The End of a Fair Price: Dynamic Pricing and the Normalization of Gouging
prospect.org
prospect.org
While there are certainly some issues of concern in the article and the reviewed book, the above seems like exactly what insurance companies should be doing: pricing (or making available) coverage based upon risk.
This is not much different from an auto insurance company raising your rates (or cancelling coverage) because you've received a number of speeding tickets, which implies increased future risk of loss.
In fact, I received a letter from my homeowners insurance company a couple years ago stating that they would not renew our coverage due to conditions that they'd observed (clearly from aerial imagery) including overgrown bushes touching the walls of the house and some larger tree branches growing over the house.
I had a landscaping company come and fix the issues, sent my own drone up to take new pictures, sent the company the pictures, and they agreed to continue coverage. And now my house has less future risk of damage. This seems like a win-win for both of us.
Your bushes only seem like a reasonable example because you are looking at them in isolation - it was only a single issue you had to deal with, and something you seemingly wanted to deal with anyway. If they had instead blasted you with a litany of different issues, or a bush that you wanted to keep for sentimental reasons, or you simply didn't have the time/resources to create your own counter-documentation and operate their heavyweight bureaucracy, you'd be singing a much different tune.
And while these things can happen anyway with regular in-person home inspections, the point is that increasing surveillance and unaccountable "AI" make it much easier to bury customers in a deluge of complexity making for even-less-competitive markets.
(I would give a healthy list of examples of my own home being deficient in many ways an insurance inspector would call out yet are in the process of being managed, but I'm sure it would just invite a lot of "well ackshually that's dangerous and weird!" out of touch responses from people whose first instinct is to call someone rather than to fix something themselves)
[0] Notice how they weren't going to raise your premiums by $30 a year or whatever, but outright cancel your policy - in other words a massive overweighting of the actual risk from some bushes growing into the house.
Given that the annual premium is like 0.27% of the value of the policy, a change in risk of a few percent because some big tree limbs were hanging over the house or because some brushes might have enabled a fire to spread to the house more easily could clearly swamp the value of the premium to them.
And, to be clear, I didn't want to spend $2,000 to fix the problems, I would have rather not had to deal with it, but that's part of the joy of being a homeowner.
====
We live in a place (California) where the government has generally prevented homeowners insurance companies from effectively charging for risk (e.g., wildfires) and therefore many companies have stopped writing policies altogether. This doesn't seem like a good outcome. Note that this is the same state that won't let auto insurers charge based on "black boxes" either, so good drivers are subsidizing bad drivers (even more than in other places).
I agree with you that this is terrible. The perverse incentive also underlies the rest of your comment - the insurance company is looking for any reason to cancel your policy. Yesterday it was overgrown vegetation, but who knows what it will be tomorrow.
And while this would appear to be a major impediment to insurance companies accurately pricing risk (ie extra $XX for your trees rather than cancelation), I am not in California and yet still experience the same kind of thing. It really seems like these companies have no idea how to price risk apart from one big cohort of "normal", a few minor deviations (eg woodstoves), and with most everything else being a "we can't write a policy, go elsewhere". Even trying to significantly raise my deductibles to lower premiums nets like $20/year. I'm at the point where I'd drop house insurance completely except for the whole liability coverage thing, which is once again not possible to price out as a separate product in a competitive market (as once again, "different" implies "must be risky" to insurers).
> a change in risk of a few percent
You can't just hand wave adding a few percent on top of that 0.27% to swamp it. The base rate of wildfires themselves must be well below that 0.27% (modulo that perverse incentive). Vegetation obviously adds some risk, but how much? Look at the fire referenced in https://news.ycombinator.com/item?id=49899240 . Notice how it's the lone house standing. Not a patchwork of houses where a good chunk with good vegetation management survived. Rather it was proper vegetation management PLUS a lot of luck.
> that's part of the joy of being a homeowner
This is a common coping refrain but it proves to much for analysis. You could stomach $2k (which isn't all that much in the context of home ownership), but what if it was $50k from a ten item list with some items being much more costly? What if you had bought the house with a five year plan to gradually fix a bunch of similar deferred maintenance, but then were all of a sudden being put over a barrel by the insurer simply looking for pretexts to cancel? Or what if you didn't have that spare $2k, decided to do that work yourself, and their surveillance-based decisions then canceled your policy anyway because tree work "is risky" ?
The point is that every detail of real life ends up looking "risky" when you put it under a microscope - "what if?" and all that. And as I said in my original comment, insurance companies don't really seem interested in accurately pricing risk for conditions outside of the "mainstream" cohort - a cohort which additional surveillance then shrinks.
