Yesterday
Islamist gunmen in Sydney, Australia, stormed a café and took
patrons hostage, leading to a lock-down of the downtown and an
exodus out of the area. People turned to the modes of
transportation available to them and many took Uber. You may have
seen this Gawker headline floating around your social media feeds:
“Uber
Turned on Surge Pricing for People Fleeing Sydney.”
Surprise, it’s not true. Gawker, which has transformed from a
media gossip site into a lowest common denominator liberal rag over
the last decade, has adopted Uber-hating as one of those lowest
common denominator factors.
In this case, like in many of the cases seized upon by Uber
critics, the hoop-la was over automation. Welcome to the
21st century, Gawker. Uber institute the policy of surge
pricing to help best connect drivers to potential passengers during
high-demand times, like holidays or sporting events. Uber doesn’t
hide when surge pricing is in effect and it kicks in automatically
as needed. No one “turns it on.” During the attack in Sydney, then,
it makes sense that surge pricing would go into effect
automatically as there was a surge of people who wanted to use the
service.
But Uber actually suspended surge pricing and instead offered
free rides,
described misleadingly by some media outlets as an “about face.”
Surge pricing is automatic, one of the factors that makes it such
an effective tool of matching supply to demand. Presumably Uber
covered the cost of the fare for the drivers, perhaps even under
surge pricing, or else Uber’s announcement of free rides might as
well have been an announcement it was suspending service during the
incident.
Here’s the most important point: had Uber chose not to offer
free rides during this attack surge pricing would still be
appropriate. Drivers choosing to travel in and out of a danger zone
to evacuate people are incurring avoidable risk. That risk dampens
supply but increases demand, creating the potential for chaos on
the streets as passengers fight over scarce cabs. Surge pricing
encourages some passengers to consider other modes of evacuation
and encourages more drivers to go out and offer their
services.
This is a good thing. Liberals often argue teachers and other
public employees must be paid even better in order to get better
employees while at the same time balking at the idea of merit-based
pay or substantive job review. In a basic economic sense, higher
pay should attract more candidates. It’s up to those doing the
hiring, though, that the candidates are better. Government
bureaucracy eliminates a lot of the market forces that would
otherwise play out to link the best candidates with the best
compensation.
Surge pricing, like better pay, works in a similar way to
attract more drivers. In the case of the Uber driver, a valid
license and a car are ultimately all that’s needed to perform
adequately, pretty objective criteria, and Uber remains 100 percent
voluntary. Some Uber critics point to the dangers presented by
“unvetted” Uber drivers. It’s led to Uber charging a “safety fee”
to vet drivers. But it’s mostly an illusion, just like it is
with taxicab regulations There are plenty of examples of
incompetent, unsavory, and even criminal cab drivers. Any story
cherry picked about a nightmare experience with Uber will have a
counterpart in the regulated taxi industry. And there are the
stories from the regulated taxi industry—unable to track down your
driver after leaving something in the car, arguing over what price
had been agreed upon for the ride, and so on—that have no Uber
counterpart.
In other markets, surge pricing would be called “price gouging.”
This, too, is an important market tool. The costs are higher to
bring supplies into disaster areas, and as more supplies are
needed, higher prices still are needed to divert those supplies
from going to places in which it’s easier for the supplier to sell
them. Rationing gas after hurricanes, for example, only slows the
process of returning to normal. Gas is harder to transport into a
disaster zone. When suppliers are unable to adjust the price to
reflect that, even less gas is transported into the disaster zone,
making the supply even scarcer.
At the end of the day, Uber, which employs no drivers and owns
no car, is a service that helps connect people with cars willing to
drive for a few dollars with people who need to get somewhere and
are willing to pay for a few dollars. Uber offers customers more
choices and, unlike taxi cartels, aren’t forced on anyone. Critics
are of course free to keep criticizing but they ignore these basic
facts at the peril of their own reputations, if any, for
intellectual honesty and integrity.
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