RNZ vs Uber during the big earthquake

In the midst of the earthquakes last night, it was striking to compare the performance of two key public and private institutions, Radio New Zealand and Uber, and the things that motivate them.

As dozens of people noted, RNZ put in a stellar performance: Susie Ferguson rushed to the studio, and she and others provided a steady stream of calm, clear, important information, delivered both quickly and accurately. The driver for them was – I think we can assume – not financial but altruistic: wanting to help a frightened and confused public understand what was going on and how to react.

In contrast, according to reports on Twitter, Uber’s surge pricing – a process that increases the price of a ride when demand is high – pushed the cost of hiring one of its drivers to 2.8 times the usual amount.

This was immediately defended by economist Eric Crampton and others, arguing that the pricing increase was good either because it would bring more drivers onto the roads or because it would weed out the truly needy from those taking frivolous rides.

Neither argument holds up, of course. Drivers would already be making a profit with standard Uber charges, and if you need extra money to get on the road to help frightened people evacuate their homes, there’s something wrong with your levels of empathy.

As to the second point, apart from the ludicrous presumption that tonnes of people would be frivolously using Uber in the middle of the night during a massive earthquake, price is a terrible way to allocate resources because it discriminates against the poor, and because ability to pay is no guaranteed reflection of need.

What would have sorted things out very clearly is a classic public sector process: finding out people’s circumstances, assessing their need based on their overall situation not the size of their wallet, and allocating resources (rides) accordingly. Of course Uber doesn’t do that because it’s not a public service. But that brings us round again to what performs well, especially during tough times – and that, unsurprisingly, is both the public sector’s spirit and its processes.

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15 comments on “RNZ vs Uber during the big earthquake
  1. “Drivers would already be making a profit with standard Uber charges”.

    Not much. And in normal circumstances there’s a much lower risk to their cars and ability to get an income.

    • Fair point but if drivers aren’t making much profit already that’s a problem with Uber profit share because the company as a whole is enormously profitable. And in disasters generally people do millions of unpaid acts without asking for more or any money, which seems fairer and more effective.

  2. Uber is a morally questionable company, no doubt. But the price surge mechanism is a good way to mobilise drivers during a disaster. Uber drivers are not employees. What are Uber going to do, call the drivers up and force them to come out at normal pricing in the middle of the night, after an earthquake?

    • Curiously enough, UK courts have just ruled that Uber does effectively employ its staff: https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employed-status

      But that aside, I don’t think the surge is optimal. That has practical and moral dimensions. Practically, look at the helicopter companies helping people in Kaikoura etc. I bet they’re not asking extra. And as I said before, millions of acts are performed in disasters without more or any money required. So it’s clearly not necessary. Altruism and other motives are very often more effective than financial rewards. Also, practically, pricing is unconnected to need and discriminates against those who need rides but may not be able to afford them. I guess the ultimate question there is, what would a public or social (i.e. not for profit) version of Uber look like (countries like Taiwan have an incipient social rideshare scene), if implemented in NZ?

      Morally, would Uber be justified in extracting *any* level of charge, even taking all people’s life savings, for an emergency-period ride? That’s the logical extreme of that position. Most people, acc to the research, are comfortable with supply and demand operating in normal circs, but object to price gouging e.g. charging colossal amounts for snow shovels during blizzards in the US. And they’re right, partly because markets rely on free choices and choices aren’t really free in emergencies. You can’t entirely take the morals out of markets, in other words.

  3. Pingback: QOTD: Max Rashbrooke on public vs private sector | Boots Theory

  4. Pingback: Comparing a transport company to a broadcaster! | Kiwiblog

  5. Not sure the comparison between a private transport company and a public broadcaster is a valid one Max. You may more accurately compare pubic vs private broadcasters; or public vs private transport companies.

    As far as I’m aware all public trains and buses shut down after the earthquake for a not-inconsequential period of time. Regarding surge-pricing, Uber makes no additional money from this (as far as I’m aware). Rather, surge prices exist as an incentive for more drivers to get out on the road to meet any additional demand (Uber drivers have no fixed roster, and i would not expect many to be out in the middle of a weeknight).

