Cash and Carry

A couple of days ago, Dubner posted a challenge: think about activities that are legal when done for free but become illegal when they are done for money. Despite my recent post on the injustice of the taxi medallion system, not one of the 100+ responders to Dubner’s appeal mentioned that the simple act of driving passengers around is a crime — when it is done for cash.

Granted, you can get special government dispensation to do this, but this often doesn’t come cheap. Government not only requires permission to operate a taxi but often enforces draconian limits on cabs’ numbers. Hence the right to carry passengers for cash is often outlandishly expensive though the identical activity is perfectly legal and quite harmless, as long as a couple of pieces of paper don’t change hands.

This doesn’t seem quite fair to me, though I guess the tepid reader response shows that taxi regulation is not quite the pulse-pounding roller-coaster ride of an issue I thought it was. But even if it won’t be eliciting sit-ins and hunger strikes any time soon, I still think the medallion system deserves a serious second look.

William G

It might not be fair to hard working cabbies, but how else to you keep the streets from being flooded with cabs? It's packed enough already in NY, imagine what it would be like if anybody could be a cab. You would have congestion of the commons an order of magnitude worse than it is.

Whether it's right or wrong, if you can scrape together $750,000, it sure it one heck of an investment that has beat every other investment class I have ever seen over any time interval (stocks, bonds, real estate, gold, forever stamps, etc). I was thinking of starting a hedge fund. Anyone else interested?


can't you make this argument for every occupation that is somehow regulated by government? selling/giving alcohol, selling/giving medical care, selling/giving hot dogs on the street...


Why would the cost of the medallion exceed the cost to regulate it? I can see why a city would want to make sure that taxi drivers have a valid driver's liscence. Perhaps it's also worthwhile to do a background check, and to do some inspection of the cabs to make sure they are following pricing regulations. But isn't it in the city's interest to make cabs plentiful? There seem to be numerous benefits to cabs. Less drunk driving, smaller parking lots since fewer people own cars, great for tourists/business people who flew into town, etc. I can't see why cities would charge more than it costs to implement basic regulation of the cabs.


Yea, I second nate. Government regulation can't count otherwise almost every act qualifies. In fact it would probably be more of a challenge to think of things that don't become regulated when they are done for money rather than for free.

John B. Chilton

In Dubai it is illegal to car pool. The law is enforced selectively, profiling non Arab Asians most likely to be carpooling to get around using taxis. Did I say the Dubai taxis are a government run enterprise?

Another factoid. The adjoining city of Sharjah, another emirate with its own royal family, serves as a bedroom community for Dubai. Dubai and Sharjah do not allow taxis from one emirate to pick up passengers. Thus taxis return empty. The result is further congestion on already highly congested roadways.


Maybe none of the responders mentioned "taxis" per se, but I saw a number of comments that talked about charging people for a ride. Same thing.

Sam Carter

It's not strictly true that none of the commenters pointed this out.

I just read the first handful of comments, but somebody pointed out that any task that requires a gov't license meets the criteria. I believe their example was cutting hair or serving booze, but driving a taxi certainly falls into their general categorization of "stuff that requires a gov't license".


I'm with nate (#2). This makes for a weak example because the act of accepting money for a ride isn't illegal, per se (neither is it negatively stigmatized), just regulated.


As with many other things, though, it's really only criminal if you operate as a business or for strangers, isn't it? I've given a friend $20 in gas money in exchange for a ride somewhere, but I don't equate that to hiring a cab and I don't think that necessarily runs afoul of the law. Perhaps my friend can't solicit the business, but that's not the same category as prostitution, for instance, where exchanging money for sex is criminal regardless of the circumstances.

Then again, maybe it's still illegal but never enforced, the same way as burning a CD or two of music for your mother won't get you sued by the RIAA the way Internet file-sharing will, even though the difference is quantitative rather than qualitative.

Michael F. Martin

Ostrom is really good on this point -- sometimes government institutions are a good way to solve commons tragedies, sometimes not. It's not hard to see how New York culture lends itself more to the former when it comes to traffic.


That prior post was just a stalking horse for the Institute for Justice?

