Recently, National Public Radio’s All Things Considered offered an important if unusual lesson in microeconomics.
Noting the economy’s “bumpy ride” over the past few years, the segment spotlights one “sure thing” in these tough times: Taxi medallions. Due to the high price, most drivers must take out loans to own them, giving the lender a security interest — or “mortgage” — in the glorified pieces of tin. “A taxi medallion,” the story explains, “is a physical object that gives the bearer the right to pick up rides for hire; it turns out, it’s also a good investment vehicle.”
That’s because the price of medallions has skyrocketed in recent years, with at least a couple fetching more than $1 million each. The medallion owner featured in the story, a New York cabbie who bought his for about $215,000, watched it more than triple in value in eight years.
The high price of medallions is, of course, a corollary of their scarcity, of the fact that they have the practical function as the only inroads into owning a legally operating cab. Once barriers to market entry are erected around cab driving, or any other worthwhile economic activity, those who control access to that activity can collect tolls at the entryways.
This is the way artificial — as against naturally-occurring — scarcity works, coercively precluding competition in order to allow rent-seekers and established market actors an unfair, unearned windfall. The mortgages attached to worthless pieces of metal are directly analogous to the economic rents presently embedded in virtually all other areas of economic life.
The only way that big business can extort wealth from the productive is to forcibly rule out natural opportunities to create value. The state, through a profusion of permits, licenses and regulations, creates the legal framework without which monopoly could not exist and thus serves the interests of big business.
Discussing medallions on All Things Considered, Baruch College business professor Edward Rogoff said, “There’s nothing like having a monopoly to keep you profitable.” He goes on, “When you limit competition, you get strong profits, and those profits get reflected in the value of the enterprise.”
Rogoff’s example of Econ 101 is simple and obvious enough, but it has far-reaching implications for contemporary economic reality, a reality made up of state-fortified cartels in a very unfree market.
Market anarchists submit that people should be left free to use their resources in any peaceful way they see fit. Arbitrary restrictions and spurious, state-created “rights” that benefit the “Top Companies” must be slowly, nonviolently abraded, replaced with genuine, labor-based individual rights and a bona fide free market.
The state’s costly permission slips don’t “protect consumers,” but instead subject working people to the centuries-old leeching of a ruling class. We could and would do just fine without that idle class and without their mechanism of authority, the state.