San Francisco's Economically Ignorant COVID-19 Response

If politicians really want to help citizens, they should brush up on the laws of supply and demand.

Have you ever wondered why it seems like some places have a high concentration of elected officials with little to no economic knowledge whatsoever? I have. While I don't have a solution for this deficiency, I'd like to highlight one city in particular where this seems to be the case: San Francisco.

The COVID-19 pandemic now underway in the United States is, of course, wreaking havoc throughout our economy. Fortunately, entrepreneurs and corporate managers have been trying to figure out how to transform their operations in order to keep their businesses afloat. Thank goodness for the profit motive!

One industry has moved impressively fast: food service. It didn't take long for restaurants to shift their energy and resources toward selling food for pickup or delivery. Throughout the country, consumers are now as never before ordering food from their favorite joints—fancy and greasy spoons alike—to enjoy in the comfort of their homes.

This has caused a surge in demand for drivers to deliver the food. Pre-coronavirus, many restaurants didn't deliver at all, so they had to create home-delivery capacities from scratch. Others have had to step up capacity by adding more drivers. And many restaurants now increasingly rely on delivery services like UberEats and Grubhub. Following this sharp increase in demand for driving services, delivery fees have risen. This increase in fees is exactly what economics predicts will happen and recommends should happen. The higher fees reflect the increased demand for delivery services while simultaneously giving stronger incentives to more people to become delivery drivers.

However, San Francisco legislators don't get it. On April 10, the city of San Francisco issued an emergency order mandating that delivery companies that wish to continue to operate in the city cap the fees they charge restaurants at 15 percent of each order's amount. Mayor London Breed explained, "These fees typically range from 10 percent to 30 percent and can represent a significant portion of a restaurant's revenue, especially at a time when the vast majority of sales are for delivery. This commission fee can wipe out a restaurant's entire margin."

Yes, these fees will eat up some of the restaurants' profits if restaurants decide not—or are unable—to shift at least some the higher costs on to their customers. But having too few or no delivery drivers won't help their business either, and this government-imposed cap on fees will reduce the number of drivers. Unable to charge higher fees, delivery services cannot pay drivers higher wages. This results in fewer drivers and longer delivery times.

Capping these fees also reduces incentives for entrepreneurs to start new delivery services—new services that would ensure fees stay as low as possible over time.

Meanwhile, following San Francisco's emergency order, companies like Grubhub and UberEats explained why the fee cap would force them to reduce the scope of their services. UberEats noted that the limit on fees makes it difficult to cover operating costs, so they would need to stop delivering food to Treasure Island, a lower-income neighborhood further away from the city center. This predictable response triggered an equally predictable but economically ignorant outrage from politicians.

San Francisco Supervisor Matt Haney tweeted, "This is DESPICABLE, outrageous behavior from @UberEats." According to him, "The caps on commissions are to protect small businesses and ensure they can survive during a GLOBAL PANDEMIC." Haney's disregard for the law of supply and demand underscores the fact that when governments make it impossible for companies to cover the costs of supplying some service, they'll stop supplying that service.

San Francisco politicians constantly treat reality as if it's optional. For instance, through strict zoning and other land-use regulations, they have artificially inflated the wealth of single-family homeowners by obstructing the building of multifamily homes. As a result, San Francisco is one of the least affordable cities for younger and lower-income people. Its politicians then double down with rent-control regulations to try to fix the negative impacts of their zoning rules. Yet these regulations only further reduce the supply, and further raise the price, of housing in the city. Yet to this day, elected officials there persist in their misguided policymaking, against the advice of every economist.

If politicians in San Francisco really want to help their citizens, they may want to brush up on basic economics. That would be a treat.

COPYRIGHT 2020 CREATORS.COM

Comments

[JeremyR]

I'm not sure how restaurants are helped if they get charged more by the delivery service (apparently 30% gross of the order) than their profits.

Their only other option is to go out of business, which helps no one.

[MeisterPeeps]

They raise prices for their food. And since more people are willing to pay higher prices for delivery, they get more sales.

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[MeisterPeeps]

Read thomas Sowell's Basic Economics for an introduction to economics. It should really be required reading before being permitted to vote,

[Rod Flash]

Maybe they can do that after they require being able to read in order to vote.

[NOYB2]

I can’t tell whether you’re trying to be sarcastic.

But to be absolutely clear: literacy requirements are not per se unconstitutional.

What made them unconstitutional was that they were administered in a racist fashion (by Democrats of course).

[Rufus The Monocled]

Shit. I accidentally flagged your comment. Sorry. I’m not used to browsing on my phone. Reason can disregard it.

[Agammamon]

Well, sometimes its not a matter of making money but managing how much you're losing.

A restaurant may not be making a profit - but it might still be able to cover the mortgage/rent, keep the lights on, and pay some of the employees.

An owner might decide that that is worth it in the short run to keep the business a going concern for when this all ends.

Of course, by definition, those that aren't making enough money aren't doing this - they've shut their doors for the time being.

So if a restaurant is still running that means that the owners are either still making money or have limited the losses to what they can afford to cover from funds-in-the-bank for a couple of months.

