How to Fix Gotham’s Taxi Mess, by Steven Malanga, explains some of New York’s taxi history:
In the mid-1920s, New York licensed as many as 21,000 cabdrivers, and those who did the actual driving held the permits. But during the Depression, many drivers simply let their licenses lapse, so that by 1937 only about 12,000 were active. That year, under pressure from drivers, the city passed a law limiting medallions, a limit that eventually settled at 11,787. But the law went one crucial step further: it granted current medallion holders their licenses permanently, and it permitted them to sell the medallions. Later, the city allowed individuals to accumulate more than one medallion and to lease them to others.The city, in other words, created a protected oligopoly in the right to provide cab service to an ever growing city. Just like the favored nobles and merchants to whom European monarchs of old gave a monopoly on precious commodities like salt, the fixed number of medallion holders, without ever lifting a finger, were certain to coin money out of the public’s need for the service they controlled, a service whose supply became increasingly less likely to meet demand fully as the city’s economy expanded.