If you haven't followed the controversy over the limo-hailing app Uber's "surge pricing" (some would say "price gouging") policy, you probably should. Especially within the context of the ongoing debate in Seattle over how to regulate Uber and increasingly popular app-based "ride-share" services like Lyft and Sidecar.
Uber recently generated outrage from New York City customers when it responded to a winter storm by upping prices as much as eight times above their normal rates. For example, a two-mile, 11-minute ride in Brooklyn cost $94.62, six times above the normal $15.77 rate. Meanwhile a Southern California woman recently reported being charged $357 for a 14-mile ride from West LA to Hollywood.
Uber is fairly transparent about its surge pricing, though having used the app, I can see how some customers might get confused. And Uber makes a sound economic argument for how situationally adjusting prices helps to efficiently balance supply and demand. But while that might work well for customers who can afford the surcharge (even while grumbling about it), Uber's surge pricing does nothing to serve customers without such discretionary income, and who routinely rely on the stable pricing offered by the traditional taxi industry.
It's a distinction that the makers of taxi-hailing app Taxi Magic make the most of in a recent blog post:
Taxi Magic does not surge prices. We do not charge you extra for a ride in bad weather or during an emergency. We won’t increase your fare on the weekend, during busy nights of the week or on popular holidays like New Year’s Eve. With Taxi Magic, you always know what you’re going to pay. No surprises.
Why, you ask?
Well, one reason we don’t surge our prices is because we simply can’t. By partnering with existing taxi drivers in more than 60 cities, Taxi Magic fares are locally regulated. This is the result of lessons learned over the more than 100 years taxis have been operating in the United States. These regulations are not a barrier to innovation, but are hard-won consumer protections that make taxis affordable and accessible to the masses. At the same time, pricing regulations create an even playing field that prevents drivers from undercutting each other, thus ensuring everyone’s ability to earn a living and provide for their families. It’s a win-win for drivers and the riding public.
Seattle ride-share fans have been expressing outrage over a proposed ordinance that would subject Lyft, Sidecar, and Uberx drivers to some of the same regulations and restrictions imposed on Seattle's taxi and for-hire drivers. Both Lyft and Sidecar argue that such regulation would destroy their business model, forcing them out of the Seattle market. And that would be a shame. They're great services.
But I'm not sure what the alternative is. The ride-share companies are demanding either an uneven playing field in which their drivers are spared the regulatory expenses imposed on taxi drivers—thus securing a huge competitive advantage—or a playing field leveled by deregulating the market entirely. And that would mean deregulating prices.
Again, that might work for people who can afford to pay (however grudgingly) whatever price the market might demand at any particular moment. But for those who can't—say, the fixed-income elderly looking to get to a doctor's appointment during a surge period, or a low-wage worker looking to get home in the middle of the night—they could be left shit out of luck. Personally, I love having the choice and convenience these new app-based services offer. But I also appreciate knowing that a ride to the airport in a regulated for-hire vehicle is going to cost me $25 regardless of the weather or traffic conditions.
The folks at Taxi Magic are right: Regulated fares protect both riders and drivers. So Seattleites need to think long and hard before placing our trust into the hands of the very clever economists at Uber.