Wednesday, September 28, 2005
How the Independent Contractor System Harms Taxi Companies
Opinion © 2005, by Guy L. Evans
September 28, 2005
In Denver, taxi companies use independent contractor drivers, which means that the taxi companies lease their taxis to the drivers. The drivers then provide taxi service directly to consumers. The idea is that each driver is in business for himself, and that every driver is in competition with all other drivers, regardless of their company affiliation.
The argument goes that competition is good for business. But, competition at what level? Competition between players on the same football team will always result in a loss for the team. Likewise, competition between drivers who work for the same company always results in wasted effort, wasted resources, lost time, and lost revenues. It makes absolutely no sense for drivers from the same company to compete with each other for the same customer.
By analogy, what would happen to a real estate company if every real estate agent competed with each other for every sale? There will only be one commission per sale. If you pit three real estate agents against each other for the same sale, only one of them will receive a commission. The other two will make nothing, and will have wasted their time and the real estate company’s resources, time and resources that could have been used to promote another sale. It’s no different with taxis. How hard is this to understand?
I am astounded at how stupid the managers, owners, and regulators of Denver’s taxi companies really are. Think about this for just a moment. Two drivers from the same company chase after the same customer, who will pay $20.00. One driver gets there first and takes the call. The other driver just wasted his time and gasoline chasing a call that paid nothing. He is out $20.00. It is impossible to argue that this system is in any way efficient.
Ideally, the most efficient system would be to send one driver to answer one call, not five drivers to answer one call. Currently in Denver, there are too many drivers and too much competition among drivers. And consumers have to pay for this inefficiency in the form of higher rates.
The independent contractor system harms Denver taxi companies in another way because dozens of taxi drivers walk away from their companies each year without paying their lease fees. They collect revenues from consumers, but don’t pay the companies. I know of one case in which two drivers together owed one Denver taxi company over $5,000 in unpaid lease fees for over a year. I do not know, nor am I aware that anyone knows, how many hundreds of thousands of dollars per year taxi companies lose because independent contractor drivers don’t pay their lease fees.
Also, to my knowledge, Denver taxi companies never take drivers to court for unpaid lease fees. It seems that the contracts the companies have the drivers sign wouldn’t hold up in court, and could actually result on some taxi company employees going to prison for a long time. The result is that Denver taxi companies lose hundreds of thousands of dollars a year because drivers can’t or won’t pay their lease fees, and because taxi companies can’t or won’t try to collect the money they claim the drivers owe.
The Denver taxi companies opted for this system because they claimed that drivers were stealing too much money from them. How is the independent contractor system any different?
When the company lets a driver go $1,000 into debt to the company, and the company knows they can’t collect the money the driver owes, who is supposed to pay for that? The taxi companies have to raise the rents they charge all drivers. Rents that drivers pay the companies do not include drivers’ compensation or gasoline. Rents that drivers pay the companies provide no improvement in service, and provide no benefit whatsoever to consumers.
The inefficiency of having drivers of the same company compete with each other for the same customers, along with the money that the taxi companies lose from drivers not paying their lease fees, results in higher meter rates to consumers. Higher rates make taxi service less competitive with non-taxi alternatives. The net result is that Denver taxi companies lose millions of dollars per year in potential and actual revenues.
One other way the independent contractor system harms Denver taxi companies is that no matter how much the taxi companies raise their rents to drivers, company revenues never seem to improve. Two words: Supply and demand. The services the taxi companies provide independent contractor drivers are overpriced relative to the number of drivers on the street and the amount of available business. Every time the Denver taxi companies raise their rents, they push marginal drivers out of the system. Even with government protection from legitimate and necessary competition, Denver taxi companies’ total revenues are limited by the laws of supply and demand.
There is no demand for overpriced, unreliable taxi service (when you can get any service at all) delivered by bitchy, self-serving, disheveled, overworked, underpaid cab drivers who think they are in business for themselves and who are under no obligation to provide service to anyone.
Guy L. Evans
Aurora, Colorado
Opinion © 2005, by Guy L. Evans
September 28, 2005
In Denver, taxi companies use independent contractor drivers, which means that the taxi companies lease their taxis to the drivers. The drivers then provide taxi service directly to consumers. The idea is that each driver is in business for himself, and that every driver is in competition with all other drivers, regardless of their company affiliation.
The argument goes that competition is good for business. But, competition at what level? Competition between players on the same football team will always result in a loss for the team. Likewise, competition between drivers who work for the same company always results in wasted effort, wasted resources, lost time, and lost revenues. It makes absolutely no sense for drivers from the same company to compete with each other for the same customer.
By analogy, what would happen to a real estate company if every real estate agent competed with each other for every sale? There will only be one commission per sale. If you pit three real estate agents against each other for the same sale, only one of them will receive a commission. The other two will make nothing, and will have wasted their time and the real estate company’s resources, time and resources that could have been used to promote another sale. It’s no different with taxis. How hard is this to understand?
