The existence of Uber and other on-demand car services in New York City’s iconic, taxi-saturated landscape has been a matter of debate since Uber launched in the city in May 2011. Yellow cabs are a cultural mainstay here, but the convenience and comparatively low prices of Uber — and other transport apps such as Lyft and Gett — have taxi companies worried that their artificial monopoly is in immediate danger.

Traditional taxis in New York City are governed by the medallion system. Medallions are effectively licenses to operate a traditional taxi in the city. However, the city does not issue them like regular driver’s licenses, but sells them at auction at exorbitant prices — anywhere from hundreds of thousands to over a million dollars. Medallions are not affordable for the average taxi driver, so they are sold to companies who then rent them to prospective drivers. These companies treat the medallions less like operating licenses and more like assets, in much the same way a landlord would hold apartments to rent and collect value.

This medallion system creates a market for speculation which results in bubbles and busts the same as any other widely traded commodity. This results in unnecessary instability which wouldn’t exist in traditionally structured companies. And it keeps the supply of cabs on the road artificially low, creating a level of scarcity that insures fares stay high.

Uber put a major dent in this system, ending a decade-long speculation bubble that saw medallion prices rise from $250,000 to over $1.2 million. In the four years since Uber’s introduction to the city, prices fell down to around $800,000. This bubble burst is a signifier that, in addition to being technologically outdated, the old taxi system was not financially sound. Ride-sharing apps provide an alternative that, at the end of the day, is more or less the same for drivers and more convenient for riders, including service for the disabled and to outer boroughs.

All this is not to say that Uber has a perfect business model. A pending lawsuit against Uber alleges that the company compensates its drivers as independent contractors — freeing Uber from the obligation of regulation and paying for benefits — while managing their schedules and hours as if they were employees. Similarly, Uber pays fees in many cities if drivers are fined or their cars impounded, flying in the face of existing city ordinances which require all vehicles in this industry to have a permit. Nevertheless, the panic of the taxi market in the face of a threat like Uber shows that a system built around market speculation, where taxi companies coast on the artificial scarcity of medallions without innovating or expanding, is not stable.

A version of this article appeared in the Tuesday, Sept. 8 print edition. Email the WSN Editorial Board at opinion@nyunews.com.