Quite belatedly, I found an interesting article on Taxi Medallions and Rent-Seeking. I particularly like the juxtaposition of the sidebar and the article's primary content; read the sidebar first.
Why did I include in the "categories" for this post "all benefits go to the landholder"? Because a taxi medallion is a privilege, which, in classical economics, is another form of "land." Read the sidebar!
There is an easy solution: auction off those privileges for limited periods of time. Lather, rinse, repeat!
The sidebar quotes Adam Smith "... the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce," which leads me to think about Henry George's axiom that
"The fundamental principle of human action — the law that is to political economy what the law of gravitation is to physics — is that men seek to gratify their desires with the least exertion." [Progress & Poverty Book III, Chapter 6 — The Laws of Distribution: Wages and the Law of Wages]
One quote from the body of the article:
Studies of economic losses due to rent-seeking and the resulting monopolies have produced figures ranging from 3 to 12 percentage points of national output for the US.
All of these are possible reasons why the city of Milwaukee might want to limit the number of cab permits, but they do not imply that the existing owners must have a permanent right to them.
The city could simply auction 321 licences every year or two and capture all of the economic rents for itself. Another argument is that a permit acts as a pension for drivers that would otherwise not have a business they could sell on retirement. But that is true only for the first, lucky generation of owners.