Monthly Archives: April 2016

Uber vs. DC Metro

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According to Wikipedia,

Of those that work in Washington, D.C., 44.8% drive alone to work, 21.2% take Metro [the DC subway system], 14.4% carpool/slug, 8.8% use Metrobus, 4.5% walk to work, 2.7% travel by commuter rail, and 0.6% ride their bicycle to work.

Carpools are a pain to arrange and to maintain. But Uber offers a solution.

UberPool—the latest incarnation of Uber in New York City—works by finding users who are headed on similar routes and matching them up in cars that make multiple pickups and drop-offs. The service launched in New York last December and is also online in three other cities, but only started gaining traction here a few months ago, after Uber began advertising it heavily and promised UberPool riders steep fare cuts.

It seems to me that if Metro were to shut down completely, this sort of just-in-time carpooling could pick up the slack. I don’t know how the current system works, but I can imagine something like the following:

As a commuter, you wake up in the morning, and you decide that you will be ready to leave at, say, between 7:45 and 800 AM. You enter a price at which you would be indifferent between driving and collecting passengers or riding and paying the price. The system finds a price that balances supply and demand. If it’s above your price, then you drive and pick up other passengers, who pay you. If the market price is below your offer, then you ride and pay the driver who picks you up.

Unlike an old-fashioned carpool, every day you might come and go at different times, and every day you might have different people in the car with you.

This sort of a system would balance supply and demand. So if it were in place, then Metro could shut down and there would be no commuting disaster. Instead, some of those 44 percent who commute alone and some of those people who now take Metro would switch to these flexible carpools.

The system could reduce the number of cars on the road by offering a premium for picking up more than one passenger and a discount for being an extra passenger. The premium and the discount could depend on traffic conditions.

Contrast the flexibility and adaptability of such a system with Metro.

Instead of Deposit Insurance?

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Clive Crook writes,

banks should be made to pledge assets as collateral, in sufficient quantity to cover their deposits and other short-term liabilities. A rule to this effect could replace conventional deposit insurance (with premiums in effect collected upfront in the form of haircuts on the collateral).

Read the whole thing. Pointer from Mark Thoma. Crook is reviewing a book by Mervyn King. I will have to read the book, because I do not understand the concept.

I think of an ordinary bank as having loans as assets. Its liabilities consist of deposits and equity. You can think of the assets as already “pledged” to the depositors, and if the depositors can be paid off, then the shares in the bank have positive value. It sounds like what King is talking about is an intermediary (a government agency?) that manages the way that these assets are pledge in a way that better protects depositors. Again, I will have to read the book.

A Workable Phone Spam Filter?

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A commenter writes,

I switched my landline to a VOIP service called ‘Callcentric’ years ago. It’s been great for me. Really cheap. Lets me block unwanted calls. Voice mails are sent to me as email attachments. Setting up the VOIP box initially require a little technical messing around, but that’s been the only drawback.

Several other commenters offered suggestions. I have some questions.

1. This seemed like the best solution to me. What are the worst drawbacks?

2. We have a phone on each floor of our house. Can we use one VOIP box with multiple phones?

3. Are there useful articles out there that describe the process of using VOIP for this purpose?

4. Are there useful articles out there about choosing a VOIP box?

A World with B’s and C’s

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The comments on my Three Axes to Explain Terrorism post inspired what I am going to say here.

1. I believe that human population includes both B’s and C’s. B’s are inclined temperamentally or ideologically to use violence to control others. C’s are not so inclined, and they seek ways for people to interact peacefully.

2. If there were no B’s in the world, C’s could adopt a simple rule of never engaging in violence. However, such a rule when followed by C’s produces a very bad equilibrium if there are B’s in the world, because it leaves the B’s unchecked.

3. To check B’s, C’s must be willing to commit violence against B’s. This makes C’s a bit like B’s, but I do not believe that this implies total moral equivalence. As one commenter put it,

The distinguishing factor is intention. The civilized nation should be motivated towards living peacefully so long as that is a live option. It does not intend harm to non-combatants and does as much as it can to avoid civilian casualties – the barbarian groups murder non-combatants in gruesome ways for shock value.

4. One of the mechanisms that C’s will use is a state and its government. When C’s organize a state and its government, they create institutions that seek to constrain the government’s ability to use violence, so that it is only used to protect against B’s. These institutions are necessarily imperfect, but this does produce a more civilized (and libertarian) outcome than (2).

5. The apparatus of a state can be taken over by B’s. See the Soviet Union or Nazi Germany. That is a major risk of (4).

6. In his comment, Handle writes,

progressive politicians and the leaders of majority Islamic countries are trying to convince [both Islamophobes and radical Islamists] that there is no link between Islam and political violence, and, at least tacitly, if we can all just get people on all sides to shut up and quit insisting there is such a link, then it will quickly cease to exist and we can reify the claim and bootstrap a decoupling into existence.

In other words, if you deny that Islam is connected to B’s, then that will be self-fulfilling. Conversely, if you insist that Islam is connected to B’s, then that will be self-fulfilling.

Unfortunately, I do not think it’s that simple. In the story about the Belgian prison, the WaPo reporter wrote

Proselytizing prisoners used exercise hours and small windows in their cells to swap news, copies of the Koran and small favors such as illicit cellphones. Gradually, they won over impressionable youths

[my emphasis]. If the prisoners had become C’s as a result, that would be fine. But instead they turned into worse B’s.

7. I do not believe that we can rely solely on the Koran to turn Muslims into C’s. I do not believe that we can rely solely on the Bible to turn Jews or Christians into C’s.

