If Uber works, you might be less happy with your transport options

Let’s say you are optimistic about the long-run prospects for Uber to transform society, as I am.  Counterintuitively, that could mean the perceived quality of an Uber ride goes down.

The better Uber gets, the more people can do without cars and the more taxis will go out of business.  In contrast, we are currently living in a world where there is excess capacity of automobiles, especially for short-term rental.  The stocks of taxis, rental cars, and personal automobiles mostly have been determined by past considerations which did not take the existence of Uber into account.  Those stocks will decline over time as idle vehicles are used more efficiently.  There will be fewer circulating vehicles and perhaps the price of a short-term ride will be higher, once the excess capacity disappears.  Waiting time might be higher too.

(Admittedly these results could go in either direction.  Think of this as being a race between two adjustments: cutting back on the stock of vehicles, and using the extant stock of vehicles more effectively.  Arguably we already have reaped the latter economies, at least short of driverless vehicles, but with time the former adjustment will kick in more and more, and so the flow of “available vehicle time” into the market already may have peaked.)

That is precisely the scenario where Uber is probably doing the world the most good.  Resources put into automobile production can be diverted to other purposes, with potential environmental benefits as well.  The beneficiaries would be consumers in non-ride industries, who will enjoy lower prices and better selection.

Yet the lower consumer surplus from the Uber experience may decrease the political popularity of the service.  More of the social benefits would be invisible to riders and instead dispersed across a wide range of consumers elsewhere.

Here are related comments from Izabella Kaminska.  It is an interesting piece but I do not agree with her conclusions, and you can think of this post as an attempt to state what I think she should have argued.


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