Economics

People are angry that Uber paid its drivers higher fares to drive into a terrorist war zone

Uber users complained that they were paying prices that were too high when they summoned Uber drivers to the London terror zone. Was Uber morally wrong for charging higher prices for these evacuations?

CNN published the story:

App users complained that they were being charged inflated prices on Saturday night after a van plowed into pedestrians on London Bridge and three knife-wielding men attacked revelers in a nearby nightlife district.

The backlash was intense on social media, where commentators said that Uber should have immediately disabled surge pricing for people trying to make their way home across the capital.

“Hey @Uber — you’re really going to surge price x2.1 during a terrorist attack in #London???” said one Twitter user. “Lower than low.”

ALLOCATING SCARCE RESOURCES

In the middle of a terrorist attack in London, or in any major city, Uber drivers are a scarce resource. That’s because demand in the region near the attack skyrockets. The people who are located near the attacks want an Uber driver probably more, at that point, than a person calling an Uber on the other side of the city who hasn’t even heard about the attack yet.

The lives of the people near the attack who are calling an Uber might depend on that Uber arriving ASAP.

But, for that matter, the lives of the Uber drivers might be at stake, too. When they respond to a call to drive into a terrorist war zone, they might not know it’s a war zone. They signed up as Uber drivers in exchange for payment. They may be willing to drive into a war zone, like any mercenary recovering precious loot, if they knew the price was high enough.

So, there’s a problem. The people near ground zero need Uber to divert its city-wide drivers to the war zone to perform an immediate evacuation. The supply of Uber drivers remains fixed, so all of a sudden this massive increase in demand has raised the value of this now-much-more-scarce resource.

People miles away want Uber to take them to the shoe store. People near the terrorist attack want Uber to bail them out of harm’s way. How can this series of events and the shift in supply-and-demand be communicated? How can we know which user’s call is more important? Is it more important to drive someone to the shoe store, or more important to save someone’s life?

I think we would all agree that saving someone’s life is the more important of the two. As it turns out, when it’s not being interfered with, the free market feels this way, too. It communicates the moral need to evacuate a stranded victim with a very strong signal: a high price. High prices alert Uber drivers to a more lucrative deal. When they see high prices suddenly popping up in a particular area of the city, like sharks responding to fresh meat, they turn their cars and head for the money.

DESPISING THE FREE MARKET

Now, for whatever reason, certain people hate the free market. They have their own idea of what “fair” is, and the free market doesn’t seem to implement “fair” according to their wishes. The free market operates on this principle: high bid wins. When competing with other buyers over who gets ownership over a scarce resource, if you bring the most money, then you will most likely gain exclusive ownership of that resource.

I’m aware that sellers may look at other factors besides just price, but that is their prerogative. In general, though, it is the price mechanism that determines how scarce resources are allocated.

How much is your life worth? Who, at the moment they realize their life is in jeopardy, wouldn’t pay all they had to get out of that situation so that they could live another day and see their family again, if only for one last time?

And how grateful would you be to the driver who decided to respond to your call?

In the case of the people summoning an Uber, but protesting that the company is “price gouging,” they are an especially demanding clientele. Not only do they not want to pay higher prices for the company to immediately deprive other pedestrians on the far side of town the ability to call an Uber, they also do not care one iota for the well-being of the uber drivers.

This is why the Red Cross uses a memorable phrase when training lifeguards: “Reach or Throw. Don’t Go.” That’s because drowning victims will try to pull you down while you’re trying to save their life. It’s safer for everybody if you throw them a life preserver.

WHEN FAIR IS UNFAIR

The Uber drivers are people. As much as the scared folks near the crime scene want to get out of the situation, for some reason the complainers think that the uber drivers are public servants who serve selflessly at their beck-and-call. And, in a sense, they do, because that’s how Uber works: you push the button, and a driver shows up. But those drivers are being paid for their service.

But if the Uber drivers served themselves as selflessly as these losers complaining about price gouging, then there’s no room to blame any Uber driver who doesn’t respond out of a desire to save their own life.

The users summoning the drivers must make a deal with the drivers to make it worth their while. The Uber user’s life is at risk. They must find an Uber driver who is willing to put their own life at risk to save the user whose life is at risk. Offering to pay a huge price to the next driver who arrives the fastest is how the distressed victim finds the daring driver.

In fact, Uber drivers don’t make a lot of money. They complain, but they still do it. Why? It gives them a chance to make money on their own terms. Many of them live for the surge. They call it “chasing the surge.” That’s when they can clean up.

The whiners don’t want to pay more for an immediate evac, but they also don’t think their saving angels should get paid more either for driving into harms way and risking their lives, their families, and who knows what else, just to pull some stranger (possibly ungrateful if they complained about the pricing) out of a deadly situation. All other things considered, it would be the rational decision for an Uber driver to look at the risk attached to driving into a war zone compared to the risk of driving to the shoe store and, at the same price, decide it’s the better deal to drive to the shoe store.

COMPUTERS FASTER THAN PEOPLE

Uber has built-in algorithms that automatically raise prices during periods of higher demand. This mimics the free market’s price mechanism. It is meant to efficiently allocate scarce resources — in this case, Uber drivers. The people who want to go to the shoe store might be willing to sacrifice their ride if they knew about the terrorist attack going on across town. The price mechanism gives them the ability to do that.

And quickly. The affair ended in 8 minutes. The algorithms can react much faster than human communication can.

So, what’s the alternative to Uber’s dynamic pricing mechanism?

Price the fares in the middle of a terrorist war zone the same as those 5 miles away in a normal, peaceful zone? Uber could broadcast a message to all drivers and command them to drive into the war zone and abandon their current fares. But then, the Uber drivers would have to do this voluntarily. They may not survive the drive. Maybe they think it’s better to be fired and live another day, than die for a pittance.

But Uber is bigger than their critics. They are refunding the fares of users who called Uber during the attacks while surge-pricing was still in effect. This is good for business. It’s smart marketing. The company will probably take the loss. The drivers collect the higher fares for risking their lives, and the users who called an Uber during the attack get free fares.

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