I am astounded at how stupid the managers, owners, and regulators of Denver’s taxi companies really are. Think about this for just a moment. Two drivers from the same company chase after the same customer, who will pay $20.00. One driver gets there first and takes the call. The other driver just wasted his time and gasoline chasing a call that paid nothing. He is out $20.00. It is impossible to argue that this system is in any way efficient.
Ideally, the most efficient system would be to send one driver to answer one call, not five drivers to answer one call. Currently in Denver, there are too many drivers and too much competition among drivers. And consumers have to pay for this inefficiency in the form of higher rates.
The independent contractor system harms Denver taxi companies in another way because dozens of taxi drivers walk away from their companies each year without paying their lease fees. They collect revenues from consumers, but don’t pay the companies. I know of one case in which two drivers together owed one Denver taxi company over $5,000 in unpaid lease fees for over a year. I do not know, nor am I aware that anyone knows, how many hundreds of thousands of dollars per year taxi companies lose because independent contractor drivers don’t pay their lease fees.
Also, to my knowledge, Denver taxi companies never take drivers to court for unpaid lease fees. It seems that the contracts the companies have the drivers sign wouldn’t hold up in court, and could actually result on some taxi company employees going to prison for a long time. The result is that Denver taxi companies lose hundreds of thousands of dollars a year because drivers can’t or won’t pay their lease fees, and because taxi companies can’t or won’t try to collect the money they claim the drivers owe.
The Denver taxi companies opted for this system because they claimed that drivers were stealing too much money from them. How is the independent contractor system any different?
When the company lets a driver go $1,000 into debt to the company, and the company knows they can’t collect the money the driver owes, who is supposed to pay for that? The taxi companies have to raise the rents they charge all drivers. Rents that drivers pay the companies do not include drivers’ compensation or gasoline. Rents that drivers pay the companies provide no improvement in service, and provide no benefit whatsoever to consumers.
The inefficiency of having drivers of the same company compete with each other for the same customers, along with the money that the taxi companies lose from drivers not paying their lease fees, results in higher meter rates to consumers. Higher rates make taxi service less competitive with non-taxi alternatives. The net result is that Denver taxi companies lose millions of dollars per year in potential and actual revenues.
One other way the independent contractor system harms Denver taxi companies is that no matter how much the taxi companies raise their rents to drivers, company revenues never seem to improve. Two words: Supply and demand. The services the taxi companies provide independent contractor drivers are overpriced relative to the number of drivers on the street and the amount of available business. Every time the Denver taxi companies raise their rents, they push marginal drivers out of the system. Even with government protection from legitimate and necessary competition, Denver taxi companies’ total revenues are limited by the laws of supply and demand.
There is no demand for overpriced, unreliable taxi service (when you can get any service at all) delivered by bitchy, self-serving, disheveled, overworked, underpaid cab drivers who think they are in business for themselves and who are under no obligation to provide service to anyone.
Guy L. Evans
Aurora, Colorado
Monday, September 26, 2005
Shoveling Sand
Opinion © 2005, by Guy L. Evans
September 26, 2005
My favorite example of wasting money on what seems like a good cause is set in the dessert. Give a man a shovel and pay him $12 per hour to shovel sand. He has a job and he’s making a living. That’s a good thing, isn’t it?
Here’s the problem: Someone is paying for this poor guy to shovel sand. What they get for their $24K per year is a very unhappy man with a shovel and a dead end job who is doing nothing worthwhile for damned little money. He isn’t providing any benefit for anyone. He isn’t making enough money to go to school and improve his lot. He can’t save a dime. He’s screwed.
I continue to argue that the only way to succeed is to define your objectives and argue about the methods later. The man with the shovel example above is a bad case of confusing the method with the objective. It isn’t how much you spend that matters; it’s what happens after you spend it.
It makes no sense to employ people in activities that benefit no one. It makes even less sense to spend tax dollars the same way. Building houses that no one can live in and roads that don’t go anywhere may benefit the construction companies involved, but after they leave, no one benefits.
Do you buy jars of peanut butter just to fill up your shelves? Do you buy bottled water just so you can pour it down the drain? I don’t know about you, but when I spend a dollar, I intend to get more than a dollar’s worth of benefit. Otherwise, why spend money at all?
Spending money to solve a problem is only warranted when some lasting benefit results. Otherwise, we might as well spend our time building sand castles on the beach, or shoveling sand in the dessert.
Guy L. Evans
Aurora, Colorado
Opinion © 2005, by Guy L. Evans
September 26, 2005
My favorite example of wasting money on what seems like a good cause is set in the dessert. Give a man a shovel and pay him $12 per hour to shovel sand. He has a job and he’s making a living. That’s a good thing, isn’t it?
