The economics of Uber

We were talking about this at lunch the other day, and now Josh Barro steps forward with the numbers:

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.

In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently scrapped a planned medallion auction.

There is more here.  I learn also that Nevada just banned Uber.


Uber is the perfect example of a free market success story disrupting a state-run monopoly. The left fears uber and other companies like it because it threatens their power in the same way the antiquated music industry tried, and ultimately failed, to control downloads.

I agree and the decline in Taxis will redeploy immigrant labour to other sectors It's a great time to be alive!

The number of taxis isn't decreasing, that's the point. 0/10. F.

Taxi industry capitalists oppose Uber. Political progressives, from my experience, support entrepreneurial innovation like Uber, Air B&B, Zip Car and oppose crony capitalists like farmers getting subsidized crop insurance, ethanol industry that exists because of subsidies and the mandate that Conservatives keep quite about, and the loopholes in the corporate tax (which should not exist, anyway).

Wait... I have never considered myself a progressive, yet I am on the same page on all of those issues!

I know you are only speaking from your experience, but can you point me to a Progressive FAQ that would bolster these arguments? Maybe it's time for me to switch sides.

I was going to say the same thing.

Lol, cognitive dissonance?

Political progressives support Uber and Air B&B because it enables them to avoid the effects of all the progressivist laws that govern the modern US workplace. What if hipsters had to grapple with worker's comp premiums, payroll taxes, Title VII, hours-in-service, etc.? I think most would lose their progressivism pretty quickly.

It's pretty clear how this ends up: either everybody has to be licensed and scrutinized for things like discrimination and disparate impact and FLSA or nobody does. For all the that the progressives talk, what's more important is to look at what they do.

one example of progressive young voters who were hurt by taxi laws is found in San Francisco: urban tech company employees tired of waiting for a taxi back home at the end of a Saturday night spent bar-hopping

Back in May or so, the IWW/SEIU helped taxicab drivers protest against Uber in Seattle's city hall. I had a discussion with one SEIU representative who essentially stated that Uber is a product of disruptive capitalism which only serves to harm taxi drivers of their livelihoods. After all, it's only $65 to buy a taxi medallion from Seattle, allowing poor immigrants an easy way to own the means of production for their trade.

This was all fine until I suggested that medallions haven't been issued since the 1980s and the real price was greater than $100,000, and that every taxi driver I spoke to indicated their wage from renting the cab came out to minimum wage.

From the criticisms of Uber read online and personal experiences with those who admittedly are the opposite of the "right-wing," I'd say the anti-Uber crowd is left leaning.

Wait, what? The leftish news sites I read are almost universally in favor of Uber.

I doubt ummm deigns to read leftist news sites. He already knows what they think without actually needing to read them.

That's some interesting reductionism. The left wing city hall types that harass Uber have more claim to the left wing mantle than the left wing news sites you read. I don't think ummm is right it isn't a left/right issue, but there's a lot more to the left than left wing news sites.

Horseshit. Almost every single public opponent of these businesses are on the left in either politics or the media. You obviously have paid almost no attention. If not for that opposition, we wouldn't even be discussing these businesses because almost no one on the right has ever attacked them. Yes, the entrenched interests oppose them, but they are only successful because of their sympathizers in the progressive media.

Almost every single public opponent of these businesses are on the left in either politics or the media.

I'd be very surprised to find that the median medallion owner is a liberal.

Indeed, I would assume the politics of medallion owners are similar to that of car dealers (and many other conservatives) they are all free market - until it comes to their own market.

This puts them in a practical coalition with the left, but not much else.

"Wait, what? The leftish news sites I read are almost universally in favor of Uber. "

Well maybe, but that's not the noticeable trend:

"Why Uber must be stopped The touted start-up is proving to be the embodiment of unrestrained hyper-capitalism. What happens when it wins? "

Mother Jones
"Drivers: Uber Is Skimming Our Tips Class-action lawsuits among the latest headaches for Silicon Valley's tech-taxi darling. "

"Al Franken Questions Uber Over Privacy"

The Modern World - Tom Tomorrow
"Cartoon: The future: it's UBER-IFFIC!"

Daily Kos
"Ridesharing and Redlining: Uber, Lyft, Race and Class"

I'm sure some Left Leaning sources have written positive articles on Uber, but the majority of such articles I've noticed are clearly anti-Uber.

