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There is some evidence Uber’s surge pricing is improving taxi markets. The firm says drivers are sensitive to price, so that the temptation to earn more is getting more Uber drivers onto the roads at antisocial hours. In San Francisco the number of private cars for hire has shot up, Uber says. This suggests surge pricing has encouraged the number of taxis to vary with demand, with the market getting bigger during peak hours.
However, the inflexibility of Uber’s matchmaking fee, a fixed 20% of the fare, means that it may fail to optimize the matching of demand and supply. In quiet times, when fares are low, it may work well. Suppose it links lots of potential passengers willing to pay $20 for a journey with drivers happy to travel for $15. A 20% ($4) fee leaves both sides content. But now imagine a Friday night, with punters willing to pay $100 for a ride, and drivers happy to take $90: there should be scope for a deal, but Uber’s $20 fee means such journeys won’t happen.
We are arranging a car to take us from our flat to Heathrow Airport early Saturday morning, then return us on Monday evening. The price going to the airport is ₤28, the price returning is ₤38. Why the difference?
One possibility is cost-based price discrimination: the driver may have to wait at Heathrow, since the plane and retrieving our baggage may be delayed. Another is that the prices are set to match the differential set by metered taxis to reflect waiting time for fares at Heathrow (although I would think that competition among car services would eliminate that differential). I don’t see how this differential could arise from demand-based price discrimination; and neither of the other explanations seems very satisfying.
What could be less controversial than the principle that the public should be consulted about transportation policy? In future posts, I’m going to write about why puppy dogs are despicable and why we should all root for the Miami Heat, but for today I’m going to question this seemingly unquestionable proposition.
There is good reason that one of modern transportation planning’s most fundamental precepts is that the public should be consulted on policies large and small, from constructing a new subway line to changing a humble bus schedule. This is the product of very real abuses, particularly during the creation of the Interstate Highway System. At that time, government had virtual carte blanche to displace residents and bulldoze neighborhoods. For example, for Los Angeles’s Harbor Freeway in the late 1940s, the condemnation resolution for the right-of-way was approved by the court the day after it was filed by the state. The following day, every piece of property along the route was posted with a fifteen day notice to vacate. And less than three weeks after the filing of the condemnation resolution, the Division of Highways began clearing the property. Read More »
Unlike its natural rivals—San Diego, San Francisco, and Seattle—Los Angeles is a rotten place for a port. But that hasn’t stopped the city known for inventing and reinventing itself from becoming the busiest container traffic hub in the US. The story of how L.A. transformed itself into one of the world’s great shipping centers is rife with corruption, power politics, double-dealing, bribery, and betrayal. It’s a story that could only have dripped from the pen of one of the city’s Hollywood hacks–if it weren’t true.
Despite its worldwide association with sand and surf, Los Angeles began life as an inland community. Its original port was at San Pedro, roughly 25 miles to the south. But San Pedro had been cursed by nature. There was no shelter from waves and wind; it was far too shallow to accommodate shipping; and its bottom was mudflats, making construction of heavy piers or breakwaters difficult. Bringing cargo ashore meant transferring it to longboats from ships anchored several miles out at sea, rowing it ashore, and then hauling it by hand across a rocky beach and up a steep slope. The only alternative to this difficult operation was to beach the ship, an even more challenging undertaking. Writing in his 1834 account of his time as a sailor on a ship plying the California coast, Two Years Before the Mast: And Twenty-Four Years After, Charles Henry Dana called San Pedro a “hated… thoroughly detested spot.” Read More »
An article on VOX by Guy Michaels and Ferdinand Rauch looks at whether towns in France and Britain are “poorly located.” The authors explain that being in the wrong place — with poor access to world markets and resources, or vulnerability to natural disasters — has dire economic and social consequences. Examining historical evidence from the Roman Empire and the Middle Ages, they found that towns in France stayed put, while those in Britain moved:
Medieval towns in France were much more likely to be located near Roman towns than their British counterparts (Figure 1). These differences in persistence are still visible today: only three of the 20 largest cities in Britain are located near the site of Roman towns, compared to 16 in France. This finding suggests that the British urban network shifted towards newly advantageous locations, while French towns remained in locations, which may have become obsolete.
They also found coastal access to be important: Read More »
The latest Freakonomics Radio podcast is all about our long, risky, and mostly unrequited love affair … with the automobile. (You can subscribe to the podcast at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript; it includes credits for the music you’ll hear in the episode.)
For more than 100 years, we’ve relied on the car to get from place to place; it changed the way we think about distance. But it has also been a deathtrap. John W. Lambert, the man who built the first gas-powered car in America, in 1891, got into a crash. You’ll hear about it from his great-granddaughter Carol Lambert. Read More »
From a reader named Kevin Murphy (alas, not the Kevin Murphy):
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The Economist just reported on what you covered in the “The Downside of More Miles Per Gallon” podcast in February. It’s looking like Oregon is leading the way in possibly charging per mile: “A bill that would have applied a VMT fee to all new vehicles doing 55mpg and above died in the last legislative session; instead, 5,000 volunteers will join a new VMT scheme in July 2015. They will be charged at 1.5 cents per mile rather than paying the state petrol tax (30 cents per gallon).”
Michael Sivak, a transportation scholar at the University of Michigan whose work has appeared on this blog before, released a new study on inter-state variations in economic activity per unit of driving. His findings are interesting and reflect significant differences in GDP per distance driven among U.S. states:
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In 2011, the highest GDP per distance driven was in the District of Columbia ($30.04/mile, followed by Alaska, New York, Connecticut, and Delaware. The lowest GDP per distance driven was in Mississippi ($2.51/mile), followed by Alabama, New Mexico, Arkansas, and Oklahoma. The median value was $4.66/mile. In comparison, the standard federal reimbursement rate for fixed and variable costs of operating an automobile in 2011 was $0.51/mile.
From 1997 to 2011, the largest absolute increase in GDP per distance driven (with GDP measured in current dollars) was in the District of Columbia (+$14.95/mile), followed by Alaska, New York, Delaware, and Oregon. The smallest increase was in Mississippi(+$0.67/mile), followed by Alabama, Michigan. Florida, and New Mexico.