A license became a scarce asset
New York City did not let anyone put a taxi on the street and pick up passengers for a fare. The city limited the number of yellow cabs authorized to do so, and a medallion was the transferable license that made a cab eligible to operate. The car could be replaced; the permission was the valuable part.
That limit turned access to a busy market into something owners could buy and sell. As long as passengers relied heavily on street-hailed taxis and the number of authorized cabs stayed constrained, a medallion offered a route to earning fares—or to collecting income by leasing the right to someone who drove.
Why the price could climb
A buyer was paying not for a guaranteed profit, but for access to a regulated stream of potential business. The more people wanted rides, and the harder it was for new cabs to enter the market, the more valuable that access could appear. Medallions could also be resold, so expectations about future taxi earnings became part of their price.
This is how a rule meant to limit the supply of taxis could create scarcity in a separate market: the market for permission to operate. The city did not have to sell a medallion for a high price itself. Once the licenses were transferable, buyers and sellers could push their resale value upward.
The risk behind the million-dollar price
A medallion’s value depended on the business model around it. If passenger demand shifted to services that did not depend on the same street-hail license, the old permission could bring in less income than buyers had expected. The license remained real, but its usefulness—and therefore what someone would pay for it—could change.
That made a medallion both an operating credential and an investment whose value rested on continued demand for traditional cabs. The million-dollar price was not simply the cost of a taxi; it was the price of a scarce doorway into a particular market.