> Note that this is the same state that won't let auto insurers charge based on "black boxes" either, so good drivers are subsidizing bad drivers (even more than in other places).
This is the same exact "I've got nothing to hide" argument, but with even more invasive telemetry reporting. What you're calling "subsidizing bad drivers" I would call responsible consumer protection to avoid a race to the bottom into yet another pervasive surveillance regime.
We can easily think of types of bad driving that will not show up in telemetry, and types of telemetry that will flag as "bad driving" while being perfectly prudent. And that's not even getting into things like "we see you go out most Friday nights" or "we see you visit liquor stores".
Pricing on crash and moving violation history, as has been the standard for a long while, is good enough. If you feel you're overpaying because rates are constantly going up, the solution certainly isn't to embrace a crab bucket mentality of trying to push it onto some vague "other" people! Rather this is counterproductive - additional discriminators inevitably make rates go up due to increased complexity/stickiness despite any illusion of a temporary reprieve.
This is more like your insurer following you around and evaluating your driving skills.
And yes black boxes are a thing but a) are opt-in and b) universally reviled.
Actuarial science is its own field that prices uncertain future events. As you’re bringing out here, the insurer has additional uncertainty as to the actual driving habits of their policyholders, so some conservatism is likely priced in. Aggressive drivers would like to pay the premiums of careful drivers.
This is related to the origin of GEICO, Government Employees Insurance Company. Back in the day, you had to be a state or federal employee for them to bind coverage. The investment thesis was that civil servants’ caution in their choice of employment was an accurate indication of their overall risk appetite and risk-taking behavior. GEICO was able price policies lower without going broke because they by design insured a lower-risk population.
So it is not necessarily objective, fairly considered observations (and I think pretty different from speeding tickets). At least in our case it was maximally for the benefit of the insurer. I think that is relevant to their claimed premise.
Though to be precise, this was over a year ago so I’m not remembering their exact wording. But it likely wasn’t literally “drone footage alone,” but probably something more like “our drone footage and associated analysis” — in any case the effective interpretation being “we don’t care about installation date or your inspection. Replace it or lose coverage.”
Not that it makes it right, but there’s enough providers in my area it was less effort to get new coverage than continue to fight them.
This is the point where you stop talking to the insurance company and start talking to an attorney as well as your state insurance commission.
Also if it is a part of the mortgage why doesn't the lender pay for it? They need it, not the homeowner.
Is insurance company affiliated with companies doing the repairs?
It's a funny business. Every insurer wants better risk assessment, since it's a competitive advantage. At the same time, the better the risk assessment gets, the less point there is to having insurance in the first place. At the limit, insurers that could accurately predict the future would charge you premiums equal to your actual future costs and you might as well just put the premiums in a savings account instead.
If the roof is beyond end-of-life they probably won't pay anything, as it's a predictable cost of owning a home not an unexpected loss which is what insurance is for. Same reason they won't pay to have a tree taken down just because it could fall and cause damage. You're supposed to maintain your property; insurance is for losses beyond normal wear and tear/maintenance expense.
I mean, it's good for the insurance company to help it make more profit, but it undermines the arrangement of how insurance works. So, I would argue it's not what they should be doing from a societal perspective, and there should be regulation that stops them doing that.
If you take it to the extreme of them being able to tell with 100% certainty who's going to need a payout when, they'll just arrange it so they'll never need to pay out. They'll not do or stop doing contracts with those that will need a payout, or they'll raise the premiums such that they still gain. Insurance would become pointless and customers are better off saving for their own expenses.[1]
I've made this comment before. I'll just quote myself on the basics of how insurance works, to make this point clear:
https://news.ycombinator.com/item?id=49820825
> With regards to insurance, that industry depends on ignorance. If an insurance company had perfect information (psychic, precognition level) on who's going to need a payout when and who's never, then the point of the insurance becomes nil. They're not going to enter contracts with individuals that result in a net loss, only with those that result in a net gain. That can look like them just raising prices until it results in a gain. If that's the case, people can just save and use their own money to cover the events that will happen, because insurance would not be of any benefit to anyone at all.
> The way insurance works on a basic level is they know a percentage of people will have a set of events happen to them, but they don't know who. They have a large amount of clientele and charge everyone such that the revenue can cover the expenses of the unlucky percentage of their clientele and make a profit. To the individual, the insurance expense results in significantly less than what they would pay would they be part of the unlucky percentage without the insurance cover.
