A hard-headed economic analysis of the ride-for-hire company suggests that it is an example of hazardous free-for-all market principles rather than free market efficiency.
Each time Uber angers customers with another surge pricing incident, or angers a city by ignoring its laws, an army of fans jump to its defense and cry “free market.” This is followed by a litany of complaints about stupid consumers or old fart city leaders, along with an easy, breezy explanation of supply and demand. The New York Times recently went so far as to run a headline about the ride-for-hire firm that declared, “Uber improves life, economists agree.”
Uber is making a lot of people into amateur economists, including, it seems, many professional economists. It’s a trap many have fallen into before: thinking a free-for-all market is a free market. I’m going to call that Ubernomics.
Before I go on, let me get this out of the way: I like the concept of Uber and Lyft, the ride-hailing company notable for its large, pink mustaches. I use them. Uber has clearly demonstrated a better way to move people around. Cheers to you, aggressive ride-hailing firms.
But a hard-headed economic analysis of Uber suggests that the ride-for-hire firm is driving itself, its passengers, and perhaps America’s public transit systems, toward a dangerous disaster. It can, and should, be saved, but that won’t happen until folks stop defending the firm’s bad behavior with ill-considered assertions about the “free” market and Silicon Valley “disruption.”