Surge pricing, anyone?

One social contribution that I tentatively attribute to Uber is popularisation of the concept of surge pricing. That is, we try to call an Uber and all-too-frequently get told that we have to pay a premium at this particular point in time, due to high demand. On the other hand, recent shortages of toilet paper, paracetamol, and certain foods were not accompanied by any kind of surge pricing, and the limits imposed on how much stuff you can buy, were not so effective in keeping these goods available. At this point, things have improved, although I have not been able to buy flour recently: the shortage of flour in the supermarkets I visit seems to be chronic.

Now I appreciate the objection to charging to charging a premium to allcomers, rich and poor alike, in the context of vital food and medicine. (Although, limits on purchases can also be criticised as being unfair to a single purchaser buying for a large family, or a key worker who is short of time and doesn't want to search excessively for a desired item.) In trying to advocate surge pricing, let me turn instead to possible examples less controversial, such as hairdressers and garden centres. When these establishments are allowed to reopen, it seems reasonable that they should charge a premium (temporarily). Not only do they need the money, but it would help to control a flood of customers all causing long queues and infecting each other at close quarters. To be honest, I’m not optimistic that this will happen, since they will still worry about accusations of price-gouging, plus there’s the question of how big a premium is appropriate.

An article in the Economist highlights a related problem, which is the difficulty of measuring the rate of inflation, at a time when various goods and services (whose prices get used to measure inflation) are unavailable. Coming back to flour, it may be felt that some of it (not all!) should be sold at market price, meaning one that some people will pay, but where it stays on the shelves for a few days, at least. There is a moral case against selling goods too cheaply, which is that it becomes an attempt to hide a problem — a successful attempt, if inflation cannot be measured.

Finally, the problem discussed here touches on a defect at the heart of traditional economic theory, which is the celebrated existence of “correct” prices, unaccompanied by a means of arriving at those prices. The Algorithmic Game Theory community has quite rightly worried about price discovery and its computational obstacles. But the obstacles are also social, and status quo bias plays a big part.

Short-term prospects for UK universities

A round-up of gloomy reading material I have been taking in.

UK universities fear huge budget holes as Chinese students stay home has worrying figures about the dependence of UK universities on students from China in particular. Note the discussion about Aberdeen University towards the end of the article. had hoped to earn £50m from overseas students this year, 20% of its overall income, but that “is now likely to fall substantially, because of the restrictions and uncertainty created by coronavirus”

How can universities climb out of the coming financial abyss? considers prospects of universities closing or merging, or obtaining bridging loans from banks or government, possibly with strings attached (such as closure of certain courses seen as not very valuable). It is suggested that some prospective UK students may decide to defer going to university, although for the ones that do, “those students may have an edge in the graduate jobs in three or four years’ time, though it’s not clear how many students, if any, will be making that wholly rational calculation.”

Universities UK: state bailout required to save institutions. Some comments added by readers made the point that senior administrative salaries ought to be cut, in the context of requesting a government bailout.

Coronavirus: universities face a harsh lesson discusses universities in the UK, USA, and Australia, with emphasis on the likely loss of income from overseas students, especially from China. The ‘overexposure to the Chinese market’ story seems to be widespread.

What will higher education look like after coronavirus?
The Office for Students will need to design and put in place a multi-billion pound stabilisation fund to prevent the collapse of scores of vulnerable English universities. Access to this fund should be subject to strict non-negotiable conditions, including the phased closure of poor-quality and low-value courses under teach-out arrangements to ensure that students can complete their studies. (This seems easy to say; harder to say what’s meant by a poor-quality and low-value course. I don’t think some smirking reference to Gender Studies does the job.) More optimistic about the long-term; argues that demand for higher education will increase in developing countries. The article has an unfortunate digression into an argument that universities that attract plenty of students, should continue to expand at the expense of ones that don’t.