Here’s the problem: Someone is paying for this poor guy to shovel sand. What they get for their $24K per year is a very unhappy man with a shovel and a dead end job who is doing nothing worthwhile for damned little money. He isn’t providing any benefit for anyone. He isn’t making enough money to go to school and improve his lot. He can’t save a dime. He’s screwed.
I continue to argue that the only way to succeed is to define your objectives and argue about the methods later. The man with the shovel example above is a bad case of confusing the method with the objective. It isn’t how much you spend that matters; it’s what happens after you spend it.
It makes no sense to employ people in activities that benefit no one. It makes even less sense to spend tax dollars the same way. Building houses that no one can live in and roads that don’t go anywhere may benefit the construction companies involved, but after they leave, no one benefits.
Do you buy jars of peanut butter just to fill up your shelves? Do you buy bottled water just so you can pour it down the drain? I don’t know about you, but when I spend a dollar, I intend to get more than a dollar’s worth of benefit. Otherwise, why spend money at all?
Spending money to solve a problem is only warranted when some lasting benefit results. Otherwise, we might as well spend our time building sand castles on the beach, or shoveling sand in the dessert.
Guy L. Evans
Aurora, Colorado
Tuesday, September 20, 2005
Hurricane Rita Update
Weather report © 2005, by Guy L. Evans
September 20, 2005
As I stand atop Lookout Mountain just west of Denver, Colorado, I scan the eastern horizon for any signs of Hurricane Rita.
Nothing.
I’ll keep you posted if anything develops.
Later.
Guy L. Evans
Aurora, Colorado
Weather report © 2005, by Guy L. Evans
September 20, 2005
As I stand atop Lookout Mountain just west of Denver, Colorado, I scan the eastern horizon for any signs of Hurricane Rita.
Nothing.
I’ll keep you posted if anything develops.
Later.
Guy L. Evans
Aurora, Colorado
Thursday, September 15, 2005
To Pledge or Not to Pledge
Opinion © 2005, by Guy L. Evans
September 14, 2005
While our nation is at war with a religiously motivated, fanatic, genocidal enemy, Americans fuss with each other over the wording of--get ready for this one--the Pledge of Allegiance. I’m not making this up.
At issue is whether school children can be allowed (not compelled, allowed) to recite the Pledge of Allegiance because it contains the words “under God”. (I am stupefied.)
What is the purpose of asking people to learn and recite the Pledge of Allegiance? What do the words of the Pledge actually mean?
The Pledge of Allegiance is not a binding oath. It seems to be more of a team building effort than a request for an actual commitment to act on behalf of our nation.
So, what’s the point? What good does it do to recite the Pledge, and what harm does it do to not recite the Pledge? In the converse, what harm does it do to recite the Pledge, and what good does it do to not recite the Pledge? More important, what is the point of asking children to recite a Pledge of Allegiance when they may not even understand what a pledge is or what allegiance means?
I suggest that a meaningful Pledge of Allegiance should be written for adults, not children. Here is my submission:
For children, you might consider something more along the lines of promising to learn about America and to love our country, our liberty, and our heritage. It is worthwhile to teach children, and other Americans, that hundreds of thousands of people who lived before us gave their lives, their labor, their love, and their blood so that we could reap the benefits of liberty, so that we could live free.
I pray God bless America. And I pray that Americans will continue the revolution of individual liberty, private property, and the rule of law.
Guy L. Evans
Aurora, Colorado
Opinion © 2005, by Guy L. Evans
September 14, 2005
While our nation is at war with a religiously motivated, fanatic, genocidal enemy, Americans fuss with each other over the wording of--get ready for this one--the Pledge of Allegiance. I’m not making this up.
At issue is whether school children can be allowed (not compelled, allowed) to recite the Pledge of Allegiance because it contains the words “under God”. (I am stupefied.)
What is the purpose of asking people to learn and recite the Pledge of Allegiance? What do the words of the Pledge actually mean?
The Pledge of Allegiance is not a binding oath. It seems to be more of a team building effort than a request for an actual commitment to act on behalf of our nation.
So, what’s the point? What good does it do to recite the Pledge, and what harm does it do to not recite the Pledge? In the converse, what harm does it do to recite the Pledge, and what good does it do to not recite the Pledge? More important, what is the point of asking children to recite a Pledge of Allegiance when they may not even understand what a pledge is or what allegiance means?
I suggest that a meaningful Pledge of Allegiance should be written for adults, not children. Here is my submission:
I pledge allegiance to the United States of America. I pledge my honor to defend the Constitution of the United States, and to defend our nation, our people, our laws, our liberty, and our heritage.You could even throw in a “so help me God” at the end if you want to. But then, you’d be inviting the lefty crackpots to claim that you are establishing a religion.
For children, you might consider something more along the lines of promising to learn about America and to love our country, our liberty, and our heritage. It is worthwhile to teach children, and other Americans, that hundreds of thousands of people who lived before us gave their lives, their labor, their love, and their blood so that we could reap the benefits of liberty, so that we could live free.
