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March 18, 2007

David Friedman on Taxis and Tipping

Arnold Kling

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.


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John T. Kennedy writes:

"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?

Posted March 18, 2007 10:20 PM

David writes:

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.

Posted March 19, 2007 07:35 AM

Bill Stepp writes:

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.

Posted March 19, 2007 11:44 AM

Matt writes:

The IRS agent hanging outside my house is a taxi driver?

Posted March 19, 2007 02:02 PM

Jessica Daniels writes:

I tip my cab drivers just because that meant I didn't have to walk...

Posted March 26, 2007 01:03 PM
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