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Oh yeah, I agree with you 100%! I just wanted to add another dimension to the equation, one which is on my mind a lot. To give an example of my thinking, I pr

by akamaka 11y ago

Oh yeah, I agree with you 100%! I just wanted to add another dimension to the equation, one which is on my mind a lot. To give an example of my thinking, I predict that Uber, once it defeats the incumbents in a fair fight, will contribute to keeping wages down, by capturing most of the value in the taxi industry. Customers will be satisfied to have just one or two taxi-hailing apps installed on their phone, so that even though anyone can theoretically create a competing app, there will be a single dominatant brand that will have much greater power over drivers than the existing local taxi cartels ever did. Overall I'm optimistic about a future where more and more people are empowered start businesses and break down barriers, but I see a lot of bumps along the way.

merpnderp 11y ago
But once Uber has broken down the barriers, won't there be a flood of new entrants all trying to undercut each other with lower prices and better service? Won't the externalities of this benefit society far more than the reduction of wages for the drivers? And won't the companies end up as close to zero profit margins as possible, like we see in nearly all mature competitive markets?
- akamaka 11y ago
  In my opinion, yes, definitely yes, and probably not, or at least not automatically. The network effect alone is a huge barrier to entry. Second, the only obvious way to undercut Uber on prices would be by being bigger. There are significant fixed costs in software and analytics, and with Uber's profit margin being quite thin (compared to the fat economic rents imposed by the incumbents), it would be near suicidal to compete directly. Even if you could be twice as efficient as Uber, the price difference for the customer might be measured in pennies for each ride.
  - merpnderp 11y ago
    Your posts have been very insightful. So I wonder if you think Uber will functionally have maximum utility for this market? It will be as efficient as possible without some major change in the business? And won't that be a great thing for people needing cheap rides to get around town, especially in places underserved by public transportation? This good quite probably outweighing the reduction loss of wages to taxi drivers. The way I envision it is the wages to the taxi drivers have been reallocated to provide dirt cheap transportation to the public at large, multiplying the utility of those wages. But I haven't seen the inside of an economics classroom since high school :)
    - akamaka 11y ago
      The part that excites me the most is the potential for reducing car ownership. The utlization rate for both cars and parking spaces is extremely low (something like 5% for cars and 15% for parking spaces), so it's not hard to imagine hundreds of billions of dollars in savings. As for low wages for the drivers, I think that won't be a problem that disappears on its own, but I'm strongly against solving social problems by trying to keep wages up artificially.

by akamaka 11y ago

merpnderp 11y ago

But once Uber has broken down the barriers, won't there be a flood of new entrants all trying to undercut each other with lower prices and better service? Won't the externalities of this benefit society far more than the reduction of wages for the drivers? And won't the companies end up as close to zero profit margins as possible, like we see in nearly all mature competitive markets?

akamaka 11y ago
In my opinion, yes, definitely yes, and probably not, or at least not automatically. The network effect alone is a huge barrier to entry. Second, the only obvious way to undercut Uber on prices would be by being bigger. There are significant fixed costs in software and analytics, and with Uber's profit margin being quite thin (compared to the fat economic rents imposed by the incumbents), it would be near suicidal to compete directly. Even if you could be twice as efficient as Uber, the price difference for the customer might be measured in pennies for each ride.
- merpnderp 11y ago
  Your posts have been very insightful. So I wonder if you think Uber will functionally have maximum utility for this market? It will be as efficient as possible without some major change in the business? And won't that be a great thing for people needing cheap rides to get around town, especially in places underserved by public transportation? This good quite probably outweighing the reduction loss of wages to taxi drivers. The way I envision it is the wages to the taxi drivers have been reallocated to provide dirt cheap transportation to the public at large, multiplying the utility of those wages. But I haven't seen the inside of an economics classroom since high school :)
  - akamaka 11y ago
    The part that excites me the most is the potential for reducing car ownership. The utlization rate for both cars and parking spaces is extremely low (something like 5% for cars and 15% for parking spaces), so it's not hard to imagine hundreds of billions of dollars in savings. As for low wages for the drivers, I think that won't be a problem that disappears on its own, but I'm strongly against solving social problems by trying to keep wages up artificially.