[IceTrey]

I always just go pick up my food but are they not charging the fee to the customers? "Yes sir we deliver. It'll cost you an extra 30%."

[Kevin Smith]

Its a bit different when you go through a service like GrubHub or UberEats, you never actually talk to the restaurant. But if you compare the prices on the app to their menu prices the delivery fee is baked in already if you use the service

[Don't look at me!]

Customers are addicted to “free” delivery.

[Juice]

If you use Seamless, they charge $3.99 for delivery plus tip. Or maybe they raised it to $4.99. IIRC, Doordash has "free" delivery" but all the prices are increased about 10-15%. Anyway, I used Seamless once and it turned out that the delivery was $12 more than the $32 in food. For me, that's not worth it since the restaurant is only a couple of miles from the house, so I just go pick it up now.

[Mr. JD]

Having a particular category of expense exceed your profits is a very normal part of doing business.

Walmart's profit margin is typically 3%. It was 1% last year. Do you think their "payroll" expense exceeds that?

[LarryA]

In almost all businesses taxes exceed the profit margin.

[James K. Polk]

You don't have to be sure; the market will sort the answers out if you let it.

[DrZ]

Read this sentence carefully then ask what a larger supply of drivers does to the cost of delivery:

"The higher fees reflect the increased demand for delivery services while simultaneously giving stronger incentives to more people to become delivery drivers."

[Case of the Mondays]

So shocked that uber left prog faggot asshole fascists cannot understand supply and demand.

[James K. Polk]

It's not so much that they don't understand it, they're not even aware of the concepts.

[Unicorn Abattoir]

San Francisco's Economically Ignorant

You could have stopped there.

[BigT]

Word

[Jerry B.]

Could have left out "Economically" and been more accurate.

[Case of the Mondays]

https://www.foxnews.com/us/gavin-newsom-to-close-all-california-becahes-state-parks-memo

Cocksucker Newsom thinks he's in control. Stupid fucker has not figured it out.

[BigT]

Someone should be registering the protesters to vote. Newsom might notice.

[Ken Shultz]

"Have you ever wondered why it seems like some places have a high concentration of elected officials with little to no economic knowledge whatsoever? I have. While I don't have a solution for this deficiency, I'd like to highlight one city in particular where this seems to be the case: San Francisco."

I suspect the problems in San Francisco are typical of single party states. San Francisco has 11 members on its Board of Supervisors, and all 11 of them are Democrats.

https://en.wikipedia.org/wiki/San_Francisco_Board_of_Supervisors

There is no chance that any one of them will lose an election for rejecting basic realities about supply and demand because winning office is about being more extreme and anti-capitalist than the other candidates that would challenge them for a seat within the Democratic party. They're elected on issues like fighting climate change, for instance, which is seen primarily, within the party, as a fight to ignore market forces and use the coercive power of government to force consumers to make sacrifices for the benefit of the environment. Pain as a result of ignoring market forces is a virtue in their minds.

They have a long history of this going back to issues like rent control. It's a one party state, and it's a state that is ideologically opposed to bending to market forces.

The question of what to do about it is the question of how to make a competing party competitive in San Francisco. So long as the individuals on the Board of Supervisors have no fear of losing an election because of their hostility to basic economics, and good reason to fear that if they ever falter in their hostility to basic economics that someone else within their party will replace them, they will continue on as they have for decades.

We might like to imagine that eventually the single party state would falter if the people there suffered enough pain for the government's ignorance and stupidity, but the example of Detroit isn't very encouraging. How bad does it need to get before ideological hostility to market forces makes people vote for someone in second party? Last I heard, the fire department in Detroit won't bother themselves with putting a fire out in a building unless someone can confirm that the building is occupied.

There were 1.85 million people living in Detroit in 1950. In 2010, there were about 700,000--and they haven't had a Republican mayor since 1962. They lost over a million people over a period of decades, and nobody ever thought it was bad enough to elect a Republican. That's the way San Francisco is only more so. They'll depopulate before they let a second party become competitive.

[IceTrey]

I have no sympathy for the people that live there. They're getting exactly what they voted for.

[Commenter_XY]

See, that is exactly how I feel. And I live in the People's Republic of NJ. I did not vote for the Team D ignoramuses who run our state.

[Kevin Smith]

I feel bad for some of them. After all, the cart that gets stuck in the rut usually comes long after the cart that created the rut. Its at a point where if people want change, there are no options other than leaving

[BigT]

Pain as a result of ignoring market forces is a virtue in their minds.

Much like religions. Suffering is a virtue.

[Rat on a train]

There is no sacrifice too great for the proles. And the party will continue to tell them how noble they are for their sacrifices.

[Dturtleman]

But they will be expected to keep making those sacrifices, for the greater good, you know. No slacking, now, comrades!

[Sevo]

"...San Francisco has 11 members on its Board of Supervisors, and all 11 of them are Democrats..."

I'm pretty sure at least one is to the right of Bernie.

