In my Uber/Lyft-less city we had a snowstorm last week and I needed to get to the airport. I spent 15 minutes letting my phone fruitlessly ring to various cab companies before giving up and digging my car out to drive and park for probably $90+ for the course of my trip.
It's a curious human psychological tic that people think this is a better situation for me than looking at my phone's Uber app and deciding whether $90 for this particular ride would be worth it or not. And not just thinking that the latter is better for me, but that I need to be sheltered by law from encountering the former situation.
The article is mainly about the shortcomings of pure unregulated capitalism, but thanks for your little story about yourself!
Which makes your comment incredibly ironic, you know, because the underlying message is that a system driven only by individual perspectives is fatally flawed.
You know what? I'm not going to apologize for my explicit rudeness. I'm up against people with an implicit rudeness that NEVER apologize for their actions.
I've realized that there are a lot of people in the technology industry who seem to be under the impression that capitalism is "out of our control" and that it also is somehow a system of ethics and morality.
This isn't my only outlet, of course, but this is ground zero for this disgusting and expanding movement of market fundamentalism.
I'm perfectly willing to trade some virtual karma for some real world karma.
> What if uber had been in his city and charged 4000$ for a ride to the airport?
Then I would have dug car out of the snow and drove to the airport. I would not have been any worse off. The difference is that the LA Times wouldn't write a story about me.
So you're posting your hypothetical anecdote because you're upset that the LA Times didn't interview you?
What unrepresented party to this story do you think you belong to? People who are upset that uber isn't around to serve them? Again, this is entirely dependent on circumstances that you haven't made clear. Maybe Uber and their pro-market pricing think that you're in a region they can't make a profit in, and therefor will never be an option for you anyway.
Are you just in the class of people who are upset that taxis aren't available in bad weather in your area? Again, do you live up on the top of a mountain? Are you hard to get to? Again, it's not clear.
It just sounds like you're unhappy with your local taxis, and support unrestrained market policies, which frankly, isn't interesting or relevant to stories about Uber, their places in existing market places, and whether they're serving their customers well with surge pricing.
Guys, you're completely missing the point of his anecdote. Due to the weather, he was unable to get a taxi, he completely lost that option. If fares had been way higher then he most likely could have (either because more drivers would want to work, or because less people would be willing to pay those fares, or for a mixture of these two reasons). Thus, an Uber-pricing system would have been beneficial to him - even if he decided not to use it, it would have at least given him an option to use it (what if he didn't have a car and really needed to make that journey).
He's not trying to complain about his local companies, or anything like that, he's merely pointing out that this sort of pricing can be beneficial to some people, not just to Uber.
That doesn't mean it's the best system overall, it doesn't even mean this anecdote owner thinks it is, it's merely a discussion point.
Capitalism and nature are two completely separate things. One is a man made system. The other is a system that made man. We have the power to control our own systems and we have been doing so for millennia. We don't have the power to control nature, it still controls us.
The problem arises when Über and Lyft have their way and bring about an end to public transportation but refuse to have any outside regulation.
The article is about more than Uber, the article is about how a whole generation of tech entrepreneurs seem to have almost no understanding of why we have regulated markets in the first place.
Are you implying that Uber has no impact on the shape and nature of the market of taxi cabs and drivers in the cities they serve?
Because that seems pretty hard to swallow given how much people crow about Uber disrupting markets.
Uber does help define the landscape of drivers and availability. There are other sorts of pricing models they could even follow. Why not charge a little bit more during off peak times, and then turn around and incentivize drivers using the subsidy from off-peak hours, rather than dumping it all on individuals traveling during points of tumult/crisis?
There are a lot of models between the awful medallion system many cities have and the way that Uber works right now. And frankly as much as i hate how taxis work in a lot of US cities, and as much as i love the user experience that Uber delivers, they certainly should not be immune to criticism, especially over issues like this.
> Why not charge a little bit more during off peak times, and then turn around and incentivize drivers using the subsidy from off-peak hours, rather than dumping it all on individuals traveling during points of tumult/crisis?
Because someone else would start up with a pricing model of charging less during off-peak hours, providing no service whatsoever during weather situations, and the pricing model would fail.
It can be done at the government level - tax cab rides, then use the proceeds to subsidize those at other times, but it can't reasonably be done by one company unilaterally. The medallion system sort of does this, by fixing both price and supply. It's probably suboptimal, though.
It's a supply and demand thing - there's a choice -- Some people get cabs at sub-market rate, and some stand on the corner for an hour trying to get a cab -- or -- Some people pay more for a cab, while others balk at the price and find an alternative method of transportation.