> The arrangement is founded on the ignorance of who belongs to the unlucky percentage. The economics of insurance don't work without the ignorance. So yeah, at some point, algorithmic pricing of insurance likely ought to be banned if we still want insurance to exist on a meaningful level.
[1] As a parenthesis, it being better to save is in a closed system sort of way. In reality, the fact that a lot of people would still get insurance because "that's responsible" means end providers can raise their prices on the assumption that most of their customers are the insurance companies and insurance companies "are rich", so there would still be a price difference. That's kind of what you see with health insurance where people that are not insured can get lower prices than those that are, such that it may end up even cheaper than the copay. That's for example, kinda what can be seen with styropyro's healthcare story:
https://www.youtube.com/watch?v=1162ouPHH3Q
> 5:39 so my insurance denies the CAT scan right I mean that's a really really common move for health insurance they just like to blanket deny procedures
> 6:21: but uh but the stupid part is is then I got billed $3,300 for that scan with insurance and the even dumber part is that I I got a quote from my clinic on what it would cost me without insurance and it was only $1,400 so because I have this insurance it actually cost me more money to get this scan like how is that how is that even possible that is the stupidest thing in the world
I imagine he can't see it because of the stress and anger, but that's probably exactly why the insurance denied it, because they were being billed way too high by the provider. If the provider billed the company what they billed regular people, they likely wouldn't deny them at the start. There's a limit to what anyone can pay, even insurance companies, and they have to put a stop at some point.
Back to the original point, imagine what that looks like with end providers that don't provide separate pricing between the insured and the non-insured, and where most people have insurance. The end provider would just give the higher pricing, the one for presumably rich insurance companies, so you would still save money with the insurance despite the fact that you'd save even more if the insurance companies didn't exist.
Anyway, this is a separate problem from insurance companies investigating too much and undermining how insurance works for their own profit.
And I'm not saying the hospital is innocent here, but this "costs more when billed to insurance" is a long-known issue.
> if the hospital has evaluated that a CAT scan costs them $1250 to do
Remember that the fact that they can use insurance companies to drive up prices means they can also drive up their own costs.
This is why mutual insurance companies exist, where there is no external investor who is trying to extract profits.
[0] https://www.npr.org/2023/08/24/1195331310/red-roof-house-fir...
ps. Firefighter II (volunteer), Santa Fe County, NM
The whole point of insurance is to manage risk by spreading it across all consumers. If my insurance rates go up based on my usage or individual risk factors, it’s just an elaborate money making scheme. It should be like “everyone has to pay x to get insurance to get covered and if the claims start going up, everyone has to pay more”.
But then again, there's presumably some sort of balance. If someone insists on building and rebuilding in a flood or fire zone, it's not obvious that everyone else should see their premiums go up to cover that. One option is for the insurance company to just cease insuring the property(ies), but I suspect there's more overall negatives to that than if they bump the premiums of clients in specific locales.
I haven’t laughed so hard in years.
Why should someone who has an unpatched hole in their roof pay the same rate as someone who maintains their roof?
Because otherwise the insurance companies can just look at your completely maintained roof that will last another 20 years and ask for a full replacement because it is 10 years old. And if you don’t comply they will drop you. (Happened to me)
If we mandate that insurers keep premiums equal for everyone, get ready for a lot of people to have zero access to insurance as they're deemed too risky to cover.
So someone with cancer should be charged $20k/month then? I am completely healthy and haven’t used my insurance much in the last 10 years. Why are my premiums so high? And why are 65+ year olds not footing most of the bill? I am not advocating for that but just pointing out that were obviously okay with charging for some risk profiles but not others.
You're right - I really should be paying less due to the unpatched holes in one section of my roof. I obviously need no coverage on this part of the house, as the damage (both already occurred and ongoing) are not covered causes of loss. If you know a way I can express this to my insurance company to receive a discount, without them going "this is weird, we're actually raising your rates", please let me know.
Yes, but this does not imply that customers with (potentially vastly) different risk profiles should pay the same rates.
The canonical example is that 18-year-old single males with previous speeding tickets pay more for auto insurance than married 40-year-old women with clean driving records.
If the same argument is to be followed why does a person with potentially large medical bills not pay a disproportionately larger premiums than a healthy person?
It's clearly the case that people who are overweight, smoke, or consume alcohol heavily should pay more for health insurance based on massively increased risk of loss.
Fortunately, other forms of insurance (e.g., homeowners, automobile) are not regulated in this uneconomical fashion.
