The Case for Uber Surge Pricing After a Mass Shooting

In criticizing the move, the New York Post got basic economics wrong.

The media's ignorance about basic economics is galling.

I expect it from politicians. I expect it from The New York Times. But it's sad to see in the New York Post, my town's rare alternative to Democrat media.

Recently the tabloid freaked out over higher prices imposed by ride-share companies. "New Yorkers are fed up with forking over excessive amounts for Uber and Lyft rides."

Excessive? Just what is "excessive?" Who decides?

Prices were already up because gasoline costs more, New York City keeps imposing new taxes and regulations, and the federal government pays so many people not to work that there's now a shortage of drivers.

That day, unusually high "surge" prices were in effect because there had been a horrible shooting on the subway. Commuters, fearful of another subway shooting, turned to ride-share services.

How should a company like Uber deal with that? Suddenly, there is much more demand for rides than supply. Should customers just wait in line? Most wouldn't get a ride for days.

So, ride-share companies do the sensible thing: They temporarily raise prices. They lower them again when there are free cars. This is the best solution for the most people.

Those who desperately need rides can pay extra for them. Those with spare time can take a bus, walk, call a friend, etc., or just wait for prices to drop.

Higher prices also mean higher pay for drivers, which encourages part-time drivers to drop what they are doing and start offering rides.

Such congestion pricing could also reduce traffic jams if politicians gathered the courage to impose it.

But this pretty good solution is not good enough for economically ignorant reporters. The Post said, "Critics say the sticker shock is unsustainable."

"Critics say" is a clue that you are reading the product of lazy reporting. When reporters don't take the time to search out reliable sources or gather actual data, they simply write, "critics say." The critics could be their friends, family, or a couple Uber users at the airport.

How do these critics know the prices are "unsustainable?" They don't. Ride share investors, with their own money on the line, know more about what is sustainable. If prices were really unsustainable, the company would go out of business.

The reporter went further: "critics say [the fares are]…sometimes downright unethical."

Unethical? Uber drivers don't force people into their cars. They don't even trick us with advertising.

In fact, they do the opposite. Before I can book a ride, I get a message warning me that the cost will be "higher due to increased demand."

Economist Don Boudreaux wrote the Post (good for the Post for publishing his letter): "Prices reflect underlying realities of demand and supply. In New York City, rising crime (thanks, Bill de Blasio!) simultaneously raises the demand for Uber rides as it lowers the supply of such rides. These realities cannot help but push fares upward."

Right.

Uber and Lyft are great innovations. They forced taxi monopolies to treat customers better and let ordinary people use their cars to drive for money.

But businesses get clobbered in the media whenever there's an aberration. On that day, social media exploded with comments like, "Fare surge after a mass shooting….Shame on you @Uber."

The companies quickly went into damage control mode. "Our hearts go out to the victims," tweeted Uber Support. "We disabled surge pricing in the area."

Disabling surge pricing may be good PR, but it's a terrible practice. At the beginning of the pandemic, when toilet paper and hand sanitizer were scarce, politicians told people, "Report merchants who raise prices!" They called that "illegal price gouging."

But "gouging" was a good thing even then. It disincentivized hoarding and got suppliers to make more of the products we need most.

Yes, today "gouging" is often illegal.

But that's only because when it comes to what makes markets work, well, most politicians and reporters are just clueless.

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Comments

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

Uber and Lyft screwed themselves over right from the beginning, by establishing the "Uber" and "Lyft" prices, as if Uber and Lyft were in charge. It astounded me; the right way would have been to let drivers set their own prices and the business add 10% or 30% or whatever it works out to. Make customers realize right up front who was earning the price.

Let drivers set their rate when they sign in. I've never been one of those drivers, I don't know the process, but it must include some signin to tell Uber or Lyft you can now take rides, and it would be simple enough for the signin process to show what the average paid ride is right now, how many customers are waiting for a ride, how many drivers are waiting for a customer, and let the signin process include setting the minimum rate they will take.

