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Surge Pricing Is Unfair, Unethical And Unconstitutional

22/04/2016 8:15 AM IST | Updated 15/07/2016 8:26 AM IST
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Close-up of a Radio Taxi sign on a taxi roof, Delhi, India

Here's a tale of two people selling two different things.

Person X sells medicine from a shop in the local market. Person Y sells a taxi service on a mobile app.

A consumer goes to Y. "I need taxi." Y says, "Sure, "Sure, but since so many other people want a taxi too and I have limited supply, I've increased the rate. Pay that price and you get your taxi, or else someone else does." The consumer complies and pays three times the normal rate and rides happily to her destination. "These new app-based services really solved our public transportation problems, what a splendid idea, the free market is beautiful," she tells herself.

Why do we complain about the autowalas who won't ply by meter, or charge extra for certain destinations? Aren't they simply following Uber's logic?

The next day, the same consumer goes to X to buy medicine. X says, "Sure I got meds, but too many patients are demanding it. I have a limited supply, so I am charging ‎surge price‬ on meds." The consumer is outraged. "What the eff? Just gimme my damn meds at MRP." X is unmoved. "pay three times the MRP or leave. You are under no compulsion to buy from me. There are other pharmacy shops." The consumer is mighty pissed and calls the CM to lodge a complaint about unfair, unethical, exploitative practices. The CM intervenes promptly and threatens action against the pharmacies charging surge prices.

Then the CM also intervenes in the case of app-based taxi services charging ‪surge prices and the same consumer bemoans the "death of free market." She berates the "Commie" CM for his vote-bank politics. "Why doesn't the CM control his vote bank, the rogue autowalas who never go by meter?" She rants. "Dear CM, please stick to your job, don't meddle in free market."

The CM wonders, what is my job?

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The surge prices charged by app-based cab services like Uber and Ola represent capitalism in its most brutal form. The message here is, "more power to the free market, leave no space for government's intervention, price regulation is an obstacle to growth, eventually leads to rationing, just let the demand and supply decide prices."

Ola and Uber have simply taken the practice of demanding extra money at random to exploit your crisis and vulnerability and made it mainstream.

Do they know what a free market means? Where it leads us? Does India have an absolute free market? Will we ever have one? Does the Constitution allow us to be one? Why do we have this thing called MRP (Maximum Retail Price) on all products? And why shouldn't MRP apply on app-based taxi services?

Let's apply surge pricing to pharmacies. Or hospitals. Limited beds, too many patients? Increase the price. What happens? The rich get the beds, the poor die. If the CM intervenes, call him a Commie and anti-development maniac.

Everything has a fixed price for everyone and it doesn't fluctuate at each instance of purchase. Imagine you go to the movie hall and buy a tub of popcorn for ₹100 before the movie started. In the interval, you go again and the guy at the counter says that the same tub is now available at ₹300. Does it make sense to you?

Why do we complain about the autowalas who won't ply by meter, or charge extra for certain destinations, or simply refuse their service because they won't get any commuter on return, or demand extra over the metered bill? Aren't they simply following Uber's logic, demanding more incentives, over and above the metered bill, to offer you their service?

Uber has this to say:

"The Uber fare rates automatically increase, when the taxi demand is higher than drivers around you. The Uber prices are surging to ensure reliability and availability for those who agree to pay a bit more."

The algorithm is the new hand of God. We don't question the algorithm; it is transparent, honest, divine. And we are morons.

Now apply the logic to autowalas. Imagine two people hail the same auto-- one needs to go to hospital, the other to the shopping mall. The autowala sees high demand, low supply, and says "I'll take whoever is willing to pay me more." The one who needed to go to shopping mall was richer, paid the surge price and went. The poor person died on the road.

That's free market for you. That's capitalism. Evil and inhuman.

Ola and Uber have simply taken the practice of demanding extra money at random to exploit your crisis and vulnerability and made it mainstream. We don't like it when people are random. You buy a litre of milk for ₹30 in the morning, and if the same milkwoman asked for ₹90 in the evening, you'd shout yourself hoarse. "WTF! How random." But when the mobile app does it for you, you trust the algorithm. The algorithm is the new hand of God. We don't question the algorithm; it is transparent, honest, divine. And we are morons.

We have metered billing for water and electricity, we pay phone bills by calls/hours. We pay for gas as per consumption. Imagine if you had random algorithm-based billing for all these things? It's conceivable, since aren't all these commodities coming to us in limited supply?

If we must come to terms with surge pricing, we will need a whole new legislation to decide what kind of products and services or businesses it is permissible for.

Those championing for surge pricing in the name of free market, will they please start respecting the autowala's demands next time they hire one? No, that won't be necessary. They don't hire autos and they don't care about the autowalas. They are the white-collared middle class in MNC offices who can afford a surge price. They are the much-celebrated stooges of the capitalist regime. They are the voice of the nation, they vote, they decide, they compete, they love growth and development.

But they forget one thing--siding with capitalist forces is not only cruel but also stupid because capitalism will eventually eat you up and spit you out. The rule of the free market is that big fish will eat small fish. Bottom line: No fish is safe.

In the above tale of two people selling two different things, if you allow surge pricing to one and deny it to the other, it would be unconstitutional as the policy would contradict the right to equality under Article 14 of the Constitution. If at all owing to technological advances and new market conditions we have to come to terms with surge pricing, we will need a whole new legislation to logically decide what kind of products, services and businesses it is permissible for. Until we do that, allowing it to few players like Ola and Uber and denying it to say autowalas or black and yellow cabs, is just unfair, unethical, unconstitutional.

I applaud the Karnataka and Delhi governments for taking the right actions against surge pricing because it is indeed the job of the government to intervene.

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