New Yorkers Complain About Economics

From the ever-expanding “This Isn’t Price Gouging” Department, the New York Post reports:

Passengers are blasting the Uber car-service app for its “surge’’-pricing scheme, which kicked in during the city’s first snowstorm of the season — in one case pricing a short trip across town at a whopping $132.

But in Boston, blogger Jessica Gioglio — who bills herself as “The Savvy Bostonian” — shelled out $91 for a 3.18-mile, 16-minute trip from Beantown’s Back Bay to Central Square.

Posting a screenshot of her e-mail receipt, she called the fare “price-gouging” and said, “I’m really disappointed in u guys.”

Uber, much maligned by regulatory fiends and taxi cab sympathizers, has really upset the taxi cabal in many major U.S. cities. Namely by providing better, more convenient service for a more premium price.

Unlike taxicabs, whose drivers can usually only impose a change in prices when allowed by decree from the government (i.e. during a snowstorm, or when gas prices are unusually high), Uber can raise prices to reflect market demand. And users are clearly made aware of this before they agree to take an Uber, as seen below.

The Post continues:

The app’s practice of surge pricing is actually designed to help consumers, Uber spokeswoman Nairi Hourdajian insisted Sunday. The higher rates “get more cars on the road quickly when demand outstrips supply, helping to guarantee that New Yorkers can get a ride when and where they want,” she said.

“As soon as demand falls or supply increases sufficiently, prices return to normal.”

Uber cars and their drivers, like everything else, are a scarce resource with alternate uses. Uber is right to raise prices to incentivize more drivers to work than to accept private contracts (as many Uber drivers do in Washington), hunker down with their family, or go out and get supplies for their homes. Just like laws prohibiting so-called “price gouging” during a storm serve as a disincentive for shop owners to stay open, the rules that govern taxi cabs often result in less taxis being available.

Which, in turn, might cause Uber’s demand to surge even higher than it normally would if taxis had greater flexibility to charge market rates. bsig

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2 Thoughts on “New Yorkers Complain About Economics

  1. Economics is a set of norms, not a set of immutable laws. People strongly object to the charging of much higher prices under emergency conditions, because it’s considered a form of exploitation of weakness created by conditions that are completely outside of people’s control. Whatever its other merits might be, it is that.

    • Jim Swift on December 26, 2013 at 6:07 pm said:

      People “strongly object”? Good golly. Call me callous, but the feelings of certain people as to what price they want to pay when scarcity or high demand exists doesn’t mean that the price should be so. Sadly, many levels of government fix the price.

      Just because some people feel and consider that raising prices during times of high demand or scarcity is “a form of exploitation” does not make it so — they would be wrong.

      Forcing individuals to sell a good or service for a certain rate is an actual form of exploitation. But, rare is the case when they’re required to provide the service. So, many opt not to provide the goods or services when they’re required to sell them at a below-market rate, and fewer people ultimately get access to that good or service.

      I guess we have the feelings and considerations of people to thank for that.

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