The point is, make it obvious to customers and the public that the drivers are in charge, and Uber / Lyft is just coordinating everything. Instead, Uber and Lyft took all the credit, as if the drivers were just anonymous serfs. Well, it works both ways. They want the credit when drivers are cheap, they can take the blame when drivers are expensive.

[ElvisIsReal]

Drivers don't even know where their next fare is going before they accept the ride. It's crazy that there hasn't been a more driver-friendly service by now.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

That's crazy. I remember my shock when I first found how opaque the process was. It seemed like they'd gone out of their way to design the most convoluted system possible, locking in drivers as too ignorant and naive to have any responsibility other than not crashing. I especially don't understand their requirement for newish cars; why shouldn't I be able to drive people around in my beat up truck, if they know in advance? No one is going to drive their shiny new car on the roads around here!

Let customers and drivers make their own choices from full disclosure. Require up to date insurance, not have a criminal record for kidnapping or assault, and butt out otherwise.

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[perlmonger]

Drivers don't even know where their next fare is going before they accept the ride.

Not accurate. The fare says both pick up and drop off location before they accept. Which is why if you're going somewhere there aren't going to be a lot of return fares from, you might get ignored if the price isn't high enough. Had a friend get screwed by that cycle at SEA.

That was actually worse, because after you sit in the queue for them looking for a driver for 15 minutes, they say they're very sorry, and offer you a discounted ride. Which, if the drivers didn't pick you up for $75, they're definitely not picking you up for $60. And yes, the price difference gets split between the driver and Uber / Lyft. I think eventually she had to call a regular taxi to get anyone to pick her up, and there were several people standing around in a similar situation.

[Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf]

I've been thinking how a Reason edit button should work. The biggest problem with editing is that you can change a comment after people have replied to it. One solution is to prevent edits if a comment has any replies. But there is still the problem of someone loading a page, getting distracted, and replying an hour later, after it has been edited. So the "Reply" button needs to refresh the comment if it has changed instead of popping up the reply box.

It would be even better to keep all edit history, and lump replies under the appropriate revision. That would be pretty simple; change the formatting to list all revisions as distinct comments, each with their own replies. Only allow replies to the latest revision; but allow replies to nested replies to any revision.

[Don't look at me!]

It’s not that important.

[perlmonger]

I'd say put the "change history" behind a link to keep the comments from getting too cluttered, but that's basically the idea I was working with.

There's no way for the webpage on my PC to know to reload if the comment has changed without doing a query every time, though. Which is certainly possible, but may have unfortunate side effects if the site starts to get overburdened by reload calls.

[BadLib]

Recent updates to WaPo's comment system seem to do much of what you describe in the first paragraph with respect to replying to a comment that has been edited while you're crafting your clever reply to the original argument. They do impose a 5 minute time limit for editing (and making an edit does not renew that timer). Though I wish they had an option to just not display comments still subject to editing or to clearly identify them (such as by changing the background on that comment).

WaPo's commenting section is at least WYSIWYG unlike Reason's so the need for preview is much less. I sometimes end up writing my comments here in emacs w/autoviewing toggled on so every time I save the html file it opens it in my browser. Unfortunately Reason doesn't support most HTML tags and entities (such as, perhaps, <) and inserts line breaks when there's a blank line but doesn't respect the "break" HTML tag. (And I've not found any documentation on what IS supported and I don't want to clutter up a comment section trying to derive that...

Oh, what the heck...

Well, at least links, bold,italic, and

blockquote

work.

A couple break tags in the middle of the string 'ABCDEF': ABCDEF

And an attempt to bracket the 'CD' in the string 'ABCDEF' with "less than" and "greater than" signs:
AB<CD>EF

And an attempt to display something in a monospaced font without molestation:

#include
/* No, DON'T really do it this way! */
int main (int argc, char *argv[]) {
long chk, test;
for (chk = 3; chk <= 1000; chk += 2) {
for (test = 3; test = chk)
printf("%10li is prime\n", chk);
}
}


[BadLib]

Well, the "code" tag didn't work out as hoped (yes, I indented the code correctly with two spaces for each level).

