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Wired: Uber Learned the Hard Way: Transparency Rules the Sharing Economy

Uber Learned the Hard Way: Transparency Rules the Sharing Economy

There is an important lesson buried here about transparency and how Uber is approaching it, but unfortunately it’s couched in Wired’s “sharing economy” Utopian bullshit. There is a simpler, more accurate way to write this article:

1. Free market systems settle price based on an equilibrium between supply and demand. When demand goes up but supply stays constant, prices must go up to ensure that demand matches supply. Hence, surge pricing.

2. Markets depend on information, and supply/demand equilibrium only happens as it’s explained in the textbooks with perfect information. Without perfect information, you get a spread between expectations and reality, and unhappy people.

3. Uber determined that giving the participants in their market more information made it work better. No fucking shit.

 

This is not about “transparency”, or the “sharing economy”, this is pure, basic microeconomics. Markets function more rationally when their participants have more information. Etsy and AirBnB aren’t giving more information because of some cultural zeitgeist, they’re doing it because it helps them serve their customers, who are participants in their market, better. There could be an interesting article written about why it took Uber so long, but not about the fact that they started doing it. But as I’ve said before, any thought that the average technophile has an understanding of economics is quite optimistic on my part.

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