Don't mind answering this ummm guy: he believes the left engages in a war against individual sucess (lool), american excepcionalism, GOP is awesome, left is the source of all evil, etc.

So the mirror image of your tribal identity (lol).

The left fears uber

Huh? The left loves uber as it breaks the back of the rent seeking medallion owners.

The rent-seeking medallion holders are participants in a government sponsored monopoly, you know, like USPS, Amtrak, lotteries, public education, and in many states alcohol sales. These types of monopolies are right up the left's alley.

and in many states alcohol sales

Which undermines your argument as state liquor monopolies and heavy regulation are far more common in conservatives states. Utah, Wyoming, New Hampshire, Mississippi

It doesn't matter. The point still stands: the left loves government-sponsored monopolies.

the left loves government-sponsored monopolies.

As does the right. The right is also in favor of extended drug patents and other IP protections. Both examples of gov't granted monopolies.

There is a not so subtle difference. IP is property rights, similar to how the government has granted you a monopoly on your checking account. IP also isn't a process of production as the above examples were. Id be willing to bet that a majority of lefties would support establishing a monopoly regime of IP, for instance in Pharma, by banning corporate research and increasing NIH grant funding through increased taxation of pharma corporations. Besides, I don't even believe that pro-IP is a position held by most on the right.

I think you're missing a fundamental point: monopolies are fundamental tenets of the left's political and economic philosophies.

I think you’re missing a fundamental point: monopolies are fundamental tenets of the left’s political and economic philosophies.

Maybe in the UK in 70's. Today, nothing could be further from the truth.

IP is property rights, similar to how the government has granted you a monopoly on your checking account.

No,not at all. Patents/IP are actually exactly like a taxi medallion - it's a government granted monopoly that the gov't issues in an attempt to control/promote trade and industry.

One take on what "the left" thinks of Uber is found in the comments section on the Huffington Post story about Uber in Nevada:


"Uber is a taxi company. Call it like it is. And regulate it as it is."

"... people should at least have to pay some sort of licensing fee or tax or SOMETHING to make sure they are meeting basic safety standards. But beyond that, its unfair to expect an individual with a car to have the same setup as a company with a fleet. For a country that says it values innovation, we sure do like to make it hard for new ideas and ways of doing things."

"We the public are tired to Taxi companies ripping us off. A lot of these drivers are rude and will most of the time take a longer route. As long as Uber has insurance I rather take them. Many people do not trust Taxi's."


Uber is new. Give it a few years and you will hear the same complaints about Uber that you hear about taxis now.

If the government succeeds in regulating, then you're right.

They need more supply of taxis in Manila, too, where it will cost you about 1000 pesos ($23) to go across town (20 km = 12 miles) during rush hour, especially near the business district of Makati, a lot of money where a day's wage is 300-400 pesos for most people. But supply is controlled by politically connected cronies. There is an app where you can ask for a taxi via smartphone, but taxi drivers ignore these requests during rush hour. Uber is needed here, unless you like to ride in overcrowded jeepney buses. However, having said that, I am a fan of private buses (as jeepneys are), if the density is right, as it is here (about 30M people packed into an area roughly the size of the DC beltway).

I think Manila has more significant problems than a lack of uber- the infrastructure is terribly congested, regardless of who's driving.

Hey Ralph, the same could be said about NYC, Los Angeles, or any other major North American city ... stop being such a racist wuss

Yeah! He said something I don't agree with! He must be racist!

I assume you're being ironic. If not, I recommend a visit to Manila to see for yourself. It's a great place to visit. But infrastructure is even worse than, say, Jakarta.


The food is the worst in Asia, there's nothing to see in the city, its overcrowded and its unsafe on foot alone at night.

What's so great about it?

How UBER is going to change urban transportation, its upsides and downsides are still not fully understood, I believe. A crucial question that challenge libertarians (UBER optimists) is if UBER and its free market competitors can on their own solve all our transportation problems. The answer to this question is is not clear but my guess is 'no'. It's still too soon to arrive to a conclusion, though, and I'm a big fan of experimentation.

It would be interesting to conduct quality experiments in various parts of a city on the responsiveness of Uber.

Take DC.

