During the recent hostage crisis in Sydney, due to increased demand, Uber’s surge pricing took effect. Understandably, people wanted to get the hell out of dodge. Fast! Since then, there have been a slew of articles lambasting Uber’s “dynamic pricing” model. Surge pricing, especially during a terrorist threat, always rubs the public the wrong way. And yet, various writers have come to Uber’s defense, arguing that surge pricing is simply an example of supply and demand.
Olivia Nuzzi, with the Daily Beast, wrote:
“Uber does not have a responsibility to care about you. Uber is not a government entity, and it is not beholden to the general carless public during an unwelcome drizzle of rain or even a time of great distress.”
Matthew Feeney, with the Cato Institute, the Koch-founded libertarian think tank, wrote on their blog:
“What is great about a pricing system like Uber’s surge pricing is that it allows users who want an Uber ride the most to have it. Prices are a great way of communicating customer preferences.”
Fair enough. In Econ 101, you learn all about supply and demand. On paper, surge pricing makes total sense. But corporate boosters like Feeney are missing some major factors that obviously aren’t apparent from the exalted view of an ivory tower. Namely, Uber isn’t a $40 billion company because it’s the Grey Poupon of urban transportation. Not only do they hope to take the place of traditional taxi service, Uber wants to replace car ownership altogether. How can they do that with part-time drivers whose only incentive to drive is the opportunity to gouge people desperate enough to pay whatever it takes to get home?