The horizon is not so far as we can see, but as far as we can imagine

How Monopolies and Oligopolies Cause Shortages

I don’t usually write “just go read this” posts, but I’m going to make an exception for this piece by Matt Stoller on how a monopolized economy causes shortages. This is the best article I’ve ever read on how monopolies and oligopolies work (Stoller tends to just say monopoly), and how their incentives systematically induce them to reduce the welfare of almost everyone in society.

Matt starts by noting that now that Uber and Lyft have destroyed Washington DC’s cab companies, waits for rides are now ten to 20 minutes, as well as being more expensive.

It was obvious that this was the play; destroy the cab industry by underpricing, then reap monopoly profits, and it’s something I pointed out repeatedly for years.

But Matt has put together a systematic explanation of how the entire process works which is the best I’ve seen, and you should read it.

Go, read.



The Simplest Explanation for Western Decline


Open Thread


  1. different clue

    Uber Lyft is a case where ride-seekers really did have a choice. They could have chosen to keep paying more for real cabs, like I did, or they could have chosen the cheaper-at-the-time choice, Uber Lyft, which is the choice they chose.

    I have never taken a Uber Lyft and I hope I never will. Our cab companies were driven either extinct or into legal shelter as limited purpose limousine service “car” companies. I sometimes take those if I must. Otherwise I take the bus or I walk.

    People who chose to exterminate the cab companies by choosing to go Uber Lyft have earned the higher prices and longer wait times which they have chosen to help Uber Lyft create.

  2. Ian Welsh

    I’ve never ridden one either, but I understand why people do and don’t expect otherwise.

    There’s a reason why “dumping” (underpricing) is often considered illegal.

  3. bruce wilder

    The oversupply of finance driving the building of monopoly is a key to the story. I do not see how Uber/Lyft survive, let alone charge enough to generate a return on the vast sums squandered on destroying the taxi’s and seriously damaging public transit, (not to mention all those junky rental scooters!) Like WeWork, they will not be around for the end-game. Financial profit thru managed disinvestment, enabled by business strategies that are profoundly destructive to the economic ecology is the story Stoller is assembling from many, many stories.

    The power of his argument rests on those numerous examples. He is actively soliciting examples. If you know the juicy details of an example, even an obscure one, help him out.

    The struggle against the enervating abstractions of economics lie ahead and the examples are ammunition for that fight.

  4. someofparts

    The comments following the post are really good too and add a lot to the conversation.

  5. someofparts

    The comments provide more examples and they are good ones.

    Also, the first comment was someone who was sending a copy of the article to their people in Congress, also not a bad idea.

  6. different clue

    I have read a theory that the investors who keep putting their billions into UberLyft had exterminating the taxi industry and exterminating mass transit if possible as their goal, and if they have lost their money but gained that goal; then the money has been well spent, from their viewpoint.

    About those trashy little e-scooters, the young people love them and they are here to stay. Is there a way to improve them and domesticate them and enlist them in service to loftier goals?

    First, they need not attrit mass transit. If mass transit is moving mass quantities of people along fixed routes and stopping a fixed points for persons to get off and get on, then the e-scooters could serve all the leadaway streets and little corners and stuff not on the fixed routes. So urban travelers could ride the mass transit till they are close-ish to their not-on-the-route destination, and then find and ride an e-scooter over that last mile to the destination. E-scooters and mass transit could increase eachothers’ ridership.

    They could increase eachothers’ ridership so much that mass transit starts doing measurably better, and a risingly critical massload of e-scooter riders might start thinking about how to make the e-scooter safer and more rider-friendly, and then how to help the city and the e-scooter co-evolve to eachothers’ presence.

    If e-scooters had bigger bicycle-style front wheels they would be safer . . . less prone to tip over and more able to ride through and eat the tiny little potholes which flip little-wheel e-scooters over and injure people. E-scooters could be designed for a top speed of 10 or 15 or so miles per hour. The danger e-scooter could give rise to the safety e-scooter just as the danger-bike gave rise to the safety bike in the late 1800s, E-safety-scooters.

    They could have 2 little wheels in the back instead of just one . . . for even greater stability. And they could have a little narrow high verticle stuff-storage boxket on the back between the two wheels. An e-trikescooter. E-safety-trikescooters.

    The same cities which are under pressure to create bike lanes could just as well create bike-and-e-scooter lanes for even more human traffic to flow.

    E-scooters take way less energy to build and to run then ubercars do. So people moving by e-scooter instead of ubercar would be using vastly less matter and energy.

  7. Bill H.

    Am I wrong in concluding that the economic situation does not improve as the pandemic recedes and eventually ends?

  8. Hvd

    Using Uber as an example is unfortunate in that it involves replacing a terribly managed regulated monopoly taxis (at least in New York City) that failed to present a decent product with an unregulated monopoly with one that actually delivered for at least a brief period of time. Rather than respond with better cars and a better service the regulated monopoly just cried unfair. Competition might have succeeded in creating a better all around product. Instead a failure of genuine and reasonable control of a natural monopoly resulted in what we see. in

  9. someofparts

    hvd – I don’t think any honest business could have competed with a crooked one that could afford to operate for less than the baseline cost of doing business over a long period. After the famous Montgomery bus boycott back in the 60s, the rulers of the town waited until press attention moved on and then quietly just never replaced the bus services for the city at all. I think it’s a safe bet that our lizard overlords would be pleased if the majority of us could barely afford to move around much.

    bill h – not wrong at all, but don’t hold your breath waiting for it to recede – the longer it rages on the wealthier the rich get and the higher the body count for regular people climbs – which is a win for our overlords in every respect

    diff clue – interesting idea about coordinating public transit and scooters – my one quibble with the scooters would be safety – as an urban female who used to work night shifts, I would not want to be headed home on a scooter in the middle of the night in a marginally safe neighborhood. As more and more people become broke and desperate, I could see the scooters becoming unsafe for anyone lucky enough to have a job.