I've stood outside for an hour on a cold, snowy, windy New Year's eve/morn in Boston trying to get a cab... I'll take the price hike vs. the jockeying for sidewalk position, fights over who gets what cab, and other silliness. I think the drivers would too.
There's a choice now, and it's arguable a fair choice. But if Uber puts heavily regulated cab companies out of business, the alternative disappears. That raises some issues in emergency situations like bad weather. Transportation is to some extent a necessity - would you be in favor of stores selling water for $100 a bottle before a hurricane? That might be the price that the market decides but the result of that is people suffering simply because they weren't lucky to be born in the right family.
you are missing the other half -- that high prices drive more market entrants. If the price of bottled Water is 100 dollars then more entrepreneurs will take the risk to transport bottled water to a hurricane prone area because of the profit incentive. This increase in market entrants would in turn drive down the costs to the point where the costs of transporting water to the area equals the ability of people to pay. If a business cannot profitably sell the water in the area then yes, humanitarian aid is probably needed short term (long term there probably needs to be analysis if the area is viable for humans to live in).
I will further this a bit: there is a lag in new entrants that varies based on the industry (e.g. CapEx intensive industries need more time to ramp production). This clearly makes the case above (bottled water in disaster areas) even more of a red herring. Sometimes even the Red Cross has immense logistical trouble delivering supplies to catastrophe stricken areas. Obviously there is some need for humanitarian aid in the world (even in a purely free market society)
General microeconomics holds that markets where suppliers are earning excess profit will be targeted by new market entrants for a piece of that action. You see that happen everyday. Dollar menus at fast food restaurants, pizza specials between dominos/papa johns/pizza hut, Lyft/Uber/Taxis, Andriod/iPhones, Kindle Fire/iPads, Amazon vs every supplier known to mankind, etc
There are literally millions of real world examples of new market entrants seeking to cut costs for a increased share of a market.
I know the basic laws of supply and demand. that is EXACTLY what I mean by dogmatic. you're quoting textbook theory at me as if the doctrine is self proving and as if I'm some sort of idiot for questioning whether your textbook doctrine applies in real life situations.
I'm asking you to consider whether or not your abstract economic theory is really operating as you expect it to in this situation. this is the real world we're talking about. its not a free market. its not a toy example in a text book. between naturally occurring inefficiencies, legal interventions, and unforeseen outside forces it is highly doubtful that basic supply/demand price effects can be thought to apply reliably as the textbook describes.
Fair point. I elaborated more above. Think we are missing each other's next move in the reply delay chain.
Sure the real world is not a perfect free market. Regulations and laws can be a huge hinderance to new market entrants...Uber ironically has felt that pain a ton with local taxi unions and laws
It's not fair now, it's random. Random is not fair. Giving one person out of 100 chemotherapy isn't fair, especially if that person doesn't actually have cancer. Cabs, especially in constrained conditions, are essentially assigned randomly. Which is only fair for a fairly narrow definition of the word.
I wrote a longer explanation elsewhere on this page, but the "getting screwed" in the current system falls on the drivers forced to offer their services at a sub-market rate.
Poor people take cabs? I think this is only true for a broad definition of "poor".
If Uber's proposition is that you can always get a car at some price then this seems like a good way to ensure availability. Not everyone values availability above all else. A lot of people are price-sensitive. At least Uber is transparent about it. And this isn't exactly food or healthcare where somebody is going to die for lack of a cab. Different markets require different amounts of regulation.
Also, per a comment further down the thread, cabs already discriminate against the poor by simply not going to those parts of town. Presumably you can get an Uber pickup in the shittiest section of NYC.
Other than that, I think your arguments are valid and are a better point than "but they can't make egregious amounts of money off of others' pain and suffering, so it's them getting screwed".
> But if Uber puts heavily regulated cab companies out of business, the alternative disappears.
Then we're into antitrust territory, which is a totally different can of worms.
> Would you be in favor of stores selling water for $100 a bottle before a hurricane?
If this were to happen, it means that there was not enough water in the first place. What's the alternative? Allocate to whoever shows up in line first? Then people who don't want to risk waiting pays someone in the front of the line to buy them a bottle of non-subsidized water, and the price of water hits $100 anyway - it just goes to someone else. As an example of how this works, see ticket sales to high-demand events (Super Bowl, concerts, and the like).
