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.

Jayson Virissimo

"It might not be fair to hard working cabbies, but how else to you keep the streets from being flooded with cabs?"

Doesn't this argument apply to any good? If the state doesn't put a limit on the number of shoe sellers in an area, what is to stop entire city blocks being filled with shoe stores and whole malls devoted to nothing but shoe stores! Umm..I don't know, maybe supply and demand?

Jim Powers

For at least 10 I drove around with a bumper sticker that said "Gas, Grass, or Ass". I'm glad a cop or taxi commission didn't stop me.


I took an illegal taxi once when I had to get from JFK to LaGuardia in a hurry. It let me skip the line of people waiting for legitimate rides, and also allowed for more flexible pricing. All in all it was a bit of a hairy experience, though.


Someone had made a point about hot dog vendors; I think this is important to look at, as it is similar in many ways. In New York City, it is outrageously expensive to obtain a license to sell hot dogs in choice spots, and considering the prices they can expect consumers to pay for their products, this makes it exceedingly difficult for vendors to turn a reasonable profit.
In an article that was I believe published by the New York Times, it was noted that there is an element of self governance amongst vendors, in that if someone is to set up a cart in an area in which there is already a licensed vendor, he may literally be intimidated into moving. So the point about the necessity of a governing body can be questioned, in that self-governance and even the introduction of natural monopolies, as with many cab businesses in large cities, would really eliminate much need for one.


I think issuing licenses to cabs was meant to assure the citizens it is safe enough to ride on one which was approved by authority.I would certainly think twice before entering a non licensed cab.


I was just reading the recent Vanity Fair's article on the craigslist killer.. you can list prostitution on craigslist by calling it "massage" and indicating your "donation"... companionship on my driving journey for a donation, anyone?


Agree with nate (and others) - any activity where the Government creates barriers to entry via licensing: eg
- someone not registered as a lawyer / doctor giving legal / medical advice: ok if it's 'help' for free; not ok if it's 'advice' given for a fee.
what about this example: busking. Here in Melbourne, Australia, you need a licence (yes!) to busk downtown. [Mayor thought it would be a good way to weed out the worst performers: clearly he has no faith in the market.] So if I play my guitar and sing badly on the street, but don't ask for or accept payment, it's probably ok. If I take money I need a licence.


The taxi issue is never on the mind of people living outside of big cities. In small towns taxis are a service primarily used by the poor.


I was in a NY taxicab the other day and paid with my credit card. It struck me that the default tip options were wildly generous. The suggested tips were $3,$4, and $5 for a ten dollar cab ride. I've always thought that a 20% tip for service is considered generous, but when I went out of my way to ignore the default options and input $2, the cabbie complained that I was being stingy. It doesn't surprise me that people are tipping more because they are nudged into doing so by the credit card machine, but it strikes me as somewhat absurd that cabbies are so reluctant to accept credit cards when the new normal rate of tipping has skyrocketed to 30-50%! It would be interesting to know how much tipping has gone up due to the default tip options. I also wonder if there is an optimal set of default choices that will extract the most tips from riders. Based on this encounter, I think the medallion companies must already have some clever economists working on this.


gevin shaw

The nature of the taxi-ride marketplace makes price or service competition impossible because of imperfect information. When you compare prices among stores, the best price you find is still available because the store isn't on its way uptown with another customer.

When you hail a cab, the price quoted has no meaning until you reject it and hail a second cab. If the first quote was lower, you have no means to act on that information, other than to reject the second quote and hope you find a third cab that matches the first, or at least betters the second. (You would have to be an economist to think this is a practical procedure for getting a ride.)

If you find a cab with service you like, what are the chances that you'll find that cab again when you need your next ride?

Cell phones change things a little (as long as we don't count more taxi accidents from drivers talking while driving), but, because your favorite driver may not be on duty or may be busy when you next ride, you would have to be a mini self-dispatcher with a stable of drivers to draw from. Again, a lot of time and energy. (They call them externalities.)


Eric M. Jones

@20 --David

FAR 61.113(a) provides that "no person who holds a private pilot certificate may act as pilot in command of an aircraft that is carrying passengers or property for compensation or hire; nor may that person, for compensation or hire, act as pilot in command of an aircraft."

Paragraph (c) of the regulation states "[a] private pilot may not pay less than the pro rata share of the operating expenses of a flight with passengers, provided the expenses involve only fuel, oil, airport expenditures, or rental fees."

Rental fees can be substantial. Fuel might be relatively little in comparison. But for a non-rental, operating expenses such as a share of maintenance expenses, deductibles and new engine kitty is probably forbidden. There is a lot of gray area.

Benjamin Seghers

"Regulated" is not the same thing as "illegal." That's why no one mentioned taxis in Dubner's query.

tax man

Why not just let everyone become doctors aswell is the American Medical Association "draconian"? They could at least make it much easier to become a doctor.


The medallion scam is just another cartel. As for regulations, they give consumers a false sense of security. Regulations are central planning, a.k.a. socialism.

The best plan is to privatise the roads.


Maybe the way to operate a taxi service is to provide rides to a closely held core of "friends" on a regular but informal basis without fanfare and advertisement. Gratuitous expressions of appreciation would replace metered fares. Licensing and taxes would be a non-issue. Where there's a will there's a way.

Tim Dellinger

"not one of the 100+ responders to Dubner's appeal mentioned that the simple act of driving passengers around is a crime"


Ummm.... with all due respect, did you actually read the comments?

#20 "Many things requiring a license, if you don't have said license ([...], car ride)"

#30 "for example, if you were to try to charge them for giving them a ride"

#78 "You generally wouldn't pay for a lift, though for a road trip or a long drive (or say, a ride to the airport, where you're saving them an expensive cab fair) you would be expected to pay (or help pay) for gas."


This actually exists to an extent in the private sector as well.
Most new cars come with warrenties which usually cover repairs unrelated to accidents, provided that regular maintenance is performed. The maintenance usually can be done by anyone, provided that they charge for the service.

This may provide insight into why the government (initially) requires payment for certain services, as services requiring either a significant time committment on the part of the supplier or highly specialized services (which would require a human capital investment) are usually only provided when the supplier derives a livelyhood from payment for the service. If no payment is recieved, then it is concievable that the supplier is compensated in another, untaxable fashon.
Therefore, the government has the incentive of receiving tax revenue from the transaction if the transaction involves cash transfer
The car warrenty may require it for a similar reason, to prevent fraud on the part of a warrenty-holder, who may want a new engine, getting the warrenty to cover it by not changing the oil until it breaks down. payment for the service ensures that records are kept: various forms of medication are prescribed for individuals who keep records of all non-cash transactions

(i.e. "on July 4th 2009, I enjoyed Bob Smith's fireworks from 6:14pm to 7:34pm. I incurred the greatest utility from the large blue ones...")



Some government oversight is necessary unless you want the streets of NY crapped up with vender's, itinerants, shysters, and rip offs.

You cry when a cop is not around protecting you but also cry about regulation. BOTH are necessary for a civilized country to survive. The other option is chaos!


The medallions can make a lot of money, but they come with a lot of regulations. The idea is that an operator will not endanger his investment by ignoring the regulations. If cabs were unregulated than the cab may or may not pick you up, may or may not deliver you, may or may not stick to his original price, may or may not be operating a safe vehicle. By making the medallion a valuable commodity the city can keep the taxi safe and of a known price.


umm, I think driving was not mentioned BECAUSE a person can LEGALLY drive others.

also not mentioned. Surgery, Electrical work, cooking, general practioners, plumbing, etc...all of which are LEGAL but REQUIRE a license.