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For those who don't know, in the US in many cities taxicabs use a transferable licensing system (aka "medallion"), with artificially limited supply:

Most medallion owners never interact with the public. Their cash flow doesn’t come from passenger fares; it comes from lease fees that drivers pay to access medallions and the vehicles they are attached to. This means that a medallion owner’s bottom line is largely unchanged whether a driver leasing his medallion gives 20 rides this week or 200.

This is not how the industry has always been structured. And it’s not how taxis operate in Washington, a freewheeling market without medallions where more than 100 companies operate, or in Baltimore, a city with limited cab licenses but no property right attached to them.

[...]

The industry shifted in two major ways in the second half of the 20th century: Cab companies turned drivers into independent contractors, and cities allowed medallions to be leased to cabbies for a fee. Today, medallion managers serve much the same function as property managers in the residential rental industry: A hands-off investor with many medallions can hire a management company to find drivers to lease them.

Also according to a 2019 NYT piece, there has been a bubble in medallion prices, which recently burst, resulting in driver suicides etc.

Banks and loosely regulated private lenders wrote risky loans and encouraged frequent refinancing; drivers took on debt they could not afford, under terms they often did not understand. [...]

The combination of easy money, eager borrowers and the lure of a rare asset helped prices soar far above what medallions were really worth. Some industry leaders fed the frenzy by purposefully overpaying for medallions in order to inflate prices, The Times found. [...]

The medallion bubble burst in late 2014. Uber and Lyft may have hastened the crisis, but virtually all of the hundreds of industry veterans interviewed for this article, including many lenders, said inflated prices and risky lending practices would have caused a collapse even if ride-hailing had never been invented.

At the market’s height, medallion buyers were typically earning about $5,000 a month and paying about $4,500 to their loans, according to an analysis by The Times of city data and loan documents. Many owners could make their payments only by refinancing when medallion values increased, which was unsustainable, some loan officers said.

City data shows that since Uber entered New York in 2011, yellow cab revenue has decreased by about 10 percent per cab, a significant bite for low-earning drivers but a small drop compared with medallion values, which initially rose and then fell by 90 percent.

Has this transferable medallion system (with limited supply) been backed by a political party in particular? Given that it is used in big cities, I would guess it was backed by Democrats, but then Baltimore or DC are Democratic strongholds too. Is there a "wing" of the Democratic party that favored this type of solution?

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This answer is going to focus solely on New York City, since that’s the only place I know anything about this. I suspect that the situation would be similar in many other cities, though. The transferrable medallion actually goes back a long time, and has generally enjoyed wide support in (at least New York) politics.

Source: Medallion Limits Stem From the 30’s - The New York Times,

In NYC, the Medallion system was created in 1937 with the passage of the Hass Act. The act was named after Lew I. Haas, a Democrat, approved by the City Council with a bipartisan 50-4 vote, signed by Mayor La Guardia, a Republican, and was based on the results of a committee also appointed by Mayor La Guardia.

The goal wasn’t to create a valuable commodity but to restrict the supply of taxis in order to combat a Depression-Era market saturation that was creating chaos:

Bruce Schaller, the director of policy development at the Taxi and Limousine Commission from 1986 to 1994, said that after the stock market crash in 1929, job seekers swelled the ranks of New York City cabdrivers to 30,000 in 1930.

Where too many passengers may be chasing too few cabs today, Mr. Schaller said, too many cabs were chasing too few passengers in the Depression years. Some cabbies worked 20-hour days and were unable to make an adequate living.

"What happens in that situation is that there is not the revenue to support a decent quality of taxi service," said Mr. Schaller, who is now the manager of market research for the Transit Authority. "The Haas Act tried to remedy that problem by stopping the issuance of any new vehicle licenses."

Before the legislation, drivers desperate to win fares cut rates, taxi fleets competed fiercely, and tensions sometimes led to violence.

In New York, new medallions have actually only been issued by the city twice: in 1937 under La Guardia (R) and in 1996 under Giuliani (R) – that’s it. The system was set up in the ‘30s and, to my knowledge, came under little criticism until investors started buying them up around 2002, and until Uber and Lyft came on the scene.

The purpose of the medallion system remains the same, though: to limit the number of taxis to ensure that taxis are profitable, and to reduce congestion and pollution that would be caused by excessive numbers of taxis on the road.

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    Frankly the substantially deregulated lending surrounding the metallion business crushed that (theoretical) profitability granted by limited medallion supply, by eating into the drivers' profits. Better luck next time. "Records show that since 2008, the taxi commission has not taken a single enforcement action against brokers, the powerful players who arrange medallion sales and loans. Korenkov, a broker, suggested in an interview that he and other brokers took notice of the city’s hands-off approach. “Let’s put it this way,” he said. “If governing body does not care, then free-for-all.”" – Fizz Oct 25 '19 at 1:31

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