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Price Theory at Its Best

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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