That's obviously true, but I think you might be missing my points. Right now, they are:

(1) If you lose your million dollar medallion, you are out a million dollars (and likely the ability to ever get a medallion again). If you lose your P2P car service rating, you do what every scammer on every online market has done since 1995: you fake up a new one and game it with BS reviews.

(2) Many of the most severe costs of running a bad car service are externalities. I haven't had a valid drivers license in (checking...) THREE YEARS, and I drive every single day. I drive in a car with invalid plates. I get pulled over (checking...) NEVER. Take me, but make me a foreigner with no knowledge of the rules of the road, no knowledge of the city I drive in, and a record of hit and run accidents. I would do just fine in a P2P cab market.

Any system that would have me as a cab driver is one we should be skeptical of.

But these are all issues that a well-established P2P Car Service could handle. Require drivers to submit a current copy of their license, insurance claim history and registration for the car in question every 3-6 months. Make this information available on the website (except driver's lastname and address or whatever for privacy). Put a GPS logger in each car (if it's not on, you don't get paid). Charge exclusively on a point-to-point basis (e.g. let the driver carry the risk of going in circles).

Fine, but these are all issues that this P2P car service doesn't handle. You basically just designed a new privatized medallion system. Plenty of car services do exactly this; it seems like you just want them to have a REST web API, so someone can build the Kayak of private car service dispatchers.

Well yeah. That would be cool.

Anyway, in a point that relates to the OP, it would be that I hope lawmakers will see this as a cue to reform and privatise taxi-regulation.

If taxi medallions cost a million dollars (one sold for $600,000 last year -- http://www.autoblog.com/2007/06/01/nyc-taxi-medallion-sold-f... ) then they are clearly an example of rent-seeking behaviour that rips off the public. Why would a taxi medallion cost $600,000? Because, due to the artificial shortage of them, you can force customers to pay $600,000 more than they'd pay if market fares operated.

No.

Suppose you make a profit of P0 in a market with no medallion system, a profit of P1 in a market with a medallion system when you have no medallion, and a profit of P2 in a market with a medallion system when you have a medallion. Then that sale suggests that P2-P1 is at least $600k, but that doesn't tell us anything about P2-P0.

Probably P1 is approximately 0, at least for someone who's already got a substantial legal taxi business, since it's illegal to operate a taxi with no medallion. So we know that P2 is at least $600k. But we know nothing at all about P0; it might be just the same, or much less, or much more.

And, actually, we don't even really know that P2-P1 is at least $600k. The person who paid that much might be an idiot (unlikely) or a speculator who thinks others will foolishly be prepared to pay even more (not so unlikely); or he may think that he'll keep the medallion for a few years and then sell it for approximately the same amount. In that case, our lower bound on P2-P1 is something like 5% of $600k per year (taking 5% as a ballpark interest rate).

So: sorry, but I'm totally unconvinced. Am I missing something?

No, you're right. What I was saying was a shorthand and an (over)simplification.

You can still have a system of cab drivers who have medallions and guarantee better service and accountability, and let the market decide on which one they want to use.