As an example of one strategy that works, one of the most important aspects of US Food policy is that we subsidize production so that food produced far beyond what would otherwise be the market-clearing price. This means that we don't have food shortages in times of disaster. One transportation-equivalent would be building a decent public transit system capable of mass evacuation.
Obviously emergency healthcare services are more of a necessity than transportation, I thought I made that clear. But in what way is transportation nothing but a luxury? How do you get to your job, or to the store, or to the hospital if you can't afford an ambulance?
Edit: I want to add that there are extremist types who think that if you can't afford emergency healthcare, you shouldn't get it. We may just fundamentally disagree about that. I think we need to use a combination of publicly funded services (yes, by taking money from the extremely wealthy) and regulation on basic necessities to ensure that everyone has access to a minimally dignified life.
At least in NY, there is no way in hell that Uber is going to put yellow cabs out of business. Not that yellow cabs are some kind of egalitarian paradise. They all congregate in the areas of Manhattan where the richest people live, work, and play. Good luck finding a yellow cab in e.g. East New York.
Arguments like these always ignore any motivation of the person providing the products and services.
If water is selling for $100/bottle you'll find a large number of people driving trucks full of water towards a disaster zone. If you regulate the price of water to 50 cents a bottle, those same people will stay home. You can call risk/reward decisions immoral all day, but it won't change reality. You think cab drivers will work for the same crap pay during a disaster?
The drivers are the ones who get hosed in the current situation, being legally compelled to offer their services at sub-market rates.
You're a programmer. What about the people who do not have the means to hire you to write code for them. Should you be required to offer your services for $8/hour? Should the rate for programmers be fixed at $25/hour?
Economics is the study of the allocation of scarce resources. Our policy choices are a reflection of those decisions. I'm open to a debate on capitalism as a concept - I certainly think it has its pluses and minuses - I don't consider myself a laissez-faire capitalist by any stretch of the imagination. But at some point every decision is a decision that has consequences - we're allocating scarce resources, which means that we're balancing diverse interests in some way.
If you believe that "hiring a vehicle" means "depriving someone else of a cab that they are entitled to" and thus has a cost to society, another policy choice would be to tax cab transactions and then distributing the proceeds evenly across the population.
This article asserts that if taxi cabs were run out of business by Uber then nothing would remain to keep Uber's prices in check. That is completely incorrect. There are a number of competing apps for rides (or they would be built quickly to compete) and cars could freely undercut Uber. I'd be the first to jump in and build an app that pulled each service's ride price to compare options.
If price gouging continued, lower priced alternatives would flourish. I'm struggling to see why this demand-driven pricing when provided BEFORE you get in the car and make your purchasing decision is a problem.
Without price gouging, would you even be able to get a ride in a snowstorm? Just because something is available in good conditions at a normal fee does not mean you can just stop planning your logistics and assume that service will be available all the time.
That said, what the market-based alternative does crowd-out is those without the resources to pay spiked fares that may have lucked into a cab in previous circumstances.
>> There are a number of competing apps for rides (or they would be built quickly to compete) and cars could freely undercut Uber.
That's one possiblity. Another is that network effects would allow Uber (or Lyft or whatever) to dominate local markets since drivers and riders would flock to the most popular. The barrier or new entrants is going to get pretty high if Uber can snap up enough drivers.
True, but there is no shortage of drivers even if they start snapping them up. For $20 a mile, I'll get in my car and pick you up. Uber would have to corner the market for all drivers by paying them off which is... expensive, and extremely unstable.
If you required a CDL or other more involved permit to pick people up that might restrict supply but I don't anticipate demand outpacing supply of drivers if there is money to be made.
transportation is a basic infrastructural need. there is profound social harm done when demand from the wealthy forces prices to rise to the point where poor and middle class people cannot afford it.
The fact that Uber may charge more during peak hours does not eliminate the fact that the poor and middle class from using buses and subways, basic government supplied transportation, both of which are abundant in Manhattan. I don't really understand, at this point, how Uber could possibly cause social harm with flex pricing. If Uber was the only option, sure, and maybe that is what you're arguing. But I doubt the poor rely on Uber for transportation, and there are still several other options.
If you aren't willing to pay more during peak times, you have to deal with the scarcity. This is problematic for things like food, water, and shelter during emergencies...not so much for luxury car rides across town.
Scarcity is interesting. It's the root problem that government is trying to manage. With perfect knowledge, a central authority could have goods or services brought to those most in need. This is very alluring to politicians as they naturally make themselves the central authority, and people have a natural bias to believe they are right and will make the right decisions.