Suppose your house would cost $400k to rebuild if it got destroyed, and the average interval between things happening at your location that would destroy it is 1000 years.
If those events happened regularly every 1000 years starting from the year you built the house then you could deal with this simply by setting aside $400 every year in a house rebuilding fund.
But if those events occur more randomly, still averaging 1000 years apart but with a large variation, that doesn't work. If you want a 99.9% chance of your fund not going bankrupt and we assume covered events are normally distributed you need a very large fund.
If you have 10000 houses still each being destroyed on average once every 1000 years, and contributing annually for each house the same amount as under the "everyone handles it themselves" scenario, then thanks to the Central Limit Theorem the size of the fund you need is way way way smaller than the combined sizes of all the funds when each house is handled separately.
Note there is nothing in here that requires the same annual contribution for all houses. What is required is that the total annual contribution matches the total average annual loses.
There may be good policy reasons for requiring some kinds of insurance to charge the same amount to everyone, or at least to group people into broad groups where everyone in the group gets charged the same.
Each drive you make will rate you based on hard braking, aggressive turning, unsafe following, excessive speeding, late night driving, forced autosteer/fsd disengagements, unbuckled driving.
You'd think that driving well would eliminate these, but no.
But they give you a pass if you use tesla fsd. That is their endgame, but it sometimes gets a pass for driving more dangerously than you do. You speed - ding. fsd speeds 3x what you do? 100% score.
lol. do you know the world this is creating? who is making the rules?
When I buy something, I really don't know what it's supposed to cost. Barring atypical levels of research, I know how much it's worth to me, and how much it usually costs, and that's it.
But my supermarket knows almost exactly how much eggs are worth to me. If it can show me, and everyone else, a different price at different times of day, I'm no longer confident in my ability to "bargain" effectively with the supermarket. So while I can see some strong economic arguments for dynamic pricing, especially in cases like power or water usage where there's a very inflexible supply, I basically just don't trust that we won't get screwed.
Fixes could be possible. Maybe with a third party system for monitoring prices, quality, etc. But it's hard, and pretty obviously not solved in the current market, much less one with even more price complexity.
Under dynamic taxation, we the public, would examine that firm's books at the end of the fiscal year and decide how much taxes they owe based on their ability to pay.
Note that companies are not natural people, they do not have a fundamental right to exist. Just like under dynamic pricing, if the shareholders and board think their dynamic taxes are too high, they are perfectly free to just dissolve the company and use their capital elsewhere.
Nothing like
- Major bank consolidation
- Major media condolidation
- Major tech consolidation
- Major grocery store consolidation
etc... to really provide wonderful competitive options.
do you want comcast or comcast?
But imposing heavier regulatory burdens has disproportionately adverse effects on smaller would-be competitors. The big, established players know this and actively engage in enlargement of regulatory scope and regulatory capture to widen their moats. Historical examples of this are Jeff Bezos encouraging states to be more aggressive in requiring sales tax levies on internet purchases and more recently the calls by Sam Altman and Dario Amodei to “pace” AI through regulation. On the surface, they appear to be public-spirited moves but are deeply self-interested.
It's just that breaking up large companies has taken a very distant back seat to imposing "good for the consumer on the surface, but actually a moat" type regulations.
Somehow we've settled into a spot where it's acceptable to have incredibly powerful monopoly/duopoly structures in American culture, sometimes with a "third wheel" of a small scattering of options to make it appear as though there's competition. Usually, the terms these companies operate under are substantially "the same" from a consumer point of view (whole related can of worms there - see: "tyranny of contract - starting with Engels and leading to Kreitner")
Want a computer? Choose: Microsoft or Apple.
Want a phone? Choose: Apple or Google.
Want to advertise? Choose: Google.
Want a credit card? Choose: Visa or Mastercard (third wheel: Discover/Amex)
Want a browser? Choose: Google (third wheel: Firefox/Safari/Edge)
Want a grocery store? Choose: Walmart or Kroger.
Want internet? Choose: ATT or Comcast.
Want to watch TV? Choose: Comcast or Disney (third wheel: Fox/Paramount/WB)
Want to stream a show? Choose: Disney or Paramount (third wheel: Amazon/Netflix)
Want to bank? Choose: JPMorgan Chase or Bank of America (lots of third wheels still, but they hold more than the next 6 combined in assets)
Want a political party? Choose: Republican or Democrat.
Want to sell a good online? Choose: Walmart or Amazon.
Want to do home improvements? Choose: Home Depot or Lowes.
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It's not about regulatory burden, its about a clear failure to provide competition by allowing a small number of dominate players to functionally own a market.
