The Democratic Socialist running for mayor of New York wants city-owned grocery stores, universal childcare, and a $30 minimum wage. Donors on Wall Street are panicking. Business leaders warn of economic catastrophe. Yet, buried in Assemblyman Zohran Mamdani’s biography lies an uncomfortable truth for some of his critics. This self-proclaimed socialist once mounted a defense of economic liberty stronger than many of his pro-market counterparts.
In October of 2021, Mr. Mamdani spent 15 days on hunger strike. The crisis he targeted wasn’t a social cause or market failure. It was a regulatory disaster, a textbook case of rent-seeking and monopoly power enabled by the state, which Milton Friedman had analyzed decades earlier. Mr. Mamdani was demanding relief for taxi drivers, overwhelmed by government-created debt.
Mr. Mamdani’s fast succeeded where many attempts had previously failed. The city negotiated $450 million in debt relief, restructuring loans and helping drivers escape the debt trap which had been so long fed by government-created monopoly. The intervention didn’t grow the size of government or create new regulations. Instead, it removed barriers to the competitive market. For a democratic socialist, it was remarkably sound free-market economics.
Since 1937, New York has artificially restricted taxi supply to 13,587 medallions, despite adding over one million new residents. This was political rent-seeking. Nobel Laureate Milton Friedman discussed this in his 1962 textbook Price Theory, writing that drivers “seem unanimous in opposing any increase in the number of cabs licensed.” Friedman understood the politics behind it. He wrote, “Why does the limitation of the number of cabs persist? The answer is obvious: the people who now own those medallions would lose and they know it. Although they are few, they would make a lot of noise at city hall.”
The alleged market failure that justified the medallion system? Too many taxis would create congestion and allow for a low standard of service. Yet this was a largely false motive. An investigation by the Federal Trade Commission found that these policies were put in place to protect privileged companies from competition, and that “Restriction of entry was not motivated by a concern for congestion or pollution externalities.” Artificial scarcity drove prices to $1.3 million per medallion by 2014. This enables predatory lending schemes and trapped drivers in debt that they couldn’t afford.
The government was not just a bystander, but a profiteer. Officials actively promoted medallions as investments on par with, if not better than, the stock market, while manipulating auction data to inflate values and profiting $850 million from sales and transfer taxes. The cost was predictable. Drivers, promised the American Dream through medallion ownership, borrowed heavily against artificially inflated assets. When ride-sharing introduced real market competition around 2014, the value of medallions collapsed, leaving drivers owing $600,000 for licenses generating $30,000 in annual income.
Debt relief, in this case, was a defense of free-market principles, not a rejection of them. Friedrich Hayek warned that government intervention creates unintended consequences, harming the very people regulators claim to protect. The medallion system illustrates his point. Officials restricted taxi supply to protect driver incomes, at the price of creating ideal conditions for predatory lending that trapped drivers.
While Mr. Mamdani is likely no fan of Friedman or Hayek, what makes his medallion protest notable is his correct diagnosis of the cause: government-created distortions. While many politicians would have faulted “predatory capitalism,” blaming market failures or calling for increased regulation, Mr. Mamdani focused on the artificial scarcity created by regulatory capture that made predatory lending profitable in the first place.
The hunger strike achieved something unique. It changed the political incentives. By creating highly visible public pressure, Mr. Mamdani helped give a voice to disorganized public interests so often overcome by concentrated private ones. He made the cost of maintaining the system higher than the political cost of restructuring it.
Mr. Mamdani prepares to govern our biggest city with many policies that confuse the failures of government with those of markets. But the humble taxi medallion raises the prospect — faint as it may be — that Mr. Mamdani could apply such a discerning eye to other areas. Recognizing that housing shortages, grocery deserts, and many of New York’s other challenges could be a result of the same regulatory distortions that once too challenged the taxi driver would be a step in the right direction.
The lesson isn’t just about taxis. It’s about how corrupt interests can manipulate well-meaning policy. Breaking from these systems requires the same commitment Mr. Mamdani showed during his hunger strike: the principles to challenge government-created monopolies that harm ordinary people. That could prove the most important lesson from Mr. Mamdani’s unlikely rise: good policy depends less on labels than on the willingness to challenge the interests that profit from flawed institutions. On that measure, at least when it came to taxi medallions, this Democratic Socialist got the economics right.
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