Things tagged alex tabarrok:

The Uber Tipping Equilibrium

Alex Tabarrok at MR:

What is the effect of tipping on the take-home pay of Uber drivers? Economic theory offers a clear answer. Tipping has no effect on take home pay. The supply of Uber driver-hours is very elastic. Drivers can easily work more hours when the payment per ride increases and since every person with a decent car is a potential Uber driver it’s also easy for the number of drivers to expand when payments increase. As a good approximation, we can think of the supply of driver-hours as being perfectly elastic at a fixed market wage. What this means is that take home pay must stay constant even when tipping increases.


At this point many readers will object that I am a horrible person and this is all theory using unrealistic “Econ 101” assumptions of perfectly competitive markets, rationality, full information etc etc. To which my response is that the first claim is plausible but irrelevant while the second is false. A new paper, Labor Market Equilibration: Evidence from Uber, from John Horton at NYU-Stern and Jonathan Hall and Daniel Knoepfle, two economists at Uber, looks at what happens when Uber increases base fares.

Libertarian Social Engineering

Jason Kuznicki at Cato Unbound:

To my mind there are two ways to do libertarian activism.

One approach is easy, deeply satisfying, and - at least on our current margin - it’s basically ineffective. The other approach is difficult, usually thankless, and - I dare say it - revolutionary when it works.

Let’s call the first way libertarian moralizing. We know it by what it aims to produce: The intended product is more libertarians. Eventually we’ll persuade everyone, or at least enough of everyone, and then we’ll change the world.


To pick a completely incendiary name, I will call this second type of activism libertarian social engineering. By this I mean the deliberate attempt to create, on an incremental, case-by-case basis, the new, voluntary institutions and practices that a society would need if it were to become significantly more private, more decentralized, and more free. I mean here institutions like cryptocurrency, which is already well known; private institutions of assurance and trust in consumer satisfaction and safety; and Alexander Tabarrok’s idea of the Dominant Assurance Contract, which is exceptionally obscure, but which stands to my mind a fair chance of making almost all state action obsolete.