Eventually you confront the problem of more people being in need than there are resources to satisfy. You can solve this by lottery or some qualification system or money. But someone somewhere will be left in the cold. This may be the poor or some schmuck who's birthday was in February.
Sadly most economies don't take the "most in need" concept a a founding principle. It's about trade, where each participant feels they are in a better situation than before the trade. Money is used as an abstraction representing utility/usefulness of an object or work done.
This is fine until you discover the person who has no money and apparently does not provide enough utility to get money (or enough money to live).
This is where charity can take action. Basically a trade happens where one's position is worse after the trade and the other's is improved.
Some believe this charity should be a private affair, some believe it should be compulsory.
Or holidays during school holidays, another classic example of people not understanding supply-and-demand (and the need to keep the infrastructure running when there is no demand).
As I understand it, Uber's prices are listed prior to contracting for a ride. Uber's market is clearly the middle to upper income brackets. If it's understood that the price is time and conditions-variant, I fail to see how their pricing method is unethical.
It's not unethical at all, it's just that mid-to-upper-class smartphone users in big cities have a wicked sense of entitlement.
They approve a dialog that warns them of 7x pricing (not with a button, mind you - but by explicitly thumb-typing the string "7X" into a box!) and then they complain on twitter when their ride is $300 and call Uber crooks.
The amount of entitlement found among the smartphone generation is staggering.
They might benefit from being a bit more transparent with pricing. From a customer's point of view, the multiplier is just arbitrary ("it's busy, so we're charging seven times what we normally do"), and they have to trust Uber that it is being set fairly. If it gets excessively high, like it has in these recent cases, they start losing that trust in Uber, and move to a competitor.
I agree, that the firm might benefit from transparency; but the article stresses the need for regulation in the interest of the consumer, not the firm.
This is how the price mechanism is supposed to work: it communicates inefficiencies over the long term.
"Let Uber put taxis out of business, as sometimes seems its intention, and there'd be no check on its "surge" pricing and no way at all for ordinary people to get around."
No way at all for ordinary people to get around? Is this a joke? As far as I'm aware, ordinary people take ordinary transportation, like, you know, subways, buses, bikes and such.
No, he doesn't. And it's pretty obvious what he means: that primary method of transportation for most people is public transport and price hikes during the scarcity periods will be a minor inconvenience as many other transportation means are available.
It's not that obvious to me. As a person who doesn't drive, taxis are crucial to my getting around, and I have to take one at least once or twice a month.
edit: and to make it very clear, I can think of three jobs that I would have had to quit if reasonably priced taxis weren't available.
> Uber's defense is that it needed to charge so much more to encourage its drivers to stay on the job
Maybe people would be more OK with it if Uber kept their commission flat, i.e. they get paid the same for each trip regardless of how much they are charging extra for the conditions. Not saying they have a duty to do this, just that from a PR point of view it would get rid of the assumption that they put prices up too much to increase their profits.
I think the analogy here to price gouging during an hurricane is quite a stretch here. I don't think many would agree with "surge pricing" on essentials or transportation during Hurricane Katrina where the alternative might be death or extreme property damage. I don't see how that applies to the vast majority of Uber surge pricing scenarios.
I have a friend who lives in Pac Heights and gets hit with surge pricing all the time, likely because few Ubers are willing to pick up customers there. He's switched to Flywheel, which works well and doesn't have surge pricing. Seems like everyone wins here. Meanwhile, I live in SOMA, rarely get hit with surge pricing, and pretty much exclusively use UberX/Uber.
Uber tried to use surge pricing in the aftermath of Sandy in NYC, and was basically forced to pay the drivers the extra surge prices out of their own pockets due to the PR fiasco that ensued.
Of course, this was only the aftermath. I am very skeptical that for hire taxis are a good way of saving lives in an emergency.
I personally totally buy the economic argument for surge pricing. But they have a very PR problem of convincing people that it's useful and beneficial to everyone.
Experiments using the Ultimatum Game have shown that people hate feeling like they're being ripped off, no matter how much we think they should just act rationally and understand the circumstances.
A great book on this is Priceless by William Poundstone.
Right? It’s telling, in a very Stanford Prison Experiment way, how that works.
Take my girlfriend. She used to work as a nanny for a couple, two lawyers for the State. They were strictly middle-class, and paid the same to my GF as they would for daycare (my GF had taken care of their two children when in daycare, until the center closed). It was mutually beneficial, as my girlfriend’s own daughter was the same age as their kids and knew them.
