The Uber price gouging in Sydney problem was brought to my attention by Daniel Brent (thanks!). Jodi Beggs has covered it better than I could:
I’m beginning to think that the overlap in the Venn diagram of “Economic Theory” and “Good PR” is an area that my cat couldn’t resist trying to crawl through due to her obsession with small spaces. Case in point (re the economics, not the cat):
On the plus side, Uber has started explaining the rationale behind the price increases. On the down side, people still hate it. On the…maybe up side, it appears that people may have progressed a bit from kidding themselves into thinking that regular prices and enough available supply is an option and are at least considering the relative suckiness of high prices versus a shortage:
She then describes the usual economic argument that price reflects willingness to pay, demand/supply results in efficiency, admits that she is bored even writing it again, and then gets to the interesting stuff. What is galling about surge pricing / price gouging is not really that prices fluctuate, it is price reflects willingness and ability to pay and that you can be sure that the rich people are going to get out of the Sydney CBD / a bag of ice after a hurricane (even Uber's condolences invited the wrath):
... In return, I will distance myself a bit from Econ 101 and acknowledge that, the more income/wealth equality exists in a market, the less likely the system of rationing via prices is to be either truly efficient or fair. Unfortunately, I don’t know where to go from there, since it’s unclear what a more optimal system would look like ...
I totally agree. Economists don't do enough to make sure A maldistribution of income undermines the efficiency argument (i.e., I believe in diminishing marginal utility of income) and I don't know where to go from there (except to expand the earned income tax credit).
Note: I couldn't figure out how Jodi embedded those tweets so I resorted to a screenshot. The future would be a lot cooler if someone could point me to the twitter embedding trick.