Place a call from a taxi or an Uber ride in various parts of the city--rich, poor, business, etc.--and see how long it takes to get a ride.

I bet you do not get a ride in a poor area from Uber, but you do from a taxi.

I wonder if the Uber driver in DC will speak English and know where Dupont Circle is, unlike the cabbie I once had.

Or if the Uber driver will stop en route and chat with his friends, and only afterward take me to Union Station, as did the cabbie I once had.

Hi Bill, I was mainly referring to issues of mass transportation in metropolitan areas. But I think you raised another good point related to incomplete markets, which in only one of the many market failures in urban transportation Uber (free market) cannot solve on its own.

Your point being?

If so, then Uber will free up taxis to service these poor neighborhoods.
Win win.

derek and TMC,

In most jurisdictions, as a condition for obtaining a license, you must service all geographic areas. What this means is that there is flat pricing AND an obligation to service all areas.

So, the question with my quality test is this: will there be market failure--that is, will poor areas not be served by Uber. And, at what price relative to a regulated taxis.

Don't be afraid of experimental economics.

Regulations also forbid racial discrimination by taxi drivers so that doesn't happen either.

Is it really a market failure if Uber isn't servicing poor areas? I'd assume if they're not servicing, it's because the local residents aren't using it enough to make it profitable.

If we want to subsidize the poor's ability to buy taxi or car services, that's fine, but we should call a spade a spade and just cut them a check or a tax credit or something. Subsidizing them by propping up an entire state-regulated taxi industry seems like a really inefficient way to do this.

I bet you do not get a ride in a poor area from Uber, but you do from a taxi.

Actually the opposite is true.

Actually, the article didn't test this. They just hypothesized that the poor would pay more and the market would give them an Uber car.

Uber customers rates it's drivers. If their score falls below some score, they can no longer be drivers. So you would be wrong.

After losing my driver's license for 3 months after being caught DUI, I expect to use Uber and similar solutions where they're available.

I got a DUI once while driving an Uber cab. But that was in the early days of Uber before it got all commercial.

"A crucial question that challenge libertarians (UBER optimists) is if UBER and its free market competitors can on their own solve all our transportation problems."

Hyperbole much? Has anyone ever said that Uber will solve *all* our transportation problems?

Also, apparently it's a "market failure" if people exercise agency in deciding whom they prefer to conduct business with.

People can't be allowed to freely make decisions, because they might make the wrong ones. We need to put really smart, politically conscious individuals in Top positions and then give them the clear authority to correct the deficiencies of the "free" market. /Leftside Derp

I am all for UBER and Airbnb,etc., but I hope they (the individuals not the companies) are paying taxes. Otherwise, it would be a slippery slope to a fully informal economy. Since the companies collect transaction data, the IRS should be able to garner income information.

Yes, both of these companies issue 1099s.

Cab drivers do not like credit cards, as cash income is more easily under-reported. Uber and Lyft drivers are issued 1099s, and tips are fewer, so there is less cash income to not report.

yeah, like the libs are gonna let uber disrupt thier monopoly and then not pay taxes on it

There are always two sides to a state-run monopoly. For all the advantages taxis enjoy, they also have extra burdens, such as restrictions on what vehicles they can use. And Uber is starting to have its own issues, such as problems with press and questions about how its financing its fleet:

Don't forget the drivers, who actually finance the "fleet":

Uber is amazing. You pay someone and they come pick you up in a car. I'm not sure what this Taxi thing is, I've heard of it but I've never seen one.

In fact, I've heard of this place where you can rent books for free. I might take my Uber there. Disruption, baby!

Did you know they are working on technology that also allows you to get TV for free? With no internet? Also music for free. The world in amazing and I'm glad that I live in such wonderful times.

I don't know totally changed the way I feed my dogs. Can't figure out why my dogs keep dying though. It's likely is still ironing out the rough patches in their infrastructure, but I'm sure they'll figure out.

So does a price drop indicate that people believe the taxi industry will lose the fight to get Uber et. al. banned, or does it simply reflect an expected loss of profits during the time it takes to get them banned?

Even the first possibility might not be all good. The ultimate equilibrium could be a new set of closed shop regulations in which a few of the current disruptors have their slice of the pie. In that case the current price drop just reflects an expectation that a taxi medallion is a smaller part of that eventual oligopolistic pie.