They're just competitive enough to shut down any real competition (by undercutting them via scale, cash-on-hand, and monopoly effects) but the impact is short-lived.
And I partly blame our response in 2008 - we appear to have decided that it entirely ok to be "too big to fail" and that's an acceptable state of the country.
And it's definitely "efficient" (in some respects - much like cancer is incredibly efficient at replicating and capturing resources) but I don't think it's particularly healthy for society. A very small number of folks are sucking up more and more wealth via a set of largely entrenched conglomerates. Meanwhile - any feedback mechanism or regulation that might stop that siphoning has been knocked away.
It feels like we had a nice breeze for a bit, but we're headed directly back to the "Robber Baron" age.
A contract formalizes the terms of an agreement: “I will provide X in exchange for you providing Y.” In the event of a dispute, the contract provides an objective record of what both sides committed to performing. This is how free people transact business. The people who want to sign their name to one agreement but then have a strong-arming outsider change the terms — allegedly in the name of “fairness,” “social welfare,” or some other aggressively undefined abstraction that may be manipulated “to mean anything or nothing at pleasure” — are expropriating parasites. They demand to replace clarity and order with “progress,” itself an undefined term with no end state and an infinite playground for radical revolutionaries. Throughout history, this has been a recipe for tyranny. Every accusation is a confession.
The state does not and cannot “provide competition.” The regulatory frameworks put up are inevitably captured because the witless regulators are intellectually undermatched. The allegedly independent but captured philosopher-kings now do the bidding of their corporate masters under color of law. Instead of realizing the gigantic systematic error, radical revolutionaries want to be even more destructive and bring out their sledge hammers to forcibly break up companies, even if doing so harms consumers.
This is not how free people deal with one another. Let peace and freedom cause a thousand flowers to bloom. Stop making it difficult for new competitors to enter the market. Get out of the way.
But we have to have common ground from which to start. If merely committing terms of an agreement to writing is alleged to be tyranny, so absurd that it’s hard to believe that anyone holds such a position in earnest — if the two camps cannot agree enough on the rules of the game to write them down, then they have no hope of uniting in a peaceful society.
Consider whether his argument is at least a valid description of the issue of "free people transact[ing] business" when one side is literally the ONLY service provider, and the other is a utterly disposable customer.
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Your comment implies you don't actually understand the discussion.
https://www.theamericanconservative.com/robert-borks-america...
Back in the early days of laptops, I went to Oracle to give them a quote; while cooling my heels in the lobby I looked round, realized I was being an idiot, and so opened my laptop and increased the prices across the board.
Can’t wait for the onslaught of opinion pieces on “Has dynamic pricing fixed wage inequality” or similar. Less discrimination if an airplane ticket always costs 300$ or 3% of your monthly salary, whichever is higher.
I'm pretty sure that the pervasiveness and the inability to do anything about it is what the person you're referring to meant by 'exhausting', though I may be projecting what I find exhausting about the topic!
It is kind of obvious, and supported by economists who are the experts in this field, but the article dismisses it as bullshit without much proof.
It says differential pricing benefits no consumer, and yet, I managed to travel for way bellow cost. If it wasn't for dynamic pricing, I wouldn't have travelled at all. Of course, some people were price gouged, someone has to actually pay for these costs, but these people could afford it, otherwise they wouldn't be in.
The article then mentions overall price increases. Well, yes, sometimes prices increase, for good or bad reasons. Maybe the costs have increases, because there is a war somewhere or something, and the company has no choice but to increase the price to stay in business. Or maybe the company finds itself in a monopoly position and just wants to make more profit. In any case, the price would have increased, dynamic or not. And the solution is not to ban dynamic pricing, it is to avoid getting into wars for the first one, and break down monopolies for the second.
There is also the question of spying on people, but if you don't want spying on people, ban spying on people, dynamic pricing or not. You don't need to spy on people to do dynamic pricing, and many businesses who don't do dynamic pricing spy on their users.
Uber is given as an example, saying that they raised the prices and paid the drivers less. Well, of course they did, at the beginning they operated at a loss, this can't last, at some point they need to make profit. This, by the way, is one of the many shady things Uber has done, a company for which the entire business model is not to play by the rules. The problem is not price gouging now, it is that they were too cheap before, and yes, it is bad, because that's how you unfairly drive off the competition that can keep your prices (dynamic or not) in check later on.
This the reason that NY banned rental agents from using algorithmic pricing models.
