10th
Taxinomics & The Ripoff of Fiestyred
An unethical driver hustled Fiestyred on a trip from Midtown to Park Slope. He not only breached the NYC Taxicab Riders Bill of Rights by denying her requested route from A→B, but slow-drove even on open roads, concluding the side-street amble with some shady credit-card antics quadruple-charging the $50 metered fare.
I can understand the profit-motive of the old “swipe it again” fraud. I didn’t, however get the rest. The fare structure for medallion cabs theoretically encourages efficient, frequent fares. It’s $2.50 when you climb in, plus up to another buck at certain peak hours, and $0.40 for each subsequent “unit” of:
- 1/5 of a mile, when traveling >= 6 miles an hour or
- 60 seconds when stopped/slow in traffic
The fare’s front-loaded. Moving’s worth more than double the 40 cent ticks as a function of time than idling, so intentionally idling is a poor strategy to cheat. Less dramatically, taking a long route accrues less profit than the shortest route possible followed by a new passenger. The incentives make behavior that passengers lament (e.g. idling, slow-driving, taking circuitous routes) suboptimal for drivers, assuming a steady supply of fares.
So why the hustle? Some insights on the financially counter-productive cab driving can be found in Freankonomics Blog’s Taxi Drivers: Worse With Age, as well as the appended comments:
- Educational variance among drivers may impact their approach to driving and understanding of how to (lawfully) maximize their take.
- Cabbies are diverse by age and employment goals. Some, especially those over 50, may view it more as a way to pass time and interact with a variety of people, valuing the distraction/conversation/etc over the cash-flow.
- Others may be less concerned with maximization than with making a minimum. Teasing out fares in the hand seems more predictable than hoping they’ll be able to continuously turnover drop-offs/pick-ups.
- Perhaps differences in medallion lease deals, and between leasing and owning the medallion may alter the driver’s motivation at the margins.
Or, in the case of indirect routes, drivers may be able to pad the distance profitably enough to bag a risk-adjusted premium over the higher profit of trying to quickly turn over passengers.
If the assumption of demand for cabs is wrong - a conclusion rush hour travelers would challenge, but odd-hours travelers would support - the fare incentives get reversed. This problem is exaggerated by the oligopolistic, start-up-cost bogged medallion aution system. The supply’s not only much less elastic than the demand, but it’s prices are fixed. Beyond dampening taxi demand, the recession also holds a lot of the taxi labor supply in place, affording fewer options to those who may otherwise have peeled off in search of better income.
Drivers suffering dry spells between fares, stuck in their jobs with new pressures to clear a livable wage above their rental fee, suddenly have a financial incentive to stretch each fare for as many units as possible. As for how to pad the units, indirect routing’s more plausibly deniable, and less obvious theft than inexplicably idling/going 5mph.
So what can be done? Per The Economics of Cheating in the Taxi Market , New York’s Taxi & Limo Commission already structures fares in an appropriate way:
Apart from any considerations of price discrimination, the average price per mile of a long taxicab ride should be less than that of a short ride…Cheat-proof prices should consist of both a fixed charge and of a variable charge that is a function of the length of service provided.
The Taxi of Tomorrow initiative is vague on technical enhancements, but a more functional GPS with traffic data, navigation and routing algorithms could be deployed to audit actual routes and travel times compared to traffic-informed expectations, flagging repeat suspicious deviations (with some reasonable tolerances). I’m sure NYPD Commissioner Kelly could squeeze this in as a public safety expense, perhaps as an extension of the existing vehicle tracking program.
