Vice gets it entirely wrong on free-market capitalism

May 27, 2022

By Tim Worstall

Vice has managed to get the wrong end of this free-market capitalism mix. They’re saying that Uber and Lyft are a grand failure – when in fact they’re both grand examples of why the system works. This is especially true if they don’t in fact succeed in turning themselves into long-term profitable businesses – even if they go bust.

The point is that it’s the failures within capitalism that make it work.

“Uber and Lyft have been a crude proposition all along: Subsidize unprofitable taxi rides with venture capital money, claw for market share, and eventually figure something out that will make such taxi rides profitable …The fundamental problem Uber and Lyft keep running into is that most people are not willing to pay the fares it would cost to run a profitable taxi service with the overhead Uber and Lyft require.”

And so on, most of us could write the rest of it in our sleep so common are the talking points. But the point to remember is that this is indeed why free-market capitalism works.

The universe of things we can do expands as technology changes, what we want to have done changes as a result of fashion and happenstance etc. So, we need a method of working out what can newly be done folk would like to have done. The free market part is that anyone with an idea can have a try at it. The capitalism part is that the money is available to do so and is made if it works – which provides the incentive to try.

Things that don’t in fact work run out of money and stop – the system has its method of culling the failures. Which is the point at which we can say that Lyft and Uber, even if they superficially fail, are successes. OK, so now we know that an electronic hitch-hiking thumb – sorry, a smartphone-enabled private hire network – can’t be made into a profitable enterprise. We’ve explored that possibility and now it’s on to the next one.

Vice is a major part of the modern media landscape. The cable channel reaches 60 million American households, the magazine has a 900,000 distribution and the site gains some 25 million visits a month. It would be nice if such outlets grasped the basics of the system they live in.

That people try things and fail is indeed a failure of what they’ve just tried to do. But the success of the free market and capitalist system is exactly that – people try and we find out what works and what doesn’t. That’s how we’re able to do more of what does work, by finding out what does.


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