Why do people care about inequality?

We are often told that inequality is a big problem. Perhaps it doesn't itself slow economic growth, cause social and political instability, or set off damaging "path dependence". Perhaps CEO pay is actually reasonable! Whether or not that's true, the argument runs, people just dislike it, and since preferences are what matter, we should cut it. But it turns out people don't really dislike inequality, they just dislike unfairness.

Or so say three recent papers—two economic experiments and a review in Nature: Human Behaviour. The first (pdf) finds that people in lab experiments have a tendency, when given the option, to burn others' income when inequality rises. As an egalitarian might predict, it is low income subjects who are the burners, and high income subjects who are the burnees. But burning is substantially higher when the inequality is down to unfair rule tweaking, and lower when it's down to extra effort.

So far, so arcane, an egalitarian might argue. Fair enough. But a second study, this time conducted in India, and accepted for publication in the QJE, finds precisely the same thing. This time the authors conduct a month-long experiment with manufacturing workers. People don't like inequality when it doesn't seem to come from unequal productivity: they don't turn up for work and they work less hard. But when it clearly comes from higher output the workers don't seem to mind.

Finally, the Nature paper:

Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality.

The recent turn against inequality may not be evidence against this trend. Recent rises in wealth inequality seem to be driven by gaps in housing wealth, exaggerated by strict rules on housing supply. If this is true, then inequality is coming from unfair rules that rig things against one group and in favour of another. If that in turn is true then the "solution" to inequality really is just to fix the problem rules that cause some of it, but leave the bits that come from fair rules and uneven inputs alone. And, who knows, this might have some pretty nice side benefits...

Strengthen the commonwealth of nations, as well as neoliberalism

In my earlier post, Strengthen Neoliberalism and Change the World, I argued that proponents of neoliberalism should encourage societies to share experiences of different policies. No trying thing, you might think: get some people in a room and away you go.

But how do we make sharing effective? By its nature, sharing’s most useful when it’s between people in similar situations: how could we ensure that citizens of countries with similar values and systems of government to the UK that are sharing with us? What would help is a network that the UK is already a part of: the Commonwealth of Nations.

The Commonwealth is a global organisation with 52 member-states that are mostly former territories of the British Empire. Citizens of its members amount to nearly a third of the world’s population. It’s voluntary by nature: members have no responsibilities to each other. Their shared British legacy mean they are united by language, history, culture and values.

A funny basis to group countries by, some might say. Indeed, Commonwealth members put special effort into strengthening their bonds, particularly their shared values. In 2011, members signed the Commonwealth Charter signed: it sets out sixteen core beliefs for members, including democracy, human rights and the rule of law. The Commonwealth has seen success promoting the values in its Charter. Its biggest ‘win’ was the ending of apartheid in South Africa, the Commonwealth’s role was underlined when the country rejoined in 1994.

However, the Commonwealth hasn’t always been great at promoting liberalism. Major failures include permitting the 2013 CHOGM to be held in Sri Lanka, even though its government had been accused of major war crimes at the end of its civil war. Moreover, homosexual acts between consenting adults remain illegal in a majority of Commonwealth members. Finally, the Commonwealth hasn’t succeeded in other areas like trade: there’s no Commonwealth free trade agreement, for example. This inability to find ways to contribute has caused some to question the Commonwealth’s relevance in the modern world.

I started this post by asking what would make sharing of policy experiences more effective at strengthening neoliberalism. The Commonwealth of Nations provides a network of countries that could underpin worthwhile sharing. However, questions about its relevance suggest we should look more closely at its record. If sharing policy experiences strengthens neoliberalism; perhaps it would strengthen the Commonwealth, as well.

If only we could get Jeremy Corbyn to understand about capital

Jeremy Corbyn has suggested that all those gig economy companies should be replaced by cooperatives. Which some will applaud as a no doubt lovely idea - except to do so is to entirely misunderstand the role of capital in these things.

Jeremy Corbyn has suggested that 'gig economy' contracts should be replaced by cooperatives as he accused the Conservatives of presiding over a "broken" economic model.

We don't suggest that our current model is entirely peachy, that there's nothing to be one to improve the structure of the economy. We do insist though that some attention has to be paid to reality:

Mr Corbyn suggested "gig economy" firms like ride-hailing service Uber or food delivery firm Deliveroo could be replaced by co-operatives, in which drivers collectively set pay and conditions and share or reinvest the profits from their work.

We're entirely fine with cooperatives - if that's how you wish to organise yourself then great, you do that. We are indeed liberals after all. We're entirely fine with the existence of John Lewis, with farmers' cooperatives, with any method of organisation that it pleases people to partake in. We only insist that those different forms of organisation must compete against the others in the market.

However, that reality bit. Firstly, there's that slightly worrying idea that what Jezza means is a forcible change in that structure. Even in the absence of that we come to the second objection. Why aren't these firms cooperatives, why is it that they've adopted that capitalist model?