  10. Mary Bennett

    Hvd, Thank you for this. The price of a taxi might be well within the budgets of Mr. Welsh or Mr. Stoller but it is not in mine. Riders liked and still so far as I know from speaking to relatives, still do like Uber and Lyft, for one specific reason apart from price. You could choose your driver. No more having to put up with a resettled CIA asset who didn’t or wouldn’t speak English, couldn’t read a map, and copped an attitude about women traveling alone. And, with Uber and Lyft, as I understand, you could leave feedback. Price rise not withstanding, Lyft in my area still costs a third of taxi service. This is a big deal when responding to a family emergency (I don’t drive) in a town not served by any mass transit. I know and know of many folks who still drive for those two companies and regard the gig as a secondary income stream.

  11. Hugh

    Monopolies are about delivering worse goods and services at higher prices. They come into existence because government allows them to. And more than that it often fosters them. It does this either through tax breaks, think Amazon and Tesla, or via the trillions of liquidity the Fed has been pumping to the rich through the stock market. So what if Lyft and Uber have never made a cent of profit, and never will. Their valuations let the rich borrow against their holdings and reduce their tax bills. Win, win, baby!

  12. Jerry Brown

    Thanks for the just go read. That was an excellent piece of work by Matt Stoller that I would not have found on my own.

  13. Synoptocon

    Fascinating. Haven’t seen anything like those shortages in Toronto, nor can I find much mention in our media. Makes me kind of wonder whether the supply chain constriction isn’t principally in the last few links.

  14. different clue


    The social-safety danger to lone e-scooter users at night in marginal neighborhoods of rising economic desparation is a real danger, and I have no good ideas to offer on how scooter-use itself could be made any freedom-from-crime safer for lone users after dark.

    If the same risk would exist for people on bicycles or walking alone in the same places under the same circumstances, then the problem is bigger than just the particular lone-traveler transport technology. It becomes a quality-of-society problem and will it be solved by more kindness or more pro-active law-enforcement or by sending decoys into these areas . . . . decoys who look weak and defenseless but when attacked are discovered to be highly skilled, trained and motivated breakers-of-bones and rupturers of internal organs . . . . so that the crime-committing element becomes afraid to attack anyone looking weak and vulnerable for fear that they may be a knowledge-imparting decoy-in-disguise . . . I just don’t know.

    So about my dreams for the e-scooter, I will retreat to saying these dreams might still be valid in broad daylight and in high-safety areas and town and city centers in terms of energy conservation as against uberlyfts and for creating so much semi-speedy accessibility to everything between mass transit routes as to make the mass transit routes themselves more attractive to new users.

  15. someofparts

    copying a response to the article shared by a friend –

    Yesterday … I booked a taxi online that promptly appeared to pick us up at 4:20AM just as we had requested. It was a professional taxi service in Budapest that has utilized online apps created by Uber to enhance its taxi business. … clearly example of Washington D. C. taxi damage from Uber does not mean that Uber has ruined taxi service everywhere.

  16. Trinity

    For the “semiconductor problem”, it isn’t just the monopoly, it’s that everything now “must” have a chip. This was never true, and still isn’t true. And who really needs a fridge that can order milk, or would ever even use that feature? A few richie rich’s? The Internet of Things is another one of those “initiatives” that seems to have rightly disappeared.

    Reading the article and the comments, one can see big tech’s fingerprints everywhere, especially the comment about EDI by the freight forwarder: “Building an EDI connection is expensive and time consuming, so only the larger forwarders can invest in the required tech and personnel. Once the EDI connection has been established, our clients’ supply chains planning … becomes dependent upon the data generated by this linkage, making it very difficult to switch to a different logistics provider.”

  17. drumlin woodchuckles


    If a mainstream taxi service in Hungary is using Uber aps, that does not make it Uber. I wonder if Uber is legal or illegal in Hungary. If it is illegal, perhaps Uber would license its apps to a legitimate taxi company to make at least a little money out of Hungary. If Uber is legal in Hungary, I wonder how a legitimate taxi company was able to get its hands on Uber’s secret-sauce apps.

    Perhaps they are copy-cat apps. Or reverse-engineered apps. The East Europeans have their quota of computer-skilled people who can do that.

  18. different clue


    I doubt the Internet of Things has disappeared for good. Its operators may be lying low for the moment, working out how to re-infect every physical thing with their spy-chips and hacker-backdoor chips and silicon lampreys and digital cooties.

    If smart fridges, smart toilets, smart doorbells, smart toasters, etc. seem gone for now, they will be back. And they will offer a very good “market opportunity” for skilled people who know how to strip the digital cooties out of things and appliances to turn them into reliable trustworthy analog dumm appliances.

  19. different clue

    Here is a little video someone posted to reddit to show the “other side” of Lyft which sometimes happens. Probably the other side of Uber happens too, from time to time.
    And with taxis safely exterminated by UberLyft, there is no alternative in many places.

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