It's not that simple, and this topic comes up after every kind of natural disaster.
The author is completely missing the fact that the flip side of "price-gouging" is making sure that a scarce resource is only utilized by those who need it the most.
If there are only 20 taxis, and there are 20 people desperately stranded who need a taxi, and 200 people who would just "like" a taxi, then if a taxi costs $200, those 20 people will happily pay for one.
But if a taxi costs only $20, then the taxis will mostly be used by the people who don't desperately need them, and the ones that do might die (if it's that desperate).
Likewise with charging $100 per bottle of water or batteries. It doesn't necessarily make you an asshole -- it's the simplest way of making sure a scarce resource is only allocated to those who truly need it.
And more than that, it incentivizes people to provide that resource -- extra taxis ferrying passengers, extra people supplying water or batteries -- even incentiving people with extra water/batteries at home to sell them to others.
Sure, when there are good networks of trust in a society, and the resource in question isn't really scarce, price-gouging can be unfortunate. And ideally, in cases of disaster, the government should be providing essential resources for all.
But the author of this post seems to be completely and utterly unaware of the positive and possibly life-saving effects of scarcity pricing.
Again, wealth does not equal need. You're assuming all of the desperately stranded people have $200 at the ready for a taxi trip that's normally only $20. And some people will pay whatever price for convenience, because they have plenty of money.
You can't just assume that everyone CAN pay whatever price is set, and just decides not to because they don't need it enough. In this scenario, the poor people die and the rich stay comfortably unaffected while using the resources others are far more desperate for.
It seems like it's too hard to solve "who needs it" without employing some flawed metric like money. But I'm not sure there's any better solution.
$200 would dissuade me, in situations where $20 wouldn't (unless I was in a heavy bind). This isn't true for everyone, but it seems to work well in the middle.
I think Uber did nothing wrong, but maybe they need to work on how to not be perceived as assholes, they could have had customers queue up for lower prices, and specify their need, and worked through the queue judging each persons priority (but maybe you'd have even more angry folks).
In this situation, first-come first-served is clearly imperfect, but it at least avoids the bias that you get with surge pricing: service only to the financially well-off.
The author is completely missing the fact that the flip
side of "price-gouging" is making sure that a scarce
resource is only utilized by those who need it the most.
If there are only 20 taxis, and there are 20 people
desperately stranded who need a taxi, and 200 people
who would just "like" a taxi, then if a taxi costs
$200, those 20 people will happily pay for one.
I think being able to pay 200$ for a taxi is not the same as needing it the most.
This only makes sense if everyone has the same amount of resources to trade. When all you pay attention to is money, the only metric you care about is who has any money.
The flip side of this is that the best price in emergency situations is to drop your price to $0. That sends a very strong signal that the service is for emergencies only; that anybody who takes advantage is an asshole. It also removes barriers: people in emergency situations often don't have their wallets on them, et cetera.
It also generates a huge amount of goodwill that cannot be bought in any other situation.
Comments
It's not that simple, and this topic comes up after every kind of natural disaster.
The author is completely missing the fact that the flip side of "price-gouging" is making sure that a scarce resource is only utilized by those who need it the most.
If there are only 20 taxis, and there are 20 people desperately stranded who need a taxi, and 200 people who would just "like" a taxi, then if a taxi costs $200, those 20 people will happily pay for one.
But if a taxi costs only $20, then the taxis will mostly be used by the people who don't desperately need them, and the ones that do might die (if it's that desperate).
Likewise with charging $100 per bottle of water or batteries. It doesn't necessarily make you an asshole -- it's the simplest way of making sure a scarce resource is only allocated to those who truly need it.
And more than that, it incentivizes people to provide that resource -- extra taxis ferrying passengers, extra people supplying water or batteries -- even incentiving people with extra water/batteries at home to sell them to others.
Sure, when there are good networks of trust in a society, and the resource in question isn't really scarce, price-gouging can be unfortunate. And ideally, in cases of disaster, the government should be providing essential resources for all.
But the author of this post seems to be completely and utterly unaware of the positive and possibly life-saving effects of scarcity pricing.
Again, wealth does not equal need. You're assuming all of the desperately stranded people have $200 at the ready for a taxi trip that's normally only $20. And some people will pay whatever price for convenience, because they have plenty of money.
You can't just assume that everyone CAN pay whatever price is set, and just decides not to because they don't need it enough. In this scenario, the poor people die and the rich stay comfortably unaffected while using the resources others are far more desperate for.
It seems like it's too hard to solve "who needs it" without employing some flawed metric like money. But I'm not sure there's any better solution.
$200 would dissuade me, in situations where $20 wouldn't (unless I was in a heavy bind). This isn't true for everyone, but it seems to work well in the middle.
I think Uber did nothing wrong, but maybe they need to work on how to not be perceived as assholes, they could have had customers queue up for lower prices, and specify their need, and worked through the queue judging each persons priority (but maybe you'd have even more angry folks).
In this situation, first-come first-served is clearly imperfect, but it at least avoids the bias that you get with surge pricing: service only to the financially well-off.
I think being able to pay 200$ for a taxi is not the same as needing it the most.
That is true. On the other hand, it is, so far as I'm aware, the closest anybody's managed to come to reliably, consistently figuring out who does.
This only makes sense if everyone has the same amount of resources to trade. When all you pay attention to is money, the only metric you care about is who has any money.
The flip side of this is that the best price in emergency situations is to drop your price to $0. That sends a very strong signal that the service is for emergencies only; that anybody who takes advantage is an asshole. It also removes barriers: people in emergency situations often don't have their wallets on them, et cetera.
It also generates a huge amount of goodwill that cannot be bought in any other situation.