Michael Walsh

Taxi medallion issues can be pretty interesting, if you care to look. As I say, "If".

First off one would assume that the most important aspect of taxi-ing is that a person has a vehicle, and would like to *use* it and make a few bucks. Hence, yea old hackney carriage. But taxi-ing today is *not* about the vehicle, in fact the vehicle is the *lest* expensive part of the whole operation. Drivers could drive brand-new Caddies and it wouldn't make a dent in the economics: The driver income is greater than the vehicle worth, the insurance is greater than the vehicle cost, the payments on the mortgage on the medallion is greater. Even the gasoline far surpasses the value of your good ole iron.

So what's it all about? Welp, back in the day, Mrs Piscapo (honest) sued in court to retain the medallion assigned to her husband (for being a WW warrior) when he died. It turns out she had been doing the driving for many years, and just because her fellow died, she argued, she should lose her license? "Not fair!" sayeth the judiciary, and lo and behold, it became an "assignable license". Welp, add that to yea old coppers being able to Limit the number of taxis, (traffic enforcement being their territory, along with general supervision of the population), we have, unintended to be sure, a situation of supply and demand. See? Easy. Classic bureaucratic capitalism growing out of its own inertia, sez I.
But meanwhile, back at the ranch, that is to say, *here*, back at FreakOnomics, I say unto thee: "It's too late now, you can't take it back."


Michael Walsh

Ah. Another way to say my previous Comment is:
"Mrs. Piscapo always wins, not matter whatever else, Mrs. Piscapol will always win out."

This is a hard and fast universal rule, and yes you may quote me on it.


I always feel safer with a registered taxi driver. If the driver misstreats me in anyway I can report him to his company and the taxi commission. I'll pay a little extra for that!


In Quincy, IL a guy started giving rides home from the bars. It became so popular that he bought a small bus. That's when it became an issue

Just search "courtesy rides Quincy" to find out more.

ed ericson

The Dubai taxi regs remind me of the situation in Orlando, FL, where (at least until a few years ago, haven't checked lately), taxis with in-town licenses and cabs that worked the I-Drive hotels could not line up for passengers at the airport, so you had what cabbies call "maximum deadheading." The entire regulation scheme appeared to be a confection of Paul Mears, who owned the major cab, sedan and bus companies serving the area and also served on the regulatory boards. The drivers were effectively indentured to him--paying to rent the cars, received dispatches, and even gas.

The take-home lesson for me was not that regulation is bad, but that regulation is bad when the regulators are captured by monopolists.

Kevin P.

"simple act of driving passengers around is a crime - when it is done for cash"

No, that is a false statement. The taxi medallion system is for cars that accept street hails. It doesn't apply to livery vehicles (a.k.a "car service cars" or "for-hire vehicles") which do not accept street hails, but they do still need a license from the TLC.


Taxi medallions are just another form of a monopoly (City of New York and others) appointing a set of distributors who must engage in fixed-price commerce. Think Nikon cameras in 1970 and "Fair Trade" pricing. There were other cameras but they weren't Nikons. In NY I can take a black car or a black cab - subtle distinction - but it will be more costly than a cab. In 1970 we could have bought Leicas but they weren't a perfect substitute. As for the competing cities, when I was at MIT, Cambridge cabs could not pick up in Boston, so a cabbie picking me up in front of Buildfing 10 was bound to take me into Boston just a short ride across the Harvard Bridge and come back empty in what might turn out to be an hour or more due to congestion. Not surprpising that some refused.

When I commuted to NY from Boston, getting to LaGuardia on the first shuttle meant you cold catch a cab with a driver that actually owned his cab. They'd take the early shift then lease it out for the balance of the day in order to stay afloat and the medallions were "only" about $150k then.

Reducing the price of medallions to zero or something close would result in an increase in the number of cabs, but as marginal entrants found themselves sitting in gridlock all day with no fares, the market would equilibrate to the right size.



Isn't hitchhiking illegal too? So, basically it's illegal to pick up strangers, but not friends, regardless of money changing hands.


It is illegal for a private pilot to accept more than his fraction of the cost of fuel when flying anyone anywhere. Any form of compensation other than the pro rata share makes the pilot a criminal.