Random idea & question: Lots of things are similar to the taxi medallion system and are medallions systems ever good? Probably not but fun to think through!

My knowledge of the tax medallion system starts and ends with knowing that ride sharing disrupted it.

I was wondering what the current consensus view was on Uber/Lyft (I feel like this stopped being a finance twitter topics 5 years ago) and thinking about how incentives would change if drivers had a fixed cost commitment, which I realized is basically a medallion system. Based on my understanding of Uber’s economics, there would be less shocking things than Uber bringing back a medallion system for big metros. But this got me thinking about what else a medallion system can generalize to.

It’s obvious once you say it out loud but medallion systems are just another category of quantity restrictions. Medallions, franchises, occupational licensing requirements, zoning regulations, etc. all restrict quantity. There are quantity restrictions everywhere (and there must be a world of literature on it)! I vote for calling all these things “medallions” going forward. How many medallions does that Chipotle medallion group own? What was the pass rate for the law medallion exam this year? Should we increase the numbers of doctor medallions this year? Makes it more clear what is going on and more fun word to use.

So, are medallions systems ever good? Two terrible ideas come to mind.

AI stuff — Have the government issue model medallions. Economies of scale and AI economic stuff make everything wacky. Bring back price signals by restricting the output of these potentially unlimited output producing wunder-machines. *waves hands about details….*. What if there were a fixed number of medallions and each model (Sonnet, o3, etc) needed one to operate? This would obviously be terrible but would it bring benefits worth considering given how strange economics of all this might end up being?

BigCo medallions — An idea I’ve been wrestling with is how to reconcile the undeniable, easy to measure (but sometimes underrated) benefits Big Business with the large (I suspect) non-financial costs (loss of agency, aesthetic decline, weird political and religious disenfranchisement I’ve only recently started to think about how to articulate). I simultaneously love and hate anti-trust regulation: I read The Amazon Problem at an impressionable age and it blew my mind but I also recoil in disgust at the inefficiency and illogic of lots of recent antitrust stuff. Regulators are bad at regulating but regulations are important! What if the government issued medallions for BigCo industry (banks, airlines, grocery chains, big tech, etc). The interesting thing here would be using the price as a signal about impact of regulation. Big companies would obviously be able to pay whatever for these so issuing 50 big tech medallions wouldn’t really matter because the price the 50th marginal payer could pay would never impact FANG. But if a stated regulation is supposed to make an industry more competitive it would be interesting to see what a marginal player would pay to enter the market. This is an even worse idea than the one above (I think it kills startups?)! But I still like thinking through it.

Medallions system are probably (always?) bad but to the extent they create price signals in zero marginal cost industries or help recalibrate the valuation of modernly massive economies of scale of today global corporations, they are sort of interesting to think through. I think any price signal value they provide can always be provided more efficiently but alas, I thought about this so I wrote about it and I am grateful I do not need a medallion to post about it.