Price Theory at Its Best

by Don Boudreaux on November 17, 2017

in Prices, Reality Is Not Optional, Seen and Unseen, Work

This post by my colleague Alex Tabarrok on passengers tipping Uber drivers – and on Uber pricing – is a specimen as fine as you’ll find anywhere of price theory at its best.  This is economics as done well, beautifully, and usefully.  Here’s Alex’s concluding paragraph:

Uber is a great service for riders and it’s also great for people who need a source of flexible earnings. The fact that Uber drivers earn less than some people think is appropriate is a function of the wider job market and not of Uber policy. Indeed, Uber can’t increase take-home pay by raising fares and if we require them to do so we will simply hurt consumers and waste resources without improving the welfare of drivers.


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