New York’s Taxi Cartel Is Collapsing. Now They Want a Bailout. Tell Them to Stick It.

The free market: best anti-monopoly weapon ever developed.

“In New York, we are seeing a collapse as inexorable as the fall of the Soviet Union itself.”

Jeffery A. Tuckerjeff writes: An age-old rap against free markets is that they give rise to monopolies that use their power to exploit consumers, crush upstarts, and stifle innovation. It was this perception that led to “trust busting” a century ago, and continues to drive the monopoly-hunting policy at the Federal Trade Commission and the Justice Department.

No more standing in lines on corners or being forced to split fares. You can stay in the coffee shop until you are notified that your car is there.”

But if you look around at the real world, you find something different. The actually existing monopolies that do these bad things are created not by markets but by government policy. Think of sectors like education, mail, courts, money, or municipal taxis, and you find a reality that is the opposite of the caricature: public policy creates monopolies while markets bust them.

For generations, economists and some political figures have been trying to bring competition to these sectors, but with limited success. The case of taxis makes the point.

“Think of sectors like education, mail, courts, money, or municipal taxis, and you find a reality that is the opposite of the caricature: public policy creates monopolies while markets bust them.”

There is no way to justify the policies that keep these cartels protected. And yet they persist — or, at least, they have persisted until very recently.

Taxi-Driver-poster

“In less than one year, we’ve seen the astonishing effects. Not only has the price of taxi medallions fallen dramatically from a peak of $1 million, it’s not even clear that there is a market remaining at all for these permits.”

In New York, we are seeing a collapse as inexorable as the fall of the Soviet Union itself. The app economy introduced competition in a41eQn3GP4ZL._SL250_ surreptitious way. It invited people to sign up to drive people here and there and get paid for it. No more standing in lines on corners or being forced to split fares. You can stay in the coffee shop until you are notified that your car is there.

[Order Jeffrey’s book “Bit by Bit: How P2P Is Freeing the World” from Amazon.com]

In less than one year, we’ve seen the astonishing effects. Not only has the price of taxi medallions fallen dramatically from a peak of $1 million, it’s not even clear that there is a market remaining at all for these permits. Read the rest of this entry »


Analysis: Why Government Doesn’t—and Can’t—Manage Resources Like a Private Business

soviet-Obama-icon

Government versus Private Resource Management: The Theory

Robert P. Murphy writes: According to a common but naïve worldview, there are objective, well-known techniques for producing various goods and services, and the consumer preferences regarding these outputs are also common knowledge. In such a worldview—which even many professional economists, in discussing policy, seem to hold—it seems only natural to conclude that government officials could improve upon the decentralized market outcome. After all, the government has access to the same “production function” as private firms, and if it decides to be the monopoly producer of a good or service, it can avoid wasteful advertising expenses and other redundancies. Such arguments were behind the proposals for outright “market socialism” in the era between World Wars I and II, and, to this day, they guide recommendations for heavy government regulation of “natural monopolies” such as utilities.

However, more-practical economists recognize the limits of their textbook diagrams with elegant marginal revenue and marginal cost curves. In reality, we operate in a world of uncertainty. The “least cost” method of producing a good or service is never obvious, nor is what consumers will be willing to pay for various items. In a famous lecture, “Competition as a Discovery Procedure,” Friedrich Hayek explained how markets in the real world stumble upon this hidden knowledge. Various people with access to different information make piecemeal discoveries and constantly modify their operations accordingly; they receive feedback from market prices in the form of profit or loss. Firms mimic particularly profitable innovations, and if a firm does not adapt quickly enough, it will go out of business. Hayek thus viewed competition as a process rather than a condition or end-state. The state of “perfect competition” described in the textbooks—which includes the property that all firms in an industry use the identical “least-cost” method of production—is actually something that would emerge over time onlybecause of the competitive rivalry between the firms, and only if the conditions in the real world remained static long enough for all firms to fully adapt.

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Why I Am an Anarcho-Capitalist

LewRockwell2011Llewellyn H. Rockwell writes: A great many people – more than ever, probably – describe themselves as supporters of the free market today, in spite of the unrelenting propaganda against it. And that’s great. Those statements of support, however, are followed by the inevitable but: but we need government to provide physical security and dispute resolution, the most critical services of all.

Almost without a thought, people who otherwise support the market want to assign to government the production of the most important goods and services. Many favor a government or government-delegated monopoly on the production of money, and all support a government monopoly on the production of law and protection services.

This isn’t to say these folks are stupid or doltish. Nearly all of us passed through a limited-government – or “minarchist” – period, and it simply never occurred to us to examine our premises closely.state-vs-market-graphic

To begin with, a few basic economic principles ought to give us pause before we assume government activity is advisable:

  • Monopolies (of which government itself is a prime example) lead to higher prices and poorer service over time.
  • The free market’s price system is constantly directing resources into such a pattern that the desires of the consumers are served in a least-cost way in terms of opportunities foregone.
  • Government, by contrast, cannot be “run like a business,” as Ludwig von Mises explained in Bureaucracy. Without the profit-and-loss test, by which society ratifies allocation decisions, a government agency has no idea what to produce, in what quantities, in what location, using what methods. Their every decision is arbitrary, in a way directly analogous to the problem facing the socialist planning board (as Mises also discussed, this time in his famous essay “Economic Calculation in the Socialist Commonwealth“).

In other words, when it comes to government provision of anything, we have good reason to expect poor quality, high prices, and arbitrary and wasteful resource allocation.

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