December 22, 2013

Why Progressives Should Love Uber's Surge Pricing

It’s easy to be mad at Uber. Anyone who sees a price of $100+ for a one block ride is going to ask themselves how a company could possibly justify such fares.

@travisk’s answer on twitter is simple: surge pricing makes demand=supply. It’s basic economics.

The problem is that people consider Uber to be a public service, and it’s not. Uber is a priviledge for people who can afford it. For now, cabs still exist. The reason people are bitching is that they like Uber and they don’t like cabs, or (in SF or NYC) public transit.

Now the argument goes that if Uber gets massively successful they’ll kill off existing services and all that will be left is Uber.

But if the market has taught us anything it’s that when conditions are fair, competition will saturate the market with options. If Uber consistently prices out middle income riders, services like Sidecar and Lyft will fill the void. If Sidecar and Lyft are too expensive, public transit offers a cheaper (if imperfect) option.

And I get that it’s frustrating to be caught in the gap of a temporarily imperfect market, to be priced out of a service you used only one day prior. But when you rely on a private business that’s not a regulated monopoly, that’s the price you pay.

To me, Uber’s pricing decisions are actually a public good. They remind people why solid public transit is worth paying for. If you’re unable to afford UberX but can’t bring yourself to take MUNI or wait an hour for a cab, I feel absolutely none of your pain.