employees who are currently paid not to work at their desks will now be paid not to work at home.
• “Obama will also make the federal government a model employer in terms of adopting flexible work schedules and permitting employees to request flexible arrangements.” Government employees who currently do no work 9-5 will be doing no work 10-4. Maybe this will cut down on traffic in D.C.
• “Obama will enforce the recently-enacted Equal Employment Opportunity Commission guidelines on caregiver discrimination.” More new regulations to read and argue over.

If one were considering emigrating to the U.S. to become a worker, some of this sounds pretty good, though maybe not as good as a 10 percent pay raise or 10 percent income tax cut. If one were trying to figure out where to set up a new business, it is tough to see how these proposals would provide an incentive to locate in the U.S.

Obama is supposedly our nation’s best hope and these are his best ideas.

How about McCain? His economic plan starts off with a section by Wile E. Coyote. He is going to cut gas taxes. He wants to tax renters to help homeowners. He wants to put more money into student loans (most of which ends up inflating the cost of attending college). He wants to tax people who suffer from infertility to give big tax credits to parents blessed with a bunch of children (combined with the gas tax holiday, that family of six can finally help boost the economy by buying a 7-passenger SUV). Buried after a couple of pages is a section that Ronald Reagan might have written, proposing to cut taxes in order to generate economic growth. The apparent schizophrenia is not addressed.

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George W. Bush, with an eye toward influencing all of the Arab countries, recently lectured some folks in Egypt: “Building powerful economies also requires expanding the role of women in society”.

The May 28, 2008 New York Times carries an article on a Moroccan-born Belgian woman who has become a prominent Muslim leader. It isn’t clear that this is what W. had in mind…

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