Got flowers? Thank surge pricing

by Kenneth Girardin |  | NY Torch

rosesOne of the hallmarks of ride-sharing services like Uber is their practice of temporarily boosting prices to encourage more drivers to accept fares. It’s supply and demand at its simplest, and while critics have derided this price mechanism, anyone giving flowers to their valentine today is living proof that “surge pricing” benefits both providers and consumers.

Valentine’s Day routinely marks the highest short-term demand for flowers; industry surveys predict that this year’s sales will exceed $2.1 billion. Meeting this spike in demand requires farmers and wholesalers to spend more on additional labor and transportation, driving up wholesale costs. If retailers weren’t allowed to float their prices accordingly, they wouldn’t be able to make a profit, and consumers would face widespread shortages.

The market for Uber rides is no different. If drivers are unwilling to deal with inclement weather or rush-hour traffic, the number of people seeking rides can easily outnumber drivers willing to give them. With surge pricing, the cost may be higher, but everyone who wants a ride can get one. What’s more, different ride-sharing services use their own pricing algorithms, meaning passengers can compare them in real-time and get the best offer.

The push to restrict ride-sharing surge pricing, a cause célèbre for the New York City Council, recently expanded to Albany with the introduction of a bill in the state Assembly banning it outright. Government price controls, ostensibly imposed to protect consumers, inevitably cause shortages. They can prevent someone from buying flowers on Valentine’s Day or from getting a ride during a snowstorm; what’s more, they hurt both the person trying to obtain a good or service and the person trying to make a living by providing it.

Whether you were giving or receiving flowers today, be grateful that government didn’t try to “protect” someone from paying more for them.

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- Kenneth Girardin is the Policy Analyst at the Empire Center for Public Policy.