    For anyone not willing to pay surge-pricing, then they are free to call another taxi company and wait until a car is available, or indeed wait until public transport starts up again.

    I can only assume you are trying to be funny suggesting that a resource allocation committee would work better. Well done, ripping good laugh.

    • It’s certainly not a perfect comparison (and maybe I should have made that clearer), but I stand by the wider point, which is that market motives aren’t always appropriate in disasters, and those motivated by altruism or public spirit can be much more effective. As I’ve pointed out to other commenters, just think how difficult disaster response would be if everyone (incl those facing risk and providing a service) operated Uber style, lifting prices in response to demand. It would I think be both ineffective (in the sense of not getting help to those who most need it) and unfair. TV1’s Katie Bradford has pointed out other examples of price raising in disasters (charging $10 for a bottle of water, landlords hiking rents, etc) that raise similar concerns. That’s because market exchanges, to work properly, rely on free choices, which are sharply constrained or non existent in disasters. Even if you don’t agree with my specific points, that wider issue is worth thinking about. Cheers.

      • Thanks Max. Disaster response and coordination is generally the purview of Civil Defence/the Government already (not the free market or private business), so I’m not quite sure what your point is exactly, or what the problem is that you’re highlighting.

  6. Max notes that ‘if drivers aren’t making much profit already that’s a problem with Uber profit share because the company as a whole is enormously profitable.’

    Uber just lost $1.2bn for 1H 2016.

    Please don’t rush out hot takes without doing some proper research.

  7. “What would have sorted things out very clearly is a classic public sector process: finding out people’s circumstances, assessing their need based on their overall situation not the size of their wallet, and allocating resources (rides) accordingly. ”

    Um, would you have set this process up just for the earthquake situation or for all uber rides in all circumstances? How good do you reckon the public sector would be at doing this? How much would it cost to administer and how much might that increase the cost per ride? I guess you’re using this example to make a broader point about the benefits of state control (sorry, I meant ‘provision’). You need to find a better example.

  8. This is a remarkable discussion for three reasons.

    First, you conclude that “What would have sorted things out very clearly is a classic public sector process: finding out people’s circumstances, assessing their need based on their overall situation not the size of their wallet, and allocating resources (rides) accordingly.”

    There is a vast wealth of economic literature to show that central planning produces worse outcomes than if people had been left to self-sort. Your prescription would run into the same problems because that what it amounts to. How would the “EQC transport committee” know everyone’s particular circumstance and need at the time of an earthquake, and allocate resources efficiently? How would it coordinate? How would they be funded? Would it need to be staffed 24/7?

    I have some visibility into a particular government response programmes (not going into detail) where very smart and well-meaning people imbued with public spirit battle to coordinate responses on a small and moderate scale using a centrally planned model. The problem in this case is that the agency in question cannot use prices because they are providing a public good, so they must grasp the central planning nettle. In other areas, such post-quake transport, prices are an effective means of assessing need on both the demand and supply side.

    Second, you are presenting a false analogy comparing RNZ with Uber. RNZ broadcasts from one or two locations, and its reach is effectively costless and frictionless (radio waves). The same cannot be said for Uber, who has to coordinate thousands of drivers in NZ at any one time. A much better comparison would have been to compare RNZ’s broadcasts with that of private broadcasters, who also fared as admirably in my opinion.

    Third, your critique of the Uber system does not overlap at all with the many discussions I have with Uber drivers. Last night, for example, my driver informed me that he works three 12-hours shifts in a row, then has four days off, and he highly values the flexibility and earning stream that he could not get in other professions. Oh, and I paid surge pricing because it was 10:30pm on a Monday night, and the ride was still cheaper than if I’d taken a taxi.

    Jason

  9. Perhaps better comparisons would have been RNZ and Stuff. Or Uber and trains.
    But with regards to your criticism of Uber, you need to take into account the availability of roadways. This is not something controlled by Uber. It is controlled by state agencies. I understand that the state agencies that control use of the roads “distorted the market” after the quake, that is to say restricted use.
    That some private citizens were willing to jump into their cars and help people move notwithstanding the circumstances is remarkable and commendable. This can be compared to the state response which can be described as problematic at best.

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