Rental has a problem, made worse by algorithmic pricing, it is, simply, that in some places, housing on a free market would be much more expensive than people can afford. Which is a problem because people need a place to live, and kicking them out is not great. So in this case, government intervention makes sense: a ban on dynamic pricing is one thing, but also just capping rents, subsidized housing, banning short term rentals, etc... the usual "socialist" stuff. But this is, again, not a dynamic pricing problem (though it makes things worse in this case), it is a housing problem.
> they get taken for every penny that they are willing to spend
What is the problem with paying for what you are willing to pay? It is only a problem when you are paying for what you are not willing to pay. Housing is one of these cases, so is food, healthcare and other essentials, also taxes. These are special cases and they usually involve government intervention. And sure, in this case, algorithmic pricing can be a problem, because you leave the usual free market economy.
This is useful up to a point. One constraint is whether the goods are fungible. (Rental location is not.) Another is whether price differences even exist.
> What is the problem with paying for what you are willing to pay?
"Free" markets are a fiction. Transactions do not exist in a legal vacuum. (Except perhaps for cryptocurrencies, which exemplify why such laws exist.)
The fact is that some markets are dysfunctional. Cartels, monopolies, and monopsonies are generally seen as evidence of market failure.
There are sound reasons for regulators to limit price gouging. Just because retailers have pricing power does not mean they should be allowed to exploit it to the maximum degree possible. For example: company scrip has been outlawed for many years, even in the USA. Likewise, antitrust laws restrict -- or are intended to restrict -- the ability of retailers to collude in fixing prices at whatever the market will bear.
Consider a real-life example. Imagine you bought a diamond ring for your fiancee. You paid $10,000 for a tiny stone because a cartel has been restricting the supply for 100 years. Six months later, chemists make diamonds in a lab and break the monopoly. You can now buy the same stone for $500. Do you feel ripped off? Or do you feel that the $10,000 you paid represented market value, and put the humiliating loss down to poor timing?
("Same stone" is not quite accurate, because for the time being de Beers is still trying to market "natural" stones at the original price. They don't have much choice because their stockpile represents an enormous unrealized loss. Behind the scenes, you can bet that they are trying to get rid of them any way they can. In crypto parlance, they are left holding the bag.)
Now substitute "life saving drug" for diamonds, and "pharma bro" for de Beers. (And recall that the price gouging was legal, Shkreli was jailed for an unrelated fraud.)
Free market is indeed somewhat fictional, as it is far from free in practice. The stock market in particular may look unhinged, but it is heavily regulated, that's the reason why it works, and the reason it looks like the ideal of a free market is, ironically, because of regulations.
As for diamonds, these are luxury goods, being expensive is the whole point, so what if they are overpriced? If de Beers didn't have a history of things like using slave labor, I wouldn't have a problem with it. Would I have hated it, if my $10k diamond turned out $500, yes, no one likes losing money from a bad investment, but prices have to go down at some point. It also shows that competition can work, de Beers didn't go down because of regulation, it went down because it was beaten by technology and bad publicity.
The problem with Shkreli and the Epipen was because healthcare is not a normal market and completely unlike diamonds. Normally, one would expect the government to make sure that life-saving drugs stay affordable, and it is the case in many countries, the US being a notable exception. Instead, in the US, the government promotes this kind of behavior though a combination of its mostly private health insurance system, tight control on who gets to make and sell drugs, but no control on the price. EU countries (most of the developed world in fact) are much more sane in that regard. Dynamic pricing is allowed as a general rule, luxury goods are still overpriced, but essentials like health and housing are regulated to prevent pathological cases like the Epipen thing.
If you apply this thinking to the economic system practiced in most countries, the answer is that the system forces have been set up in a way that the capital owners need to be paid back on an exponential schedule, and there are barely any counter-forces to this. Hence, the system will never hit a real steady state. People will continue to creatively design more and more immoral methods of extracting monetary value from a finite system that cannot indefinitely and continuously grow exponentially. There is no other way to pay back the capitalists. There is no counter-force.
In my opinion, Uber has several key innovations over traditional taxi services:
* An accurate machine-provided fare quote that you can review at your leisure before agreeing to take a trip. (Instead of, like, calling a human dispatcher to ask for a quote.)
* The fact that the passenger can't screw over the driver by making fake requests and not showing up, or running off at the end of a trip - because the online platform is in charge of the payment collection.
* The fact that the driver can't screw the passenger over by driving extra distance, because the price is set ahead of time.
