In the book that everyone is reading but I’m still only 2/3 through, Brian Doherty writes,
[David] Friedman points out the intriguing datum that tipping in taxi cabs–almost purely a situation of paying for a public good because of social expectations–is widespread and amounts to over $100 million a year. This indicates to Friedman that most people in reality don’t get carried away with the economic benefits of free riding and neglect public goods when a developed social rule dictates that we should to the right thing.
From p. 386 of Radicals for Capitalism, where I believe that Doherty is continuing a discussion of Friedman’s 1973 book, The Machinery of Freedom.
Obviously, my Taxes and Tipping metaphor was anticipated by Friedman’s taxis and tipping.
READER COMMENTS
John T. Kennedy
Mar 18 2007 at 10:20pm
“This indicates to Friedman that most people in reality don’t get carried away with the economic benefits of free riding and neglect public goods when a developed social rule dictates that we should to the right thing.”
Doherty seems to say here that tipping is “the right thing” independent of a social rule. Why is it the right thing to do?
David
Mar 19 2007 at 7:35am
Tipping a cab driver is not a reward for personal service (which would be a private good). It is payment for the services of vacant cabs, which is a public good. More vacant cabs mean a shorter waiting time to hail a cab, which is a public good. Lindahl prices of vacant cabs (tips) can induce efficient entry in to the taxi industry. David Freidman is right to call tipping a cab driver an example of self-imposed, voluntary, Lindahl pricing of a public good.
Bill Stepp
Mar 19 2007 at 11:44am
What is “efficient entry” in an industry that is as regulated as the taxi industry? In New York you have to buy a medallion, which costs a lot of money. Entry is also far from free in other places, San Francisco, for example.
Matt
Mar 19 2007 at 2:02pm
The IRS agent hanging outside my house is a taxi driver?
Jessica Daniels
Mar 26 2007 at 1:03pm
I tip my cab drivers just because that meant I didn’t have to walk…
Comments are closed.