Timothy B. Lee offers several defenses of surge pricing by Uber and Lyft, including this.

It might seem like an obvious point, but it’s often overlooked by people who complain about surge pricing. Surge pricing gives drivers an incentive to spend more time on the road than they otherwise would. It encourages them to re-arrange their schedules to make sure they’re available on nights of peak demand. And it entices drivers who might otherwise like to go out partying themselves on New Year’s Eve to hit the road instead.

I haven’t been able to find any hard data on how much higher prices increase the number of drivers on the road — a measure economists call the elasticity of supply. But there’s reason to believe that big price increases will be more powerful during nights of predictably high demand — like Halloween or New Year’s Eve — than at other times.

If demand spikes unexpectedly, there might be a limit to the number of people who can immediately jump in their cars and help out. But everyone knows New Year’s Eve is the biggest night of the year for taxi service. Lyft has been sending me emails all week reminding me that I could make a lot of extra money if I drive tonight. So people who need some extra money have plenty of time to make the necessary arrangements.

So, to his credit, he admits that there is no data supporting surge pricing as a means of enticing ride share drivers onto the road but suggests that surge pricing incentivizes drivers to come out. The point he elides is that it is just as likely that drivers will come out on nights like New Year’s Eve whether there is surge pricing or not. The sheer volume of ride requests guarantees more business than they can adequately serve, and consequently a profitable evening. It is not surge pricing which allows just about every taxi company in major metropolitan areas to lease all of their cabs with ease on nights such as these.

To an extent the success of Uber has been driven by pricing its service substantially below the local taxi market prices. Its ability to do so derive from a substantial venture capital funded war chest as well as evasion of costly local regulations (the appropriateness of that evasion is a subject for another post). Uber’s price competition does saddle its drivers with a structure which compensates them at a level which allows for simply minimal profitability. Surge pricing is the variable which boosts drivers’ take to acceptable levels. Without it Uber might find it difficult to continue to attract and retain drivers.

To put it another way, surge pricing has nothing to do with enticing drivers to offer their services during busy periods. It is an excuse which Uber uses to overcharge for rides in order to bring the total compensation of drivers to a level whichwillensuretheir continued participation with the company. It’s not necessary on New Year’s Eve but it can be spun as such in order to achieve a different objective.

The problem Uber faces is consumer resistance to surge pricing. Not that riders will refuse to use their service; rather they are becoming educated and will simply arbitrageamong transportation providers for the lowest cost rather than simply punching up a ride on Uber. As taxi companies respond to Uber’s challenges and offer their own apps the ability to choose between price and convenience becomes much easier and Uber’s ability to offer its drivers the extra compensation from surge pricing is diminished. Among other challenges facing Uber will be its ability to replace the lost surge pricing income with higher fares and the concomitant effectthatwill have on their attractiveness to taxi service.

Uber isn’t going away but surge pricing is, and that represents a significant challenge to the company’s business model.

Sober Look presents a different take on the effect of lower oil prices on US oil production than I did in my post yesterday. They quote Scotiabank suggesting that the Bakken and Permian Basin fields are producing below break even based on current prices, while Eagle Ford is still in the black. They posit slowing drilling activity and tighter credit for independents if these prices hold. I don’t think it’s unreasonable to expect a bit of the froth to go out of the US E&P market, but I doubt that at current levels any effect is going to be other than on the margins.

Interestingly, Sober Look postulated that oil prices might get a temporary boost at least domestically if the government should choose to add to the Strategic Petroleum Reserve. Such a move would present a difficult choice for an administration committed to renewables and clearly hostile to fossil fuel production. On the one hand, lower oil prices and the consequent depressing effect on production would be welcome by its enviornmental base, while lower oil prices strain the economic arguments in favor of wind and solar. Oh, and lower oil prices certainly don’t do much to dampen the American love affair with SUVs and pickups. Overall, I doubt that any attempt to boost prices will be viewed as a viable political alternative.

This has to go down as one of those “what were they thinking moments”

The “purpose” of the memo states: “Come to an agreed State Department position on the extent to which non-U.S. citizens will be admitted to the United States for treatment of Ebola Virus Disease.”

The document goes on to discuss – and advocate for — devising such a plan. The memo recommends that “State and DHS devise a system for expeditious parole of Ebola-infected non-citizens into the United States as long as they are otherwise eligible for medical evacuation from the Ebola affected countries and for entry into the United States.”

Do read the entire story as well as the link to the memo if you have time. In fairness, State was attempting to provide assistance to local citizens of the Ebola affected regions who are US government contractors. Still, as a matter of simple politics, particularly a week before an election and in a nation clearly nervous about the disease and its spread, this has to rank as one of the more inept moves ever.

It would be easy to suggest that this is just another example of an administration which cannot get out of its own way, but that would be shooting fish in a barrell. I think it’s a perfect example of a government which is so bloated and so in search of anything to justify much of its unnecessary apparatus that it runs amok in this manner. There is little to fear in this silly exercise, but that doesn’t mean the next time these people won’t do real harm.