> roughly 75 percent of the items in identical Instacart baskets purchased at the same time varied in price from one shopper to the next
If the price differential is large enough, it sets up an opportunity for arbitrage. Maybe if 10 people cooperate and compare notes on each of their Instacart account's product prices, and then make group purchases using the account with the lowest prices...
In general, it's harder (though not impossible) to price-discriminate on goods rather than services. If seniors get a grocery discount for example, then it might be worthwhile to hire a senior to purchase things on your behalf.
Go to the supermarket and put your own items in your own cart. You'll pay the same price (the one marked on the shelf) as everyone else that way.
However, I have to push back on the idea that increasing corporate profits during the pandemic means that the price increases were not market based, or that companies had the option to just keep prices the same and everything would have continued as normal.
I feel like this conclusion (that companies should not raise prices if profit is high) shows a fundamental misunderstanding of what a free market price means, and why prices are tied to supply and demand and not profit.
SO MANY people seem to think prices are (or should be) set to "total cost to create and distribute the good + a fixed profit margin", and that market competition means every company working to drive down the cost to create the good, which would mean they could sell for less than their competitor.
But that isn't how prices are set. Prices are only slightly related to the cost to manufacture and distribute the good, and are mostly based on the demand for a good and how much supply there is.
So why would profits go up during a shortage situation like the pandemic?
Well, imagine you are a company that makes widgets, and under steady market conditions you sell 1000 widgets a month for $50, and you have a warehouse that holds about 6000 widgets (a 6 month supply). It costs you about $45 to manufacture and distribute the widgets, so you make a $5 profit on each one you sell.
Now the pandemic happens. Let's suppose your supply pipeline is completely shut down, and you can't get the materials to make more widgets at any price. However, you still have the 6000 widgets in your warehouse that you have already made. Based on your experience and the situation, it seems like you won't be able to get any new raw materials for a year, and your competitors are all in the same situation.
Now, you could keep selling your widgets at your normal price, but in 6 months you will be completely out of widgets to sell, and you won't be able to make any more. So you would sell all your widgets in the first 6 months, and then people would be unable to buy any of your widgets for at least 6 more months, no matter how much they are willing to pay... you literally won't be able to make any more to sell.
Or, you could raise prices enough so you only sell 500 a month, which will make your 6 month supply last a year.
Since all the widget manufacturers are in your same situation, they all choose to do the same, and widgets go up a lot in price. Of course, your company doesn't have any extra expenses (you aren't buying any new raw materials), so the extra money you make per item is profit. Your profit increase a bunch during that time period.
Is this bad? Should the manufacturer just keep selling the product at the traditional price? If they do that, there will be no product for anyone in 6 months. Should they keep the same price, but only sell 500 a month? If they do that, then they are going to sell out very quickly every month, and half the people who want them won't get them.
Of course, half the people that would want them aren't going to get them anyway, but how should we decide who gets them and who doesn't? We could do a lottery, but that does not seem very efficient; not everyone needs a widget with the same level of need. Some people really need the widget, because it is vital to something they do, and some people just kinda like widgets but would buy something else if it was too expensive. Making it more expensive weeds out the "kinda want it, but don't need it" consumers and lets the consumers who REALLY need widgets get them (for a higher price).
Look, we can argue for a long time about whether this is the most fair way to distribute goods. While the increased priced does weed out people who don't REALLY need the item, it also weeds out people who need it but can't afford the higher price.
But you are going to end up with people not getting the item who want it no matter what, and having some mechanism to order consumers by who actually needs it the most is a much better selection mechanism than randomly choosing.
It also shows this isn't just companies raising prices for no reason.
E.g. I'm using a per-mile car insurance policy with a device that monitors my behavior. I'm a conservative driver, so I save a lot of money. But if such systems become universal, stupid speeders will get heavily penalized because they won't be able to offload their risks onto everyone else.
So on the one hand, it's more fair to careful drivers. But on the other hand, it will logically remove all the "slack" in the system, which serves as a de-facto social safety net.
Where it becomes a problem is when the price starts being set based on aspects of the would-be purchaser that have nothing to do with the actual product, and are solely there to evaluate your willingness to pay. Charge me twice as much because I'm buying twice as many potatoes? Of course, that's how prices work. Charge me twice as much because you've purchased a detailed psychological profile based on tracking my internet activity and that profile says I really like potatoes and I'm willing to pay extra for them? No, straight to jail.
> Charge me twice as much because I'm buying twice as many potatoes? Of course, that's how prices work. Charge me twice as much because you've purchased a detailed psychological profile based on tracking my internet activity and that profile says I really like potatoes and I'm willing to pay extra for them?