[retiredfire]

It's not just San Francisco. It is the six counties, five of which surround that cesspool.
They were the first to institute the "shelter-in-place" orders and, despite having a relatively small chinavirus footprint, just extended it through the month of May.
While information is being developed that the chinavirus isn't as deadly as originally thought, there has been virtually no let up on the draconian measures, while almost all of the people think what is being done is just fine.
The voters around here deserve what they are getting.

[IceTrey]

First of all they don't want to help their citizens because they're commie assholes. Second of all the pandemic isn't wreaking havoc it's our response to it.

[Zeb]

Second of all the pandemic isn’t wreaking havoc it’s our response to it.

This can't be repeated enough.

[Rufus The Monocled]

Exactly. People are acting like we had no choice. In the process they’re letting the virus control them and to dictate policy.

[Robertd994]

I find it sad that companies like Ubereats and Grabhub are comming up with an excuse that putting a cap on fees will affect their services during Pandemic.However they may have their own reason not to regulate fees but being who they 're( a very popular and enourmous amount of earning money company) should think above profit sometimes. Now we can only hope for any midst conclusion to this.
Thanks
I wish for everyone's health and wealth!
Stay at home!
Robert Downey

[Dyzalot]

So you find reality sad?

[Sevo]

"...should think above profit sometimes."

You make up the difference or fuck off, slaver.

[Rufus The Monocled]

This guy is why we can’t have nice things. A complete useful idiot.

[mahanasrallah]

is this possible?

[Slocum]

Also don't forget that to convince people to become delivery drivers, you have to compete with the current sweet, sweet unemployment benefits proved by the CARES act. If you could make over $4000/mo in California sitting at home, how much would you demand to give that up and deliver food?

[eyeroller]

San Francisco has no lock on this dumbness. There are price gouging laws everywhere, and that's why grocery shelves are empty.

[Juice]

Well, that and the stupid regulations that ossify supply chains and limit competition.

[Commenter_XY]

The People's Republic of New Jersey is an entire state run by the economically ignorant.

[Unicorn Abattoir]

What do you expect with a Goldman Sachs executive as governor? Murphy's no different than Corzine.

[Dturtleman]

Must you continually cause me pain, just because I still live here?

[Longtobefree]

"If politicians really want to help citizens,"

And why would a PHD start with a false premise?

[Zeb]

Have you not heard of reductio ad absurdum? It's a pretty standard method of argument.

[katrin blauze]

Visit Sex in Hamburg and relax yourself a little!

[rohit raj]

Customers are addicted to “free” delivery.
Rohit

[NOYB2]

I fully support San Francisco in serving as a part of a laboratory for democracy, even if it is a bankrupt biohazard containment lab. What I oppose is state and federal bailouts.

[freedomwriter]

Ya those are only for companies.

[Sevo]

Right, those companies pour it all in the pool for the execs to swim in.

[Longtobefree]

On a partially related note, this unnecessary, virus excused, economic shutdown has proved conclusively that it will take a full economic shutdown to satisfy the global climate warming change crowd.
Remember that in November.

[Dave Boz]

Indeed. We are living through the preview version of the Green New Deal. This is your future kids: Mass unemployment, drastically lowered standards of living, and cleaner air. Enjoy.

[Chuck Heston]

Every time Wheel of Fortune tapes in San Francisco they invariably have at least one gay male contestant if not two. They always bring their “husband”. Are there really THAT many there?

[freedomwriter]

haha. The Price is Right has at least one on every show too!

[librich]

I live in the Bay Area, so I'm very familiar with things like this. All of our elected officials--city, state, federal--are Democrats with an anti-business bias. None of them think the free market is a good thing. On the surface, this doesn't make sense. The Bay Area is one of the most vibrant centers for industry and new business in the world. Why would most of the people who are part of this thriving system vote for politicians who despise it? The answer is that they don't have a clue how the economy works. I've lived among them for thirty years, so I can speak with authority. Most of my neighbors don't understand the difference between the ideas of Marx and Adam Smith. Economic theory isn't part of basic coursework in our public schools, and most of my neighbors passed through school without ever understanding how our economy works. They get a job, often a high-paying one, working for a fast-paced company and add real value to our society. And then they turn around and vote for a politician who thinks the free market stinks. It's a great irony really, and horrible failure for America.

[DrZ]

It's the same idiocy involved in preventing "price gouging" which does nothing but cause the hoarders to empty the shelves early in the process leaving nothing to purchase for the masses.

San Francisco politics and economics is based on unicorn dung.

[freedomwriter]

It is only "price gouging" during certain times. Otherwise charging 3 or 4000 percent for water or soda or a phone is ah-ok. It never applies to commodities like stock or metals.

[Sevo]

There is no suck thing as "price gouging". You are full of shit.

[freedomwriter]

Supply and demand hardly applies anymore.

[NM Dave]

The economic laws are based not on legislation but on unchanging human behavior. Any student of history can readily discern that basic human behavior hasn't changed since the beginning of recorded history. This is why we don't refer to them as the "suggestions", or the "desired outcomes" or "hopes" of economics.

[Transisi]

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