I think that's the critical question and it will probably be several years yet before we know which way this will go down. I imagine it will end up in the courts though.

Isn't Nevada's decision to ban Uber an unlawful restriction of interstate commerce under the Dormant Commerce Clause doctrine? Look it up!

Don't think so. And even if there were, there is no federal pre-emption.

What about the political economy of Uber?

Uber can only operate in a market after it has used its substantial West Coast Jewish backing to lobby municipalities out of century-old prohibitions on private ride sharing. This has, quite understandably, miffed many of the East Coast Jews who own the bulk of Taxi medallions in the country's largest cities.

Uber and Lyft are really important for Emerging Economies in Sanctuary Cities like Chicago. Urban liberals and hipsters love the service because they can use their smartphones to avoid personal interaction and hail and pay cabs. What they don't know, yet, is that most of these ride share drivers are cab industry rejects. Yes, the spitters, the masturbaters, the rapists, the unclean and unkempt from the various forgotten places of the world (from which American foreign policy has squeezed "refugees") are driving urban liberals and hipsters around in personal vehicles. How long will they tolerate "surge pricing" to catch a ride from a khat-addled psychopath with four Social Security numbers? Probably not very long. City elites like their chauffeur slaves to be heavily regulated, which is why the laws restricting private ride sharing were put in place so long ago.

The only way ride sharing services won't be a passing fad is if the middle class is further eroded to the extent that mild-mannered middle-American whites end up driving for them.

Is that parody/satire or....?

I am still waiting to see how the wear and tear of the taxis is paid for under Uber.

The Uber cap driver earn a reasonable hourly wage but that does not include the depreciation of his car.

It looks to me as if Uber is exploiting the driver by not paying them enough to cover their cost of capital

Will someone show me with numbers why I am wrong.

Remember, depreciation is a major expense for traditional taxis.

This is my constant question.

Though since uber drivers are allowed to use their cars as personal vehicles which is effectively barred to taxi drivers by most taxi regulations, it may work out differently.

In SF Uber X is $1.26 per mile and Uber Black is $3.75 per mile. The IRS per mile rate is $0.56 which, in my experience, is fairly accurate when it comes to gas, maintenance, depreciation, etc.

Who is going to take better care of their car, a driver that owns it or a driver that uses one from a common pool. I suspect that maintenance and repair costs for owner driven vehicles will be less than those for fleet vehicles.

How is this any different than a huge amount of delivery drivers? Pizza drivers for example, who are generally driving their own vehicle.

My guess is that if an Uber driver is making less than the standard delivery driver, then the Uber driver will take a job as a Pizza deliverer. And it's been my experience, that there is usually a restaurant hiring delivery drivers at any given time.

Lot of discussion up thread about whether it is the left or right that likes government granted monopolies and crony capitalism. I think if by left or right we mean to refer to the actual governing Parties, then it is clearly both sides that like those things. The people seeking government-granted advantage are equal opportunity, and they can usually find some facially-plausible sounding justification for it that arguably fits within the big tent of both Party ideologies.

This was my point earlier. The difference is that progressives support government monopolies by first principle.

Here's another good article on the medallion situation:

In NYC that's nominally $180,000 x 13605 medallions = $2.4B. Can anybody work out the numbers elsewhere?

Uber's critical market feature is increasing prices (and driver pay) for exceptional circumstances - storms, high demand events, etc. Customers can choose (beforehand) whether to pay. They can pay Uber or take a cab (if they can get one) or walk.
For an (economically illiterate) progressive on a city council Taxi Committee, this is PRICE GOUGING - which is very bad - because the NY Times sez so...
For a well adjusted, market savvy, freedom loving American, it's rational behavior.

I have heard that a Taxi Medallion has been one of the best "investments" over the past decade(s) or so. To someone who has lost the forest of economics for the trees of asset prices, this might seem like bad news. (see also: oil prices) But the medallion is not so much an investment as the negation of a rights violation -- that of doing business or transacting.

Imagine how much a Speech Medallion or Assembly Medallion might cost.

Er, the bad news (for bad economists) would be the fall in medallion price. My initial wording makes it sound like I'm referencing the historic rise in price.

Uber cherrypicking the best bus routes? Good article below.

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