I pray God bless America. And I pray that Americans will continue the revolution of individual liberty, private property, and the rule of law.
Guy L. Evans
Aurora, Colorado
Tuesday, September 13, 2005
Hurried Writings 1
Opinion © 2005, by Guy L. Evans
September 13, 2005
I just don’t have the time I used to have to write full essays. So, here are some hurried writings from a hurried writer.
An Age of Suicide
While the West is attempting suicide through birth control (including abortion), drugs, and general over-indulgence, Islam is attempting suicide through al Qaeda. The number of Moslems being ambushed and slaughtered by the cowards of al Qaeda greatly exceeds the number of infidels al Qaeda is murdering. At this rate, with Moslems killing themselves in the act of killing other Moslems by the dozens, it won’t be long before there aren’t many Moslems left.
For the morally superior, it should be noted that the hundreds of Iraqi’s being blown to meat chunks by “suicide bombers” causes the Western eyebrow to scarcely rise, while a single attack in Britain arouses great consternation. It should also be noted that leftists have no sympathy for Iraqi’s slaughtered by the dozens unless Americans are doing the slaughtering.
Hitler Wore Pants
The left is fond of making analogies to Hitler, and calling people fascists and Nazis. In their narrow minds, if you do anything similar to Hitler, that alone is evidence that you are a closet Nazi.
For your information, one of Hitler’s first acts was to confiscate all private firearms. Hitler was an animal lover and a vegetarian. Hitler condemned the Soviet Union (something the American left never does). And, oh, by the way, Hitler wore pants.
Therefore, if you wear pants and are in favor of gun control, according to the weak-minded left, you must be a Nazi.
Culture is the Foundation of Civilization
You can’t have a Roman Empire without Romans. The Roman Empire became extinct because the population became de-Romanized.
You can’t have America without Americans. The left is trying to de-Americanize the population from within through the media, the courts, and the schools.
If you went back in time and gave the U. S. Constitution to Attila the Hun, all you would have is a barbarian lord with an extra piece of paper.
In other words, culture matters. The only way the United States will survive is to embrace and promote a culture that loves human beings, and that loves being human.
Guy L. Evans
Aurora, Colorado
Opinion © 2005, by Guy L. Evans
September 13, 2005
I just don’t have the time I used to have to write full essays. So, here are some hurried writings from a hurried writer.
An Age of Suicide
While the West is attempting suicide through birth control (including abortion), drugs, and general over-indulgence, Islam is attempting suicide through al Qaeda. The number of Moslems being ambushed and slaughtered by the cowards of al Qaeda greatly exceeds the number of infidels al Qaeda is murdering. At this rate, with Moslems killing themselves in the act of killing other Moslems by the dozens, it won’t be long before there aren’t many Moslems left.
For the morally superior, it should be noted that the hundreds of Iraqi’s being blown to meat chunks by “suicide bombers” causes the Western eyebrow to scarcely rise, while a single attack in Britain arouses great consternation. It should also be noted that leftists have no sympathy for Iraqi’s slaughtered by the dozens unless Americans are doing the slaughtering.
Hitler Wore Pants
The left is fond of making analogies to Hitler, and calling people fascists and Nazis. In their narrow minds, if you do anything similar to Hitler, that alone is evidence that you are a closet Nazi.
For your information, one of Hitler’s first acts was to confiscate all private firearms. Hitler was an animal lover and a vegetarian. Hitler condemned the Soviet Union (something the American left never does). And, oh, by the way, Hitler wore pants.
Therefore, if you wear pants and are in favor of gun control, according to the weak-minded left, you must be a Nazi.
Culture is the Foundation of Civilization
You can’t have a Roman Empire without Romans. The Roman Empire became extinct because the population became de-Romanized.
You can’t have America without Americans. The left is trying to de-Americanize the population from within through the media, the courts, and the schools.
If you went back in time and gave the U. S. Constitution to Attila the Hun, all you would have is a barbarian lord with an extra piece of paper.
In other words, culture matters. The only way the United States will survive is to embrace and promote a culture that loves human beings, and that loves being human.
Guy L. Evans
Aurora, Colorado
Saturday, September 10, 2005
The Case Against Transferability
Halting the abuse of government authority in regulating taxis
© 2005, by Guy L. Evans
September 10, 2005
In New York City, they are medallions. In Portland, Oregon and Dublin, Ireland, they are plates. In Denver, Colorado, they are Certificates of Public Convenience and Necessity.
They are licenses to operate taxis for hire, and they are the source of all the troubles that government and the public experience with the taxi industry today. In this essay, I offer a concise explanation of the situation, the harm it causes, and the remedies.
Note: I owe a debt of gratitude to the Dublin Competition Authority for their research and insight into this matter. It seems the Irish have a knack for saving civilization.
