Tuesday, January 27, 2015

New York Muscles Uber to Adopt "Venezuela Rules"

I have featured a number of stories here at EPJ on the long lines in Venezuela for those who wish to buy basic goods. SEE:

VIDEO Venezuela Food Shortages: Long lines outside grocery stores to buy diapers, detergent or chicken

Venezuelans Throng to Grocery Stores Under Military Protection

Any student of Econ 101 should understand what is going on in Venezuela. If you impose price controls, there will be shortages, long lines, and little incentive for businessmen to meet the desires of the consumers.

The state of New York is forcing Uber, at times, to work under such a price control system. The price controls are implemented at a times of high demand, such as the current snowstorm in the Northeast.

Uber has put out this notice:
A major nor'easter is expected to hit the City tonight bringing heavy snow and blowing wind over the next 2 days. We wanted to provide a quick update about how your Uber rides will be affected by the storm.
Due to the State of Emergency declared in New York City, prices will not exceed 2.8x the normal fare.
This reflects Uber's national policy developed with New York Attorney General Schneiderman that balances the goal of reliable transportation options with affordability during disasters: Anytime a disaster or state of emergency strikes, dynamic pricing is capped ...

Uber then goes on to explain the Venezuela result:
 [B]e aware...
Higher than normal ETAs: Please be patient as demand for rides may be higher and wait times may be longer than usual..

Got that? Higher than usual demand but prices are capped, which provides less incentive for drivers to get out on the road, and causes distortions between supply and demand---which will cause long wait times, just like in Venezuela.



  1. Notice, this is a policy adopted voluntarily by Uber. Such a shame, but understandable given the scrutiny this business is receiving and the thumb the state it putting it under. I guess you learn to play ball if you want to stay in the game.

    1. That is how Progressive government works. The state holds all the cards and those wanting to play, must pay to do so. Call it the European model of Capitalism.

    2. Sure thing. It is as voluntary as would be someone giving his wallet to a robber showing a gun in his face. Can always refuse, can't he?

  2. Unfortunately the control freaks always end up harming the people they claim they are protecting. But don't expect them to apply one ounce of critical thinking or analysis to the results of their need to control everything.

  3. This will no doubt be hailed a victory by the control freaks. When it backfires, they will use this as evidence that the free market doesn't work, and more regulation is needed.
    I suggest these people check out this book: http://mises.org/library/forty-centuries-wage-and-price-controls-how-not-fight-inflation