Given that politicians have created and perpetuate a situation of artificial shortage that has driven prices way up, it’s probably reasonable to presume that they derive benefit, in the form of contributions from those who own medallions.
A nice system: cab owners benefit, NY politicians benefit. The only losers the millions riding in cabs - plus the people who’d like to but can’t find one.
Recently, the economy crashed and unemployment skyrocketed. Buying a taxi medallion is basically buying yourself a job, so the demand for taxi medallions skyrocketed.
That’s just my best guess, though.
I can’t imagine how someone who is newly unemployed can afford to finance a medallion. Besides, you don’t necessarily need to own own to drive a cab, since you can rent someone else’s cab. There may be a bubble in the market for NYC medallions.
Enjoy Jersey. 
That Planet Money podcast linked above explained that taxi companies own medallions and hire drivers to drive cabs, so each medallion represents tens of thousands of dollars per year of guaranteed return on investment. In addition, the value of medallions has gone up faster than any conventional investment they could find (gold, mutual funds, etc) so it’s a good investment even if you don’t use it.
(nitpick: your required to use it some minimum number of days a year, so sitting on it isn’t really an option. NYC presumably doesn’t want people using them just as investment and stripping the city of actual cabs)
The population of NYC may have increased. But the size of NYC is still the same.
As I pointed out in the previous thread on this subject, there are only 1300 miles of streets in Manhattan - which works out to about one taxi for every five hundred feet.
Granted, the medallion system also covers the other five boroughs but most taxis are concentrated in Manhattan and not even all parts of that. A study last July reported that 97.5% of cab fares were picked up in Manhattan or one of the two airports.
One problem with removing the resale market is stability; the other is opportunity.
Who’s going to buy a cab and install the meter, shield, staple a medaillion making a hole in a nice new car, if they might not get the license the next year?
If you can’t sell your medallion, then you register the medallion to your company, and sell your company. Or are you going to only issue them to people? Fred (or rather, Abdullah) has a heart attack, now he not only can’t drive, he can’t re-register his taxi and let someone else drive for him.
Or else he can, so the market is in rights to “use” rather than “own” a medallion.
Or you don’t allow companies to own medallions, but there goes organized companies with dispatchers, mechanics, etc. and the market becomes even more destabilzed and chaotic than it already is…
I think the simplest system is to increase the number of medallions until anyone who wants to make a living driving a cab can, without having to hock themselves deeper than a pre-bubble-bust mortgage. Of course, even in my smaller city, whenever the taxi board is planning to up the number of licenses, the taxi cab owners come out to council or the board in force to cry doom and gloom.
They have them on the west coast too, at least in every West Coast city I’ve traveled to. They just usually call them “town cars” instead of “car services.” I generally prefer them because the cars and drivers tend to be much nicer. Also, in places I travel to often, I have regular drivers I work with, so I know I always have someone I can trust to be on time, etc. It costs more, but IMHO it’s worth it. If you’re in one of the cities covered by Uber you can give it a shot at a discounted rate.
If you’re going to sell a medallion to anyone who wants to buy one, then there’s no point in selling them at all. Just let people get a car and start picking up customers.
The point of the medallions is to limit the number of taxis on the streets of New York City. As I’ve pointed out, with a taxi every five hundred feet, there isn’t any need for more taxis. Sure, there are customers who have to wait for an available taxi. But that’s not the bottleneck. Physical space is the bottleneck. If you tried to put enough taxis out there so that no customer ever had to wait, you’d find the streets were so full of taxis that they couldn’t move anywhere. Try driving through Manhattan some time. You’ll realize that the last thing the city needs is more traffic.