Illusory property rights and their consequences:
Government issues licenses to permit people and business to do things that are otherwise prohibited, such as operating a motor vehicle on the public highways. I do not know of any case in which government sells licenses. (Hunting and fishing licenses aren’t actually sold. The license will expire without government compensation to the licensee, and government is under no obligation to buy the license back.) Government does not establish a property interest in licenses either for themselves or for the licensee. It was originally understood that creating a property interest in the license placed government at a disadvantage, making it difficult and sometimes impossible for government to enforce the law. This is why drivers’ licenses and professional licenses do not have property values, why the people who hold these licenses do not have an actual property interest in the licenses, and why these licenses have mandatory expiration periods.
However, for taxis, this is not the case.
Government and the people who acquire taxi licenses both presume that the license is the property of the licensee. (I want to emphasize the word “presume” because, if tested, neither government nor the licensees could establish a property interest in the licenses. Banks and other lenders will not accept licenses as collateral. It’s their money that would be at risk. They should know.) When and how this happened is unclear, but it seems to have happened during the Great Depression.
The proof that the license is not the property of the licensee is that government may revoke the license without compensating the licensee in any way. Government didn’t sell the licenses, and government is under no obligation to buy the licenses back.
The licensees use the presumption of their property rights to the license to argue that certain actions of government will constitute a “taking” of the license, creating such a severe devaluation of the license as to render it worthless. This turns the relationship between government and the licensees on its head. The licensees argue, and government agrees, that government can’t issue new licenses, revoke existing licenses, or even enforce the law in any way that might significantly diminish the property value of the license.
By asserting that the license has property value, the licensees are insinuating that they possess a title to the license, and that this title creates certain entitlements for as long as they hold the license. Using this mental slight of hand, the licensees transform themselves from mere entrepreneurs into titled property owners with distinct privileges of their class. They create a kind of neo-feudalism, casting themselves in the role of vassals of the State (both protected by and subservient to the State), effectively entitled to exercise State authority over other people.
By stating the proposition that licensees are authorized to exercise certain powers of government over other people and are protected against certain laws, rules, and regulations, the absurdity of their position is revealed. The license has no property value; therefore, the licensee is not protected against “takings”. There are no “takings” if government issues more licenses, or alters or revokes existing licenses. The licensee is not entitled to the license, and government is obligated to enforce the law against the licensees. Government is also obliged to issue sufficient numbers of licenses to meet public demands for taxi service.
To give the point a punctuation, in the mid 1980’s, one of the Denver area taxi companies proposed selling some of their licenses to a competing taxi company for about $240,000, and then applying for more licenses for the minimal cost of the new issuance fee. It would have been the easiest $240,000 they ever made if government hadn’t denied their request.
The entire system amounts to a grossly inefficient use of resources and labor with monumental overhead for nothing more than the enrichment of a privileged class of license holders. It seems that government and licensees are hell bent on turning America into Mexico one taxi license at a time.
Restricted licenses versus unrestricted entry:
Agreeing to the demands of licensees to protect the property value of the existing licenses, government restricts the number of licenses issued, thereby creating artificial shortages for taxi service. The licensees then capitalize on the artificial shortage by charging lessee taxi drivers exorbitant fees for the privilege of providing the taxi service that government refuses to allow. The difference is that government issues a license for a fee, whereas the licensees charge rent (lease fees, license fees, payoff, or any number of other terms--it’s still rent). Some licensees make tens of thousands of dollars a year on rents, far more than the fee government would charge to issue a new license.
While government protects the presumed property interests of the licensees by restricting the number of licenses they issue, the licensees grant unlimited entry into the market for as many lessee taxi drivers as they can sign up. In markets where this rent seekers versus urban sharecroppers system is in place, there are too many drivers fighting over too few high paying customers. (Low paying customers are ignored because, between unrestricted rents and restricted meter rates, lessee taxi drivers can’t afford to give them service.)
Licensees have usurped the role of government in allowing entry into the market, charging excessive rents, while allowing unrestricted entry into the market, and government has allowed them to get away with it. Licensees are profiting greatly from usurping the legitimate government function of allowing entry into the market. However, licensees are not entitled to compensation merely for holding the license. They have to perform some service, or offer something of value. Offering entry into the taxi market is not a service that the licensee is licensed to offer. Only government can offer such entry.
Government permits the licensee rent seekers to use the authority of the government-issued license to demand rent from lessee taxi drivers. The lease fee is a type of confiscation, more a tax than a rent. However, government does not profit from this tax; only the licensee rent seekers benefit. Government and the licensees are equally at fault.
Real harm:
There are grounds for action by both consumers and lessee drivers.
