Taxi Reform by Uber

To commemorate the 7 year anniversary of Uber's launch in New York City, Barry Ritholtz pens an op-ed claiming that the NYC Taxi and Limousine Commission created the market opportunity for Uber to enter and thrive in NYC. By using its regulatory moat, the TLC was able to restrict the number of drivers through its medallion system. 

I wonder if Uber would have had the same success if the TLC had been more focused on meeting the needs of their riders rather than its medallion holders.

I have included an excerpt from the article that shows how the entrance of Uber impacted the price of taxi medallions. 

All of these failings would be much less likely to take place in a competitive market. We know this is an artificial monopoly because of the price behavior of medallions after market competition began: prices for medallions peaked shortly after Uber came to town, but before it had much of an impact. Bloomberg Businessweek reported that medallion prices, which peaked at $1.3 million in 2013, were already sliding, falling below $900,000 in 2013. Just two years later 2015, prices had fallen another 40 percent.

And it got worse: By 2016, the lowest reported price was $250,000. Last year, medallions sold for as little as $241,000. They are still falling. Axios noted a recent transaction that went for just 8 percent of the peak value, or about $100,000. Other cities, such as Chicago, have seen similar declines in medallion prices.

Make Whirlpool Great Again

George Will shows the tentacles of crony capitalism extending into our laundry rooms in one of his recent Washington Post articles. This is just another example where our government has chosen to prop up a special interest at the expense of the American consumer.

I have no doubt we will be seeing many articles celebrating the number of US manufacturing jobs that will be saved by this tariff. However, the article I'd most like to see is one that shows how much we are spending to save each job. While it will be easy to compare the average price of a washing machine before and after the tariff takes effect, it will be impossible to calculate the potential impact of those additional dollars if they had been spent on higher and better uses.  I'd like to think we would all be better off if we spent the same amount of energy and resources creating new jobs and industries as we did protecting the old ones.

If Whirlpool wants US consumers to choose their products, they should make better or cheaper washing machines.

I have included George's description of tariff and the impact of the whirlpool tariff below.

This is a tax, paid by American consumers, on imports that exceed a certain quantity that, in the government’s opinion (formed with the assistance of domestic manufacturers), is excessive...The tariff/tax, which is designed to limit the choices of, and increase the prices paid by, American consumers would be 50 percent on all imported machines, after the first 1.2 million. U.S. customers caused the importation of about 3 million Samsung and LG washers in 2016.

Lagniappe:  A previous Blog post  about crony capitalism in the airline manufacturing sector.

Protectionism: a Euphemism for Crony Capitalism

While protectionism seems to have strong supporters within both major political parties, it often falls short when put into practice.  George Will's Washington Post editorial shows just how difficult it is to implement protectionist trade policy in the modern economy. Multinational corporations with international supply chains create an economic impact that extends well beyond the borders where their headquarters are domiciled. It is very difficult, if not impossible, to punish intended targets without causing significant collateral damage. At best, it is a futile attempt to appease a nationalist base. At worst, it is an opportunity to perform a favor for a special interest.

I wonder if the 7000 direct Bombardier employees or the thousands of indirect employees supported by $3 billion in materials Bombardier purchases from the US suppliers every year feel protected by the tariffs. Do more expensive airplanes and the resulting higher ticket prices help Delta Airlines and its customers sleep more soundly at night? 

Quadrupling the cost of an airplane seems like a high price for the American consumer to pay to protect Boeing's opportunity to create a competing plane in the future. Unfortunately, this is just one example of cronyism created by protectionism.

Like Mr. Will at the end of his article, I am left wondering,

 Who will protect Americans from the radiating mischief of protectionism?