The financial page; fare games.(The Talk of the Town)

Afew months ago, a team of trained researchers infiltrated the rush-hour crowds in midtown Manhattan, took up positions on busy street corners, and began gesticulating wildly. No one noticed, because the researchers were doing what a lot of other people were doing: attempting to flag down a cab. You may not be surprised to hear that they didn't have much luck. The researchers' experiment proved, as such experiments often do, what most civilians already knew. "There are times of the day and parts of midtown where it is virtually impossible to find a cab," Bruce Schaller, the transportation consultant who designed the study, told me last week.

New York has a taxicab crunch. In recent years, according to Schaller, cabs have carried passengers sixty-five per cent of the time they're in operation. That figure is high, historically speaking, and although after September 11th ridership fell as tourism slumped, the bigger picture still looks the same: too many passengers, too few cabs.

The taxi industry has a simple answer to this problem: raise fares. In November, the big fleet owners petitioned the Taxi and Limousine Commission for a twenty-three-per-cent fare hike. And last month Mayor Bloomberg added his support, though he didn't commit to a particular number. Raising fares, Bloomberg said, is the only way to insure that there will be enough cabs on the streets.

On the face of it, raising prices would seem to be the perfect solution: the more money cabbies can make, the more cabs there will be. But the taxi business doesn't work that way. It's not as if, when prices go up, someone can just slap a coat of yellow paint on a Crown Victoria and start collecting fares. To operate a cab in New York, you need a medallion. And the city has frozen the supply of medallions at around twelve thousand. If there are too few cabs on the road, it's not because of low fares. It's because the city -- under pressure from fleet owners, among others, who contribute generously to the right politicians -- has kept the number of medallions artificially low. In fact, New York has almost ten thousand fewer cabs today than it did seventy years ago.

But it isn't just cabs that are in short supply; it's cabbies as well. And that, too, is an unintended consequence of the medallion system. Since it's a rare cabbie who can scrounge up two hundred thousand dollars to buy a medallion, most cabbies work for somebody else -- the big corporate fleets or management companies that own the medallions. Once upon a time, that wasn't such a bad deal. Cabbies used to work on commission, splitting their take with the fleet owners. (Even Travis Bickle managed to make a decent living.) But in 1979 the city decided to allow leasing. Today, most cabbies have to pay their lease rate up front (about a hundred dollars a day) and pay for their own gas; they get to keep what they ...