By Megan McArdle, Princess of The Land Of Money
New York just killed every economist’s favorite thing about Uber: surge pricing. Sure, many economists also love convenient car service at the touch of a button. But black-car services have been around for a long time. Explicit surge pricing -- which both creates new supply and rations demand -- has not, but it’s long been a core feature of Uber Technologies Inc.’s business model. While it can be annoying at times (during a recent rainstorm, I noticed a sudden epidemic of drivers canceling rides, which I suspect was due to the rapidly rising surge price), it also allows you to be sure that you will be able to get a taxi on New Year’s Eve or during a rainstorm as long as you’re willing to pay extra.Which economists? Alas, we will never know. McArdle links to a Hayek essay; perhaps Hayek told her he has a sad every time the government passed a law. She also links to herself, writing about the wonders of jacking up prices until only her own class can afford them, providing her with a bounteous array of luxury cars to serve her at the snap of her smartphone.
The biggest elision McArdle pulls off is an important one. People who can't afford price gouging will be unable to get transportation. This is their own problem, not McArdle's. McArdle didn't force them to make less money than she and if they want private cars they can just work harder to get them.
After all, it's just rain or a long line. The less fortunate can always use some alternate method of transportation, as her commenters say at length. McArdle is not biased, however. She acknowledges that people will have to pay a lot more for surge pricing. This is not a problem however because she has more than enough money to pay the surcharge, and when she benefits, everyone benefits.
So it's perfectly fine if cars want to cancel her call for a car even though McArdle has said that one of Uber's greatest benefits is the quick service. She's happy to wait while drivers delay pick-up until demand rises and prices are pushed to six times their usual rate. After all, she knew what she was getting into.
Sadly, no one else loves surge pricing as much as economists do. Instead of getting all excited about the subtle, elegant machinery of price discovery, people get all outraged about “price gouging.” No matter how earnestly economists and their fellow travelers explain that this is irrational madness -- that price gouging actually makes everyone better off by ensuring greater supply and allocating the supply to (approximately) those with the greatest demand -- the rest of the country continues to view marking up generators after a hurricane, or similar maneuvers, as a pretty serious moral crime."Price gouging actually makes everyone better off." Let this join the panoply of McArdle sayings, such as we are better off not having health insurance because you might catch something if you go to a hospital, and that "young people" should rush a gunman firing bullets at their heads because gun legislation is impossible. Price gouging ensures that only people with a lot of money will be able to afford things during an emergency. This is obvious, which is why McArdle commits another offense against logic, conflating emergencies with busy taxi times.
Some of the outraged people happen to be legislators, who then go and make laws against price gouging in emergencies, which apparently include needing to get a taxi in a bad snowstorm.Like that. If you read Megan McArdle you will leave believing that the government is once again putting its jackboot on the neck of the Consumer-American. Legislators want to control prices during bad snowstorms! Except she is lying. Uber was criticized for price gouging during Hurricane Sandy. If McArdle did not know this she is merely an incredibly lazy ideologue instead of a liar, who can't be bothered to learn the basic facts before she runs over to the computer to breathlessly gin up an anti-government conspiracy.
She loves her work so.
New York has such a law, and its attorney general was preparing to go after Uber for violating it. In response, the company has announced that it will cap its surge-pricing rates, not just in New York but throughout the country.There is no link to how the attorney general of New York was "preparing to go after Uber" because there is no evidence. According to news reports he "criticized" Uber's price gouging and Uber voluntarily agreed to cap its surge pricing during emergencies. McArdle does her best to confuse this last point.
This is going to make many people worse off: the drivers who would have liked to make extra on rides, and the riders who don't get rides because some drivers couldn’t be lured out of their warm beds on a cold and needy night. Of course, the people who manage to get rides will be better off, but there will be fewer of them, and it'll be harder to predict whether they’ll succeed in getting a cab. It’s the difference between a raffle ticket and a charity auction.There will also be fewer people getting rides if the prices are jacked up beyond most people's ability to pay, but they don't count. And Uber can still jack up prices astronomically on "a cold and needy night," they just can't do it when finding a ride could be a matter of life and death.
Yet when it comes to these sorts of transactions, we seem to instinctively prefer the raffle ticket. Michael Munger argues that this is because we don’t see them as “euvoluntary,” or truly voluntary. The aspect of great need makes them feel coercive, even if the person fulfilling the need is not the person who created it. So we’d rather that no one gets ice after a hurricane than see entrepreneurial people get rich selling it to willing buyers. So while this latest development is not economically optimal, it was probably politically predictable.I've been through hurricanes. The last thing you need after a hurricane is some libertarian-type trying to get rich off of others' misfortune. I found ice at a grocery store in a rich neighborhood after the hurricanes, at the regular price. If I remember correctly there was a two-bag limit, which everyone accepted because they wanted ice too. The poor stood in long lines in the Texas heat for free ice and other supplies. I would not have contributed one thin dime to an "entrepreneur" trying to get rich off of a natural disaster.
Megan McArdle knows this. She read the Little House on the Prairie books. In The Long Winter the sole shopkeeper jacked up prices during their emergency, when people were starting to starve. The townspeople informed him that if he ever wanted another customer after winter ended he had better stop gouging his neighbors. This was the same schmuck who chased off the only animals around because he was a lousy hunter. Too bad he was born so long ago; he would have been a perfect libertarian.
All the world's a sucker waiting to be taken by a clever free-marketer, to these people. Price gouging. What a thing to support. Yet another reason why Megan McArdle is one of the worst people in the world.
(still having computer issues, which makes linking difficult)