Lessee drivers and consumers are harmed by this system. Lessee drivers are paying a premium to the licensee rent seekers for entry into the market, a premium that they would not have to pay if government simply issued the number of licenses that public demand for taxi service requires. Compensation that is due to the lessee drivers for the service they provide is being confiscated by the licensee rent seekers for the privilege of being allowed to offer taxi service to the public--a privilege granted by government to the licensee but not to the lessee driver. I consider charging the driver a fee to rent the license an unjust and unlawful confiscation of the lessee taxi driver’s property (income, labor, and other compensation) for no benefit to the driver or to the public. The lessee is not receiving anything of value in return for the rents that he pays. You can’t legitimately enter into a contract to rent out something in which you have no property interest. Licensees have no legitimate property interest in their licenses, and in my opinion, the licensee rent seekers are defrauding the lessee taxi drivers to the tune of millions of dollars a year. Government is both a party to and a participant in this fraud.
The rent seekers versus urban sharecroppers system also has a corrupting influence on drivers that endangers the public. The lessee drivers pay a premium to the licensee rent seekers. The drivers have to make up the difference any way they can. They are motivated to cheat, and there are considerable financial rewards for cheating. Where cheaters have an economic advantage, cheaters prosper and drive the honest people out of the business. Also, drivers tend to chase high paying customers and ignore low paying customers. Drivers are also known to be abusive toward low paying customers.
The public has cause for action because most taxi drivers are not properly screened (it’s impossible to do criminal background checks on people from many African and Asian countries), are motivated by desperation because of restricted meter rates and unrestricted rents, and often swindle and otherwise abuse customers. Consumers also have cause for action because they pay for the premium the rent seekers charge either in the form of higher rates, lower service, or a combination of both. (In the case of some indigent elder in Denver, there is no service at all.) Consumers are being swindled out of millions of dollars a year by this system.
This is the critical point: The rents that licensee rent seekers charge the lessee taxi drivers provide no benefit to the public, and serve only to enrich the licensee rent seekers at the expense of consumers and lessee taxi drivers. Government has unjustly and unreasonably created a shortage of taxi service by restricting the number of licenses, and the current license holders capitalize on that shortage by acting as license brokers, in effect providing unlimited licenses for personal profit. The license holders are saying in effect, “Government won’t let taxi drivers offer service, but we will. All you have to do is pay extra.” The public is paying a premium for nothing more than the unjust (and I argue unlawful) enrichment of the licensee rent seekers.
The remedy:
All of the problems with the presumed property rights of licensees and most of the harm done to consumers and lessee taxi drivers can be rectified in a single stroke: Enjoin licensees from selling, assigning, encumbering, leasing, or in any manner or by any means transferring the license and any and all rights and interests under the license including the vehicle(s) that are licensed to be taxis.
Also, it is necessary to impose expirations on licenses and to require periodic renewal of licenses. Rates must also be liberalized to allow greater flexibility for taxi operators to provide different service for different markets. One-size-fits-all rates never work for any business.
The rule of law versus political agendas:
Permitting and encouraging licensees to charge rents for allowing entry into the taxi market is an abuse of government authority that harms the public. It is a direct challenge to the rule of law. However, both liberals and conservatives seem more interested in their political agendas than they are in defending the rule of law against the abuse of government authority.
Conservatives are fixated on the threat to property rights, and can’t seem to come to grips with the fact the licenses aren’t the property of the licensees. Liberals think that government is entitled to create a vassal class of privileged licensee rent seekers. Liberals think that deputizing licensees to be gatekeepers for entry into the market is perfectly legitimate, and that government can exercise sufficient control to prevent abuses by licensee rent seekers.
In a pig’s eye.
The other impediment to restoring the rule of law is institutional recalcitrance. Once government bureaucrats and their licensee vassals acquire the ability to abuse the authority of government, they never let go of it without a fight. It doesn’t matter what evidence you present, or how wrong they know they are, they will fight you.
Those of us who see the real consequences of this system, who see the real people who really suffer from the abuse of government authority, understand that the system must be corrected, and the rule of law must be restored. The suffering of the people harmed by this system is unnecessary and inexcusable.
Guy L. Evans
Aurora, Colorado
Halting the abuse of government authority in regulating taxis
© 2005, by Guy L. Evans
September 10, 2005
In New York City, they are medallions. In Portland, Oregon and Dublin, Ireland, they are plates. In Denver, Colorado, they are Certificates of Public Convenience and Necessity.
They are licenses to operate taxis for hire, and they are the source of all the troubles that government and the public experience with the taxi industry today. In this essay, I offer a concise explanation of the situation, the harm it causes, and the remedies.
Note: I owe a debt of gratitude to the Dublin Competition Authority for their research and insight into this matter. It seems the Irish have a knack for saving civilization.
Illusory property rights and their consequences:
Government issues licenses to permit people and business to do things that are otherwise prohibited, such as operating a motor vehicle on the public highways. I do not know of any case in which government sells licenses. (Hunting and fishing licenses aren’t actually sold. The license will expire without government compensation to the licensee, and government is under no obligation to buy the license back.) Government does not establish a property interest in licenses either for themselves or for the licensee. It was originally understood that creating a property interest in the license placed government at a disadvantage, making it difficult and sometimes impossible for government to enforce the law. This is why drivers’ licenses and professional licenses do not have property values, why the people who hold these licenses do not have an actual property interest in the licenses, and why these licenses have mandatory expiration periods.
