Taxi Cab Economics

The New York City taxi industry always amazes me. I got into a cab at 110th Street and Amsterdam Avenue the other evening. It was raining and I had to wait a while for a cab. It was shift change time (more about that later), but he agreed right away to take me. As soon I got in I said hello to the driver and gave him my destination. The first thing he said was “Where are we?” I thought he was joking; he was not. He admitted that he was so mixed up driving around in circles he genuinely did not know what street he was on. Of course I told him and he did get me to where I wanted to go, safely I might add. This kind of thing happens all the time. But generally speaking, I learn a lot from cab drivers. I must admit I don’t often take a cab because of the expense and the poor service. But when I do I know I will meet a driver from one of 86 different countries and there is a lot to be learned. I rode with a Moroccan driver recently across 116th Street and he was playing the wildest Moroccan music on the radio, When I told him how much I liked it he said, “That’s nothin’ man, listen to this!” whereon he took out and tape cassette of Dolly Parton and popped it into an old battery player on the front seat. She was his favorite singer and so I rode into East Harlem with a Moroccan driver playing Dolly Parton. I’ve learned about Com Pas music from Haitians and Zouk music from black Caribbean drivers. And hearing about conditions in Mali up on the Niger border with the rebels, and in places like Ghana and Zimbabwe with their repressive governments. These places are not for the faint hearted. But the drivers are here trying to eke out a living, save a few bucks to send back to their families.

How does the taxi industry work? Simply, there are a fixed number of car licenses called medallions that adorn each of the cabs that are on the street. At the time a car is licensed the owner buys a medallion, a license fee so to speak. But this supply is fixed and is rarely increased by the city. There are about 30,000 medallions out there. So in the secondary market the medallions increase in value. A medallion today is worth around $1.0 million. So a fixed number of medallions means a fixed supply of taxi cabs. Now to the demand side. There is practically unlimited demand regardless of price as there are more people looking for cabs than there are cabs on the street. This is particularly so during rainy weather or during “shift change” time when cars are running with their “off duty” lights on while they are going back to their garages. If they see you some will slow down and ask where you are going and will deign to carry you if not too far out of their way. This usually sparks a spirited negotiation between the fare and the driver as to what constitutes “too far out of the way.” When the City, through its regulatory body, the Taxi & Limousine Commission (TLC) raises its rates, demand dips slightly then rises back to the level that it was at pre-raise.

So we have covered supply and demand. What about pricing? Well the prices are fixed by the government (City). Sound like something from pre-1989 Russia. Well it is. In addition to the base prices for getting into the cab, and for each fraction of a mile and waiting time, there are additional fees. A $0.50 evening fee and a $1.00 late afternoon fee were supposed to be an incentives to keep more cars on the streets at off hours. But when they imposed the $1.00 late afternoon fee, they did not change the driver shifts so there are still less cabs on the street for a $1.00 more in fare. There is a new fee called the MTA fee which is a $0.80 fee which goes to the Metropolitan Transportation Authority (MTA) what what we do not know. It does not come back to surface transportation in New York City. The drivers are responsible for collecting this fee, which effectively makes them tax collectors for the state for which they do not get paid.

Lastly, there is an unlimited supply of labor. If a driver quits in disgust there are a lot of others waiting to take his or her place. The owners know this so they take advantage of the drivers. It costs a driver about $200.00 to take a car out of the garage, with the lease fee, gas, payments and tips to the manager, etc.

So there you have it, a business that is regulated by the city, with a protected limited supply, unlimited labor, fixed prices and in-elastic demand. A good buiness? For the owners sure, for the drivers and passengers” Forget abbout it. And for the Mayor a terrific business, since the owners represent one of the largest sources of industry campaign contributions.



Tomorrow night, PDT, early Monday morning EDT, Rover Curiosity  will land on Mars. This one-ton vehicle, about the size of an SUV, will spend (time) exploring the surface of the planet, driving around like a tourist, taking pictures and videos, soil and atmosphere samples which it will process in its on board lab. The purpose of all this is to determine the existence of conditions to support microbial life including the chemical ingredients of life. What a remarkable achievement. The mission is managed by the folks at the Jet Propulsion Lab, or JPL as it is affectionately called. JPL is located in Pasadena, CA. 

The trip is a short one in inter-stellar travel time. The vehicle took 8 months to make the 350 million mile journey. Lots of frequent flyer miles there. If humans ever get to go make sure you get a window seat. Pales in comparison, though, to the two Voyager spacecraft which left Earth in 1977 to visit the outer reaches of the solar system. They have travelled 90 billion miles and just arrived a few months ago. Lots of frequent flyer bonus miles there.
Rover Curiosity is on board a spacecraft called the Mars Science Laboratory and its job is to get Rover Curiosity there and safely landed. This will be a most difficult undertaking, and perilous to say the least. Touchdown is scheduled for 10:31 p.m. PDT on Sunday night, 1:31 a.m. EDT, Monday morning. NASA already has two satellites observing Mars close up. The Mars Odyssey Orbiter will provide communications during the landing since the Earth will have set beneath Mars’ horizon, about two minutes before landing, just like the Sun sets below our horizon. The Mars Reconnaissance Orbiter watches the weather on Mars and already knows that there will be a dust storm in Southern Mars but will be dissipating as the landing process begins.
Now here is the scary part. As we write,  Curiosity is on final approach at a speed of 8,000 miles per hour. As it finds Mars’ gravitational field it will speed up to over 13,000 miles per hour. The three part sky crane will slowly deploy parachute like structures.  The craft has to bleed off 12,999 miles per hour since it has to touch down at 1 mile per hour so as not to sustain damage to itself and its lab instruments. All this takes place in the last 7 minutes of the flight! And in the last twenty two minutes of flight Curiosity will be out of radio contact due to Mars’ gravitational force and atmospheric conditions. The folks at JPL will be at their consoles and control stations waiting for the landing signal in the blind. A nail biter!The Curiosity mission will last a Martian year, which is two Earth years.
I like the name of this vehicle:  Rover Curiosity. Humans are curious by nature. We want to know more about things. We want to know what is in that locked box in Grandpa’s cellar, what’s over the next hill, The Wright Brothers were curious, so was Henry Ford, Guglielmo Marconi, Alexander Graham Bell, Jonas Salk, Thomas Edison, just to name a few. And yes, we can add Columbus, Magellan, Galileo, who figured out the Sun did not move, Isaac Newton and Albert Einstein who played with light and gravity, and last but not least my favorite science rock star, Benjamin Franklin. So let’s all hope and pray that the mission will successful, that the sky crane JPL designed to let Rover Curiosity down safely will work. Let’s applaud all the scientists and engineers at JPL and NASA for an American achievement, and honor their and all Curiosities.