But, the "break" tag didn't work.

The "less than" and "greater than" worked (to my surprise) - of course they are not "tags".

[Liberty Lover]

The government's ignorance about basic economics is galling.
I don't care about the media's idiots. They don't set policy.

[Naime Bond]

If you want to argue supply and demand caused the surge pricing, then present evidence a surge in demand actually occurred. What was the actual number of Uber calls to actual cars on the road? Of course Reason fails to quote the article it attacks, Uber and Lyft cancelled surge pricing (why?) and '...Later that day, the company agreed to refund riders who were charged surge pricing...' Hmmm, I wonder why? Perhaps it was just a simple case of price gouging? With lazy reporting like this, we will never know.

[Earth-based Human Skeptic]

The media's ignorance about basic economics is a combination of deliberate stupidity, propaganda, and populist mob appeal.

FIFY

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[Hank Phillips]

Uber never worked for a minute the three times I installed it Stateside. Lyft works perfectly but is unavailable in other countries. Once you let U.S. Uber have your email, there is no way to get rid of the bastids and instead hire Uber apps elsewhere. So I use taxis, whose drivers at least have a clue where places are located.

[Hank Phillips]

"Such congestion pricing could also reduce traffic jams if politicians gathered the courage to impose it." Izzis a Stossel article? What's with needing politicians to impose MORE meddling? Something doesn't add up...

[BadLib]

When the concept of rideshare for pay (vs. just "on demand" carpooling) was being floated long ago I (incorrectly) assumed it would be a real time auction market with the coordinator (such as Uber) taking a cut (probably a sliding percentage with some minimum) but the rider and driver ultimately deciding the market price. No need for "surge pricing" at all...

I had assumed...

Drivers would, of course, know the pickup point and the dropoff point (within reason for privacy reasons) and perhaps see an estimated elapsed time provided by the coordinator and "default route" (based on real time traffic data) before accepting a bid.

Riders could automatically lower their bid over time based on their own criteria until accepted (to incent drivers to accept rides earlier).

Riders could offer higher bids or enhancements in exchange for service criteria like "pickup within three minutes".

Riders and drivers would have ratings. Riders could bid for a ride but specify that high rated drivers would see a higher (or even lower - but why?) bid by some user defined criteria and perhaps that lower rated drivers didn't even see the bid. Similarly, drivers could accept bids at various levels taking into account rider ratings.

Both drivers would have a "ban" function available based on riders they had previously had a bad experience with (once banned by a driver, the driver would never see an bid by that rider). Similarly, riders would have a "ban" function that would prevent a driver who they had previously had a bad experience with from seeing their bid. This, of course, would likely have little effect in all but the smallest markets - although a "ban percentage" might be available to riders and drivers alike on top of ratings so they could reject those who have been banned, as a percentage of rides, by too many.

I would expect all of these criteria to be available for riders and drivers to develop custom formulas and algorithms around. (Of course, given the state of K-12 math education in the U.S., I would expect most riders and drivers would select from a "professionally developed" array of formulas and algorithms).

There are probably times when a driver would accept a high bid that likely involved a high chance of requiring a long "deadhead" run and accept a very low bid from a rider that happened to want, but only at a low price, to pay for much of the return deadhead trip.

[Tim B]

But this pretty good solution is not good enough for economically ignorant reporters. The Post said, "Critics say the sticker shock is unsustainable."

...but sticker shock is unsustainable.

Once people get used to the new prices, the sticker shock goes away.

In order to sustain sticker shock, the prices would have to consistently be shockingly higher than expected. Which just isn't a thing.

Even in cases of hyperinflation, my understanding is that people figure out what's going on pretty quickly. And then stop being shocked by it.

[publicnewstime]

Today News Pedia
News Updates
Of course, given the state of K-12 math education in the U.S., I would expect most riders and drivers would select fro

[publicnewstime]

Euro Updates
ld prevent a driver who they had previously had a bad experience with from seeing their bid. This, of course, would likely have little effect in all but the smallest markets - although a "ban percentage" might be available

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