Seattle and surrounds are not known for heavy snow, and don’t have the infrastructure to deal with it. I work with the Fire Dept. Was called in when a big dump ended in a State of Emergency being declared.
My girlfriend’s employers got a message from the State, not to come into work that day. That they could work from home, and were advised to stay off the roads, as they were particularly dangerous with over two foot of snow, re-freeze, and largely unplowed.
They called my girlfriend (who lived with me, about 5 miles away) and, seemingly oblivious to what was coming out of their mouths: “We will be working from home today, as it’s too dangerous to drive. So we’ll need you to come in an hour earlier, thanks."
True. Are we talking about auctioning beanie babies or dialysis treatments? I expect that folks would be much more accepting of the former than the latter.
(To be clear, I'm not saying that Uber rides fall in the same category as dialysis treatments, just that folks are more sensitive to "unfair" pricing as the product or service gets more essential.)
The dilemma for Uber here is that a 6x or 7x multiplier completely changes the market for a service. It's an increase from $30 to $200. If it was just a 2x multiplier, people would be much more accepting, since it would move from pricey to really pricey.
I agree that we are only hearing complaints from people who went ahead with the purchase, and then had buyer's remorse the next day.
Uber's bigger problem is all the people who got to the screen that said it was incredibly more expensive than usual, and walked away and started talking about what a rip-off Uber is and how it gouges people who are in need.
I found myself using other service more often when I see a surcharge. Especially for short rides, I prefer waiting and extra 5 minutes and spend half of the money.
I'm sure Uber would tell you that's exactly how it's supposed to work. The price increase drives some people to seek alternate modes of transport, which keeps the supply stable so it's still possible to get a ride if you're willing to pay the higher fare.
Wellllll.... Their general line is not "surge pricing reduces demand," but "surge pricing increases supply." Clearly, over here in reality, it does both, but they prefer understandably to emphasize the up-side.
The question is, how much does it increase supply? My guess is that it doesn't increase it all that much. Uber does not, to my understanding, have a huge pool of irregular drivers who only occasionally go out onto the road during high surge pricing. They encourage their drivers to work full time, and most surge pricing (ie, not anomalous events like snowstorms) are at times of predictable high demand, when you'd expect most of their drivers to be on the road anyway.
My guess is that surge pricing (especially surge pricing in excess of x2) is mainly a windfall for Uber and their drivers, and is less effective about increasing supply than their promotional material would like you to believe.
Disclaimer: I work at Flywheel, an Uber competitor. I am not un-biased.
The bigger problem is customers opinion of the company and service. Great you got my business when I was over a barrel but I'll probably use someone else the other 99 times. Amazon keeps its pricing low for a reason. cutting fees during emegencies is how you build customer loyalty.
Price-gouging serves a purpose: it ensures that the service in question is not unevenly distributed to the first customer there. In situations like transit this advantage isn't as obvious as in situations like a gas shortage. Are cabs in the Bay Area regulated in terms of max prices? I end up avoiding Uber in surge times because basically every other option is cheaper.
If one party is willing to buy and the other willing to sell, where is the issue? If you want regulated rates, wait for a cab. Intentionally using a premium service then demanding price controls makes you sound like the old man complaining that Starbucks coffee should cost a nickel.
When will Uber cease to be a start up or a premium service or some other classification of company that allows them to skirt the laws that their direct competitors have to abide by? A large part of the argument isn't whether or not the gouging is acceptable, it's that Uber/Lyft/new ride app is allowed to loophole itself into "current market rates".
The goal of regulation is to discourage traffic jams, fights, and the like on the side of the street caused by negotiation over price. With Uber you have the opportunity to see the price before pressing the button. Ideally, there are multiple Uber-like systems which will hold prices down, with a Kayak-like service to choose between them.
There's nothing wrong with charging high prices for things that are in high demand and low supply. That's what encourages more suppliers to enter the market. There are two major situations that regulation needs to protect consumers from - asymmetric information and monopolies. Taxis are a major example of the former - that negotiating on the street would create traffic problems, and getting into the cab, then negotiating would create a major imbalance of power in the negotiation.
An example of the latter would be if Uber was the only player in the transportation market (market share > some large %) and could charge what they want, and then said something like "the only way to book one of our vehicles is through our app, and you cannot build a system which lets you book either an Uber vehicle or non-Uber vehicle."
It's a curious human psychological tic that people think this is a better situation for me than looking at my phone's Uber app and deciding whether $90 for this particular ride would be worth it or not. And not just thinking that the latter is better for me, but that I need to be sheltered by law from encountering the former situation.