However, for taxis, this is not the case.
Government and the people who acquire taxi licenses both presume that the license is the property of the licensee. (I want to emphasize the word “presume” because, if tested, neither government nor the licensees could establish a property interest in the licenses. Banks and other lenders will not accept licenses as collateral. It’s their money that would be at risk. They should know.) When and how this happened is unclear, but it seems to have happened during the Great Depression.
The proof that the license is not the property of the licensee is that government may revoke the license without compensating the licensee in any way. Government didn’t sell the licenses, and government is under no obligation to buy the licenses back.
The licensees use the presumption of their property rights to the license to argue that certain actions of government will constitute a “taking” of the license, creating such a severe devaluation of the license as to render it worthless. This turns the relationship between government and the licensees on its head. The licensees argue, and government agrees, that government can’t issue new licenses, revoke existing licenses, or even enforce the law in any way that might significantly diminish the property value of the license.
By asserting that the license has property value, the licensees are insinuating that they possess a title to the license, and that this title creates certain entitlements for as long as they hold the license. Using this mental slight of hand, the licensees transform themselves from mere entrepreneurs into titled property owners with distinct privileges of their class. They create a kind of neo-feudalism, casting themselves in the role of vassals of the State (both protected by and subservient to the State), effectively entitled to exercise State authority over other people.
By stating the proposition that licensees are authorized to exercise certain powers of government over other people and are protected against certain laws, rules, and regulations, the absurdity of their position is revealed. The license has no property value; therefore, the licensee is not protected against “takings”. There are no “takings” if government issues more licenses, or alters or revokes existing licenses. The licensee is not entitled to the license, and government is obligated to enforce the law against the licensees. Government is also obliged to issue sufficient numbers of licenses to meet public demands for taxi service.
To give the point a punctuation, in the mid 1980’s, one of the Denver area taxi companies proposed selling some of their licenses to a competing taxi company for about $240,000, and then applying for more licenses for the minimal cost of the new issuance fee. It would have been the easiest $240,000 they ever made if government hadn’t denied their request.
The entire system amounts to a grossly inefficient use of resources and labor with monumental overhead for nothing more than the enrichment of a privileged class of license holders. It seems that government and licensees are hell bent on turning America into Mexico one taxi license at a time.
Restricted licenses versus unrestricted entry:
Agreeing to the demands of licensees to protect the property value of the existing licenses, government restricts the number of licenses issued, thereby creating artificial shortages for taxi service. The licensees then capitalize on the artificial shortage by charging lessee taxi drivers exorbitant fees for the privilege of providing the taxi service that government refuses to allow. The difference is that government issues a license for a fee, whereas the licensees charge rent (lease fees, license fees, payoff, or any number of other terms--it’s still rent). Some licensees make tens of thousands of dollars a year on rents, far more than the fee government would charge to issue a new license.
While government protects the presumed property interests of the licensees by restricting the number of licenses they issue, the licensees grant unlimited entry into the market for as many lessee taxi drivers as they can sign up. In markets where this rent seekers versus urban sharecroppers system is in place, there are too many drivers fighting over too few high paying customers. (Low paying customers are ignored because, between unrestricted rents and restricted meter rates, lessee taxi drivers can’t afford to give them service.)
Licensees have usurped the role of government in allowing entry into the market, charging excessive rents, while allowing unrestricted entry into the market, and government has allowed them to get away with it. Licensees are profiting greatly from usurping the legitimate government function of allowing entry into the market. However, licensees are not entitled to compensation merely for holding the license. They have to perform some service, or offer something of value. Offering entry into the taxi market is not a service that the licensee is licensed to offer. Only government can offer such entry.
Government permits the licensee rent seekers to use the authority of the government-issued license to demand rent from lessee taxi drivers. The lease fee is a type of confiscation, more a tax than a rent. However, government does not profit from this tax; only the licensee rent seekers benefit. Government and the licensees are equally at fault.
Real harm:
There are grounds for action by both consumers and lessee drivers.
Lessee drivers and consumers are harmed by this system. Lessee drivers are paying a premium to the licensee rent seekers for entry into the market, a premium that they would not have to pay if government simply issued the number of licenses that public demand for taxi service requires. Compensation that is due to the lessee drivers for the service they provide is being confiscated by the licensee rent seekers for the privilege of being allowed to offer taxi service to the public--a privilege granted by government to the licensee but not to the lessee driver. I consider charging the driver a fee to rent the license an unjust and unlawful confiscation of the lessee taxi driver’s property (income, labor, and other compensation) for no benefit to the driver or to the public. The lessee is not receiving anything of value in return for the rents that he pays. You can’t legitimately enter into a contract to rent out something in which you have no property interest. Licensees have no legitimate property interest in their licenses, and in my opinion, the licensee rent seekers are defrauding the lessee taxi drivers to the tune of millions of dollars a year. Government is both a party to and a participant in this fraud.
