Surge Pricing, Artificial Intelligence, and Responsibility

&gt; People needed to be evacuated, but left to its own devices, our AI would have discouraged them with a higher price.<p>There&#x27;s two sides to the market. If off-duty drivers saw the higher price, they would be inclined to join. The price conveys information to both parties. Similarly, if I could, but don&#x27;t have to, take a cab, seeing a very high price would dissuade me. But if I&#x27;m in a dangerous situation, I would gladly pay that price. Prices exist whether you want them or not. Charging everyone a low price when there are extraneous circumstances that affect the supply or demand doesn&#x27;t miraculously solve the mismatch.<p>Variable pricing in general is a good idea, but you obviously need caps and floors. For instance, I have an adjustable rate mortgage. It makes sense to me, and when it starts adjusting the maximum rate it can go up to is around 10%, still not unreasonable worst case scenario. These contracts apparently didn&#x27;t have a reasonable maximum rate, but there&#x27;s no reason they can&#x27;t be built with one.<p>We should encourage transparent prices. If energy is constrained, we should discourage people from using energy if they can and encourage supply. And the simplest way to do that is the price system.

&gt; Contrast this with what we have heard about electricity providers in Texas. The surge was allowed to skyrocket up nearly 100-fold, just when people needed power most to survive.<p>Texas <i>regulators</i> set both the surge maximum and ensured that the wholesale price was set at this maximum for days on end. This was not a market exploitation of surge pricing but rather a regulator’s decision to try to manage a gross imbalance of supply and demand.

Surge pricing is great within limits (mostly monetary), to help with keeping an actual network effective. If regulations are set correctly (max surge price factor, max highprice interval in a pre-set time interval,...), and surge-pricing-aware devices are available (eg. water heaters that turn off at higher price, and turn back on at lower).<p>Going from a couple of cents to $9 per kWh, for extended time periods, without users actually having an alternative is well... pretty shitty.

A nice, strong piece. I love the example of people accepting to pay through their teeth to get to the hospital. Makes a nice, clear case for all the research on ethics in ML.

Sounds like the author knows a lot about AI and data but almost nothing about economics.<p>Prices exist for a reason; if power became more expensive that&#x27;s because it was scarce. People need to stop using it or pay more so that power companies can build more supply.<p>There are also options like the Tesla Powerwall that will be helped by this event.

&quot;we would never build a system that might “learn” that people whose destination is a hospital tend to be willing to pay higher fares&quot;<p>I&#x27;m sorry, but wouldn&#x27;t that exactly be the point of &quot;surge pricing&quot;? To allow people who REALLY need a ride to be able to pay a higher price and get where they need to be?<p>&quot;Surge pricing&quot; would kick in because of scarcity, as in, not enough rides available for everybody.<p>The person who needs to go to the hospital needs it more urgently than the person who wants to meet her friends at the pub, so she should be able to pay a higher price to get where she needs to be (the hospital).<p>The alternative is that she doesn&#x27;t have the option of paying a higher price out of &quot;ethical considerations&quot;, and has a high probability of not actually finding a ride to the hospital. How is that the better variant.<p>If you want to get all ethical about it, maybe you can set up a system where people get their money back if they can prove they needed to go to the hospital (or health insurance could cover it). But it is unlikely to cover all possible cases of urgency (&quot;needed to flee from a terrorist attack&quot;, &quot;needed to catch the love of my life before she marries somebody else&quot; and so on) . Much easier and more effective to regulate by market prices.<p>It seems to me yet another case of misguided socialist ideology causing harm in the real world.<p>An even more cynical interpretation would be that companies prioritize &quot;looking good&quot; over saving lives, so they rather implement the virtue signaling &quot;no surges for hospital rides&quot; than actually letting people catch their ride to the hospital.<p>If you are worried people might not be able to afford the ride to the hospital, you could give them credit.

Surge pricing probably wouldn&#x27;t be an issue if there were speculators that could sell during the highs to smooth it out.