This really makes no sense. If you raise the price of potatoes on me, I'll just go to someone else. Competition still exists, after all.
More realistically, you'll raise the prices by a couple of percent for potatoes for me so I won't notice that. This is more insidious, but it also is self-limiting in scope.
I guess the key here is that there's only so much information that _people_ can track. For example, I don't really care about the price of Sensodyne toothpaste that I always buy, so a store can sneakily add a dollar or two to the price.
But hey, there are AI agents for that!
The objectionable stuff would be something like giving you a higher quote because the know you buy Tom Clancy novels, not because Clancy readers are riskier, but because Clancy readers shop around less and are willing to pay more.
If you're the sort who would buy potatoes from a competitor if the price went up, they won't charge you more. Willingness to switch to a competitor will be a big part of the pricing algorithm.
Do you want Amazon charging you twice as much for a product as someone that has half as much disposable income because they’ve determined you can afford to pay more for the exact same physical item?
The parts that I _do_ want to be regulated are the requirements that Amazon puts on its merchants.
Compare that to car insurance where many of the factors are well known and have a clear impact on risk.
*ETA:* And FWIW, the author here goes about as far towards that as they can -- a shoutout at the end! Anything else would be decried as biased, after all. Great article; shame it'll soon be downranked by the wonderful machines running this place :(
That said, this’d be one of those things where you can say “this is my prediction”, and if it doesn’t come true, go looking for the forces and factors you missed from your initial prediction.
The endgame for these ghouls is to have you work 996+ and spend 99.9999999...% of your income on just the bare essentials so that there's not one penny left unmonetized for you to just exist, and nothing left for any type of enjoyment.
I guess God needs to get going building a house for every baby!
Call me when vanilla ice cream is a human right please!
https://americanaddictioncenters.org/rehab-guide/addiction-s...
https://www.samhsa.gov/communities/homelessness-programs-res...
https://www.congress.gov/crs-product/R44302#_Toc437336722
It’s not exactly a cryptic relationship, and it implies the need for more than just housing, people need serious inpatient care or structures outpatient programs and those are hard to fund. It’s doubly challenging because of how the US mental health system changed in the 1980’s… very much for the worse.
At least you didn’t assume I was arguing against housing.
The internet is full of places to pick a dumb fight and declare your moral superiority, this doesn’t need to be one of those places.
your first source says verbatim: "One of the main causes of homelessness is the lack of affordable housing". it also doesn't link addiction or mental illness as a cause - it describes that the rates are higher in unhoused populations
a brief thought experiment: if you were unhoused, living on the streets, barely enough money for food and water, your body exposed to the weather, knowing that society looks down on you at worst or ignores you at best, how would your mental health fare?
well, according to your second source:
> It can be more challenging for people who are homeless to stop using substances, because they may not have easy access to treatment, often have smaller social support networks, may have decreased motivation to quit drugs or alcohol, and may have other, higher priorities, such as finding housing or food
it's almost like being unhoused itself causes cycles of addiction because at least the drugs take the pain away for a short stint?
your third source similarly contradicts your initial claim:
>For years, ending chronic homelessness was thought to be a multi-step process, with individuals receiving treatment for addictions and illnesses, perhaps while living in transitional or temporary housing, before being found capable of living on their own. However, the strategy for ending homelessness has changed, largely due to research pioneered by housing providers. Instead of requiring chronically homeless individuals to be "housing ready" by first addressing issues thought to underlie homelessness, the new strategy allows chronically homeless individuals to move into permanent supportive housing without preconditions.
either find better sources or actually read the research you're citing, learn from them, and stop making unfounded and ludicrous claims you can't even back up
I'm sorry, but the idea that having a place to sleep is enough to save a life is sorely mistaken. A third of chronically homeless people have at least a serious mental health issue and those don't go away. Likewise substance abuse is a hard thing to kick EVEN WITH A HOME. It's doubly so these days when drugs are routinely cut with fentanyl, designer drugs, and worse. A good friend of mine died three years ago very much homed, but almost totally unable to find meaningful, quality, and lasting treatment. In the end after a DECADE clean someone abused her, tricked her, and she was gone three months later.
PUTTING PEOPLE UNDER A ROOF IS NOT ENOUGH.
I'd love to live in a utopia where our money doesn't go to murdering hundreds of children in an elementary school in another country and instead provides fully funded and socialized longterm treatment programs for people who need it, with strict regulatory and auditing guidelines to prevent abuse and non-evidence-based practices
it's a fucking shame how far we are from that ever becoming reality