The rent seekers versus urban sharecroppers system also has a corrupting influence on drivers that endangers the public. The lessee drivers pay a premium to the licensee rent seekers. The drivers have to make up the difference any way they can. They are motivated to cheat, and there are considerable financial rewards for cheating. Where cheaters have an economic advantage, cheaters prosper and drive the honest people out of the business. Also, drivers tend to chase high paying customers and ignore low paying customers. Drivers are also known to be abusive toward low paying customers.
The public has cause for action because most taxi drivers are not properly screened (it’s impossible to do criminal background checks on people from many African and Asian countries), are motivated by desperation because of restricted meter rates and unrestricted rents, and often swindle and otherwise abuse customers. Consumers also have cause for action because they pay for the premium the rent seekers charge either in the form of higher rates, lower service, or a combination of both. (In the case of some indigent elder in Denver, there is no service at all.) Consumers are being swindled out of millions of dollars a year by this system.
This is the critical point: The rents that licensee rent seekers charge the lessee taxi drivers provide no benefit to the public, and serve only to enrich the licensee rent seekers at the expense of consumers and lessee taxi drivers. Government has unjustly and unreasonably created a shortage of taxi service by restricting the number of licenses, and the current license holders capitalize on that shortage by acting as license brokers, in effect providing unlimited licenses for personal profit. The license holders are saying in effect, “Government won’t let taxi drivers offer service, but we will. All you have to do is pay extra.” The public is paying a premium for nothing more than the unjust (and I argue unlawful) enrichment of the licensee rent seekers.
The remedy:
All of the problems with the presumed property rights of licensees and most of the harm done to consumers and lessee taxi drivers can be rectified in a single stroke: Enjoin licensees from selling, assigning, encumbering, leasing, or in any manner or by any means transferring the license and any and all rights and interests under the license including the vehicle(s) that are licensed to be taxis.
Also, it is necessary to impose expirations on licenses and to require periodic renewal of licenses. Rates must also be liberalized to allow greater flexibility for taxi operators to provide different service for different markets. One-size-fits-all rates never work for any business.
The rule of law versus political agendas:
Permitting and encouraging licensees to charge rents for allowing entry into the taxi market is an abuse of government authority that harms the public. It is a direct challenge to the rule of law. However, both liberals and conservatives seem more interested in their political agendas than they are in defending the rule of law against the abuse of government authority.
Conservatives are fixated on the threat to property rights, and can’t seem to come to grips with the fact the licenses aren’t the property of the licensees. Liberals think that government is entitled to create a vassal class of privileged licensee rent seekers. Liberals think that deputizing licensees to be gatekeepers for entry into the market is perfectly legitimate, and that government can exercise sufficient control to prevent abuses by licensee rent seekers.
In a pig’s eye.
The other impediment to restoring the rule of law is institutional recalcitrance. Once government bureaucrats and their licensee vassals acquire the ability to abuse the authority of government, they never let go of it without a fight. It doesn’t matter what evidence you present, or how wrong they know they are, they will fight you.
Those of us who see the real consequences of this system, who see the real people who really suffer from the abuse of government authority, understand that the system must be corrected, and the rule of law must be restored. The suffering of the people harmed by this system is unnecessary and inexcusable.
Guy L. Evans
Aurora, Colorado
Saturday, September 03, 2005
Choosing to be Poor
Opinion © 2005, by Guy L. Evans
September 3, 2005
I heard another stupid conservative make the same stupid statement:
Results are not always goals. This is called unintended consequences. For example, a multi-millionaire makes a poor choice in investments and ends up poor. Following the stupid reasoning of the stupid conservative, the investor chose to impoverish himself.
Nonsense.
I suppose I ought to conclude that the stupid conservative who made the stupid statement chose to be stupid, but I won’t. Enjoy your weekend.
Guy L. Evans
Aurora, Colorado
Opinion © 2005, by Guy L. Evans
September 3, 2005
I heard another stupid conservative make the same stupid statement:
Poor people choose to be poor.All right. Let’s get this straight once and for all. Poor people make choices that result in being poor. Expect for religious commitments, I don’t know anyone who chooses to be poor. Poverty is the result of the choices, not the goal. Get it?
Results are not always goals. This is called unintended consequences. For example, a multi-millionaire makes a poor choice in investments and ends up poor. Following the stupid reasoning of the stupid conservative, the investor chose to impoverish himself.
Nonsense.
I suppose I ought to conclude that the stupid conservative who made the stupid statement chose to be stupid, but I won’t. Enjoy your weekend.
Guy L. Evans
Aurora, Colorado
