Wednesday, January 12, 2011

Market distortions at 4PM

We've fairly well established that New York Times transportation reporter Michael Grynbaum is short-sighted about traffic calming, bus improvements and commuting costs. Now Stephen Smith at Market Urbanism shows that Grynbaum is pretty clueless about market forces too.

Most of Grynbaum's article is a fairly straightforward explanation of large numbers of New York City taxi drivers take a break between 4:00 and 5:00 PM. Some people have long suspected that, but were unable to prove it. Recently, though, the city forced all medallion drivers to install GPS tracking devices in their cabs, so now they have proof that hundreds of cabs go off-duty during this time.

Stephen is most upset about this quote:
The hour from 4 to 5 p.m. has long been considered a low tide of taxi service, the maddening moment when, in apparent violation of the laws of supply and demand, entire fleets of empty yellow cabs flip on their off-duty lights and proceed past the outstretched hands of office workers seeking a way home.
I honestly don't have as big a problem with it as he does. He claims that "for supply and demand to work, you need drivers to be able to charge their own prices and enter markets at will." But this is not quite true. Regulation doesn't do away with the laws of supply and demand, it just distorts them, and in this case it decouples the price from the demand level, giving drivers the incentive to walk away from that demand. To be fair to Grynbaum, he uses the word "apparent" to indicate that while a potential passenger might expect the demand of his raised hand to be satisfied by the market, that's not what's happening, and he lays out the market distortions.

The city's control of supply and prices are just two of the ways that its interference in the market have caused this. Grynbaum mentions two more, but he doesn't seem to recognize them:
When the changeover became standard, its timing did not pose a big problem for passengers. Many taxi garages were situated on the far West Side of Manhattan, requiring cabs to make only a short trip to 11th Avenue before heading back to Midtown with a fresh driver.

But in the 1980s, as commercial rents rose, taxi fleets began migrating across the East River, particularly to Long Island City, Queens. The 5 p.m. shift change now included a journey over the often-packed Queensboro Bridge, not to mention the return slog to the city. Drivers started going off duty between 4 and 4:30 p.m., to ensure that they had enough time to make it to the garage; even today, tardy cabbies can be hit with a $30 fine.
Bob Fitch's the Assassination of New York is a bit dated, but it's still a great counterpoint to Bob Caro's the Power Broker, bringing us up to date through the nineties about various development shenanigans. If you've read it, you know that the Hudson Yards and the extension of the #7 subway are just the most recent of a long line of market manipulations by the City, the State, the Port Authority and even the Regional Plan Association, aiming to bring up property values on the West Side, in part to prop up the failed real estate investments of David Rockefeller and William Zeckendorf.

The other big market distortion is the "free" toll on the Queensboro and Williamsburg Bridges. We're paying hundreds of millions of dollars of taxpayer money to rebuild those bridges, and the taxi drivers get to use them for free. This subsidy is an added incentive for them to locate in Long Island City and Sunnyside instead of paying Manhattan rents.

This finally explains why it takes twice as long as I expect for the Q32 bus to go across the bridge at 4:00 PM, inbound or outbound. It's not that a ton of office workers have left early, or are coming in for second shift late. It's that the bridge and the surrounding streets are clogged with hundreds of taxis that would have otherwise stayed in Manhattan. Gee, thanks, Mike Gianaris!

(Of course, there's Grynbaum's windshield perspective at work. He could have said, "Ever wonder why your bus takes twice as long to cross the Queensboro Bridge between 4 and 5 PM?" Instead, he aimed it at taxi passengers. To be sure, the average Times reader is probably more likely to have tried to hail a cab at 4:30 PM than to have taken a bus across the Queensboro Bridge, but it's still annoying.)


Stephen Smith said...

To be fair to Grynbaum, he uses the word "apparent" to indicate that while a potential passenger might expect the demand of his raised hand to be satisfied by the market, that's not what's happening, and he lays out the market distortions.

But he misses the biggest distortion of them all: explicit price and supply controls.

Interesting point about the bridges and LIC, though – I've never actually lived in NYC, so these details generally escape me.

Regarding the far West Side, however, while I agree that it's unfortunate that it took politically-connected developer to get it upzoned and put in private hands, the upzoning/privatization was long overdue, regardless of why it happened.

- Stephen

Rockrose said...

I never thought about the migration to Long Island City like that. You're right, though. We are paying an excessive amount in taxes for those two bridges. Even if they made the tolls $1, it would still help the city out a lot.

ant6n said...

Do the cab drivers have to drive to the garage to get a fresh driver? Can't they just do the swap in Manhattan? I mean what a subways for.

EngineerScotty said...

If the market is going to be regulated in this fashion.... wouldn't something as simple as staggered shift changes be a good idea?