8. I think that C inclinations must be reinforced by a web of institutions, including families, the state, and civic associations of all kinds. My concern with Islam is that it privileges religion ahead of everything else, which reduces the ability of other institutions to play their civilizing role.

9. I have a similar concern about progressivism, in that it privileges the state ahead of everything else. As Yuval Levin points out in his forthcoming book, The Fractured Republic, progressives seem to extol the individual and the state, while opposing churches, corporations, and every other intermediate institution.

Megan McArdle on Economic Dislocation

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She scolds,

There is no better example of the folly of the elites than the current fashion for a universal basic income among both liberals and libertarians. Instead of trying to figure out something hard, like how to build an economy that provides adequate work for everyone, the idea is to do something easy, like give them checks.

To which I reply, better to do something easy than something stupid. And if you assign the task “build an economy that provides adequate work for everyone” to technocrats and politicians, they will come back with something stupid.

Leave the hard work of actually creating jobs to entrepreneurs. I do not promise that they will “provide adequate work for everyone,” but they will tend to create patterns of sustainable specialization and trade. As for government policy, my first thought on jobs policy is always to reduce the payroll tax and to de-link health insurance from employment.

Comments on Uber’s Value Proposition

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A commenter writes,

It’s not that *SOFTWARE* suddenly let Uber and Lyft do things previously undreamt of so they took over the old fuddy-duddy cab business. It was a power play.

If one of the standard cab companies had wanted to operate like Uber, the city administration which licenses cabs would have shut them down immediately. Because “That isn’t how cab companies operate” and to hell with your fancy software and lineup of venture capitalists. But Uber never tried to operate as a cab company. It just merrily put up ads and flyers and signed up drivers and was happily ferrying passengers hither and yon while the established cab companies were trying to get somebody in city government to answer the damned phone and listen to a complaint. By the time the typical city bureaucracy reacts to the existence of Uber, it’s generally gotten itself established in most users’ minds as old and legitimate, and very few cities have the … anatomical features …. needed to clamp down. So Uber prevails.

We had a useful discussion of this in my high school econ class the other day. I made a point similar to the commenter’s, that Uber’s success consisted of changing taxi regulations to allow unlicensed cars and drivers to operate.

There are many other areas where one can imagine a profitable business model could be generated by getting rid of regulations that restrict would-be suppliers from entering the market. For example, suppose that you set up an Uber that connected prostitutes with customers, and it became accepted and popular, so that the authorities decided against shutting it down. Or an Uber for capable but unlicensed health care providers. Or an Uber for liquor. Or an Uber for medications, including medications not approved by the FDA.

One student looked up the market valuation of Uber and found it to be somewhere north of $50 billion. Where does that value come from? (My first thought, by the way, is investor irrationality.)

If what Uber has is a superior algorithm for dispatching cars, then taxi companies could simply hire software developers to build such an algorithm. I don’t think that is the answer. Of course, I remember that when Amazon said that it was going to branch out from books to selling everything, somebody remarked that it would have difficulty competing with Wal-mart, because it is cheaper to start with Wal-mart’s logistics system and build a web site than it is to start with Amazon’s web site and build a logistics system. It is worth thinking about how Amazon managed to overcome that apparent disadvantage, but that is a separate post.

A student pointed out that the remarkable accomplishment of Uber was convincing riders that it is safe to use. “Can you imagine what my mom would have said a few years ago if I told her that I was using my phone to find a stranger to pick me up in a car? And yet people are ok with that now.”

I think that is the real key to Uberizing an industry. Take a business where the public has come to fear unregulated service providers, and find a way to overcome that fear before the incumbents find a way to use the political system to stifle the business.

Why don’t competitors come in until Uber’s profit margin shrinks? The students think that Uber has powerful brand recognition. One way to think about this is to ask why competitors do not come in to challenge Google.

I think that the analogy between Google and Uber breaks down because consumers do not pay to use Google. To take customers from Google, you have to offer consumers something at the same price (free) that provides a better user experience. That’s tough.

To compete with Uber, what you have to offer consumers a similar user experience at a lower price. That strikes me as not so hard to do.

Can Google Sell You a Landline?

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They say,

Landlines can be familiar, reliable and provide high-quality service, but the technology hasn’t always kept up. That’s why today, we’re introducing Fiber Phone as a new option to help you stay connected wherever you are.

Following the link, I see

Privacy controls like spam filtering, call screening and do-not-disturb make sure the right people can get in touch with you at the right time.

Spam filtering for phone calls. Verizon refuses to give that to me. The most they will do is filter 10 numbers. I get spam phone calls from more than 10 numbers in less than 48 hours.

Google does not have its fiber service in my neighborhood. But I would pay up for the spam filtering service if they could somehow provide it.

Tyler Cowen Talks with Jonathan Haidt

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Self-recommending. Here is one excerpt:

Whenever there was an empire, the empire always ran into trouble. At that point, there are those who say, “Our misfortunes are because we have lost the ways of the elders. The gods are punishing us for departing from the wisdom. We need to return!” Those are the people I would bet who if you could transplant them, they would grow up to be more conservative. They feel the moral decay. They feel the loss of the tradition.

Here is another:

The basic fact about moral argument is that we’re not really listening to each other, we’re not actually open to reasoning. We start with our gut feeling or our partisan loyalty, and at that point we become lawyers. We’re really good at being lawyers and knocking down the other guy’s arguments, and giving them our own…

Once it becomes left versus right over Obamacare, it doesn’t matter however good your arguments are, I’m not listening. I’ve got my team, and we’re on a mission to defeat your team.

But read the whole thing.