Because they've all been making great gaping losses as they start up, meaning that they've needed capital to exist. And that's the problem with cooperatives, the only capital, by definition, that is available to them is what the workers are bringing to the table themselves. Uber has swallowed however many billions it is and still makes gargantuan losses. Deliveroo being smaller has consumed less of that capital but it's still rather more than we expect a grouping of would be bicycle couriers to be able to chip in.

All of which is what the capital part of capitalism is about, allows. The ability for a new business to build itself by using outside capital, not just what the workers themselves can provide. This is true whether we look to government to provide the capital or private markets.It's still an outside source of that necessary capital and there is and should be a price for the provision of it.

As above, we're fine with cooperatives. But it's just one of those reflections of reality that the model isn't going to work with anything which is capital hungry. Precisely because capital in large quantities is not something which the workforce can bring to the table. Capital light projects like three building a new app, sure, that can and is done. But businesses which swallow hundreds of million to billion to grow just cannot be financed on the cooperative model.

Which is rather the point of this very capital part of capitalism. It's the only way we've got to mobilise the savings and investments of thousands and millions of people into large scale organisations.

Amazingly, sometimes government isn't very good at doing things

We agree that we are biased upon this point but even so it is still true that at times government isn't very good at doing things. As with this between the Coastguard and the RNLI:

Lives are being put at risk at sea because of a delay in launching lifeboats after emergency calls to the coastguard, according to senior RNLI crew. They believe a shortage of experienced staff and poor operating procedures at the Maritime and Coastguard Agency (MCA) are leading to slow responses and potentially fatal decisions.

Delays and inefficiencies between two arms of the State aren't going to surprise anyone rich in years or experience of dealing with said State. However, in what will be a surprise to non-Britons, the Royal National Lifeboat Institution is a private sector, entirely charity supported, organisation. The Coastguard is government in its glory.

There is a larger point than just to point to inefficiency. Which is that of public goods. No one does negotiate their rescue from peril on the sea (although there is much private and Admiralty law on the rescuing of assets, such as ships abandoned etc) at the time they need rescuing. The network of those able to perform rescues is a public good. The normal reaction to which is that if it's a public good, non-excludable and non-rivalrous, then government must provide it.

Which isn't, as we can see here, true. The existence of a public good is certainly a time when we should think about whether government can or should be involved. But that is not to then make that leap to State provision.

In parts of the literature you will see that lighthouses are the obvious example of when government must. No one can charge for lights, therefore in the absence of the ability of private provision government must perform the task. Which is to entirely miss that the lighthouse system for the British Isles was and is (it's a little more complex today but only recently) a private not for profit organisation, Trinity House. Enter a British or Irish port and you pay dues, some for the port, some for "lights." Those who pass by get the guidance for free, those who dock pay. Whatever else we might think about it it does in fact work.

The existence of a public good is a very good time to start thinking about government involvement, entirely so. But that is not a sufficient reason for government to either be involved nor to provide the good or service. As with the herd immunity provided by general vaccination, there are different ways to achieve the goal. The NHS performs and pays for all child vaccinations, the US systems insist they must be performed privately before a child enters school. Both work in that sense of producing that herd immunity. 

As to which system is used where and when we think a large part of it is due to historical happenstance. Lifeboats and lighthouses really got organised in Britain during the near laissez faire times of the Victorian era. Thus we've a private system of provision. The NHS was the nationalisation of the previously extant medical care system (the NHS completed its first new hospital in 1963, 15 years after NHS creation) just because post-war Britain did seem to think that government should and could do everything. Thus much of how we provide these various public goods is dependent upon just what was the idea du jour of the time we started to address that problem.

Leading to the thought that we might profitably have a proper rethink of exactly how we do address these problems. Many are insisting today that the State should be doing more - all those calls for nationalisation - but we could equally, perhaps more in fact, profitably be pondering what is it that government does do but shouldn't be? 


Here's an interesting historical rewrite

We do note that there's often enough an attempt to rewrite history. Or, perhaps, to emphasise one aspect rather than another. The New York Times recently ran a piece insisting that communism had its good parts as women had more orgasms. Female sexual pleasure is indeed important but we're deeply unsure that it's a justification for the Holodomor.

Similarly there's been a long running insistence that Britain was at its best in 1976, for that's when we were most equal. Not a view that's likely to be shared by anyone who was there at that time nor was it sustainable as the subsequent years showed.

And then there're those who wish to trample over the basic facts, not just polish certain facets of reality:

For too long, people in social housing were forgotten and denigrated, and estates were left to disintegrate under the last Labour government and every Conservative government since the 1980s.

Well, no Ms. Foster, that isn't actually what happened, is it? As Polly tells us in the same newspaper:

Labour's extra spending went mostly on improving services – hiring doctors and nurses, more and better qualified teachers, rebuilding leaking schools and aged hospitals, free nurseries and 3,500 Sure Start centres. Too few homes were built, but 90% of social housing was brought up to "decent homes" standard, rescuing estates from chronic disrepair. 

As The Guardian itself insists, comment is free but facts are sacred. Not too much to ask that a publication lives up to its own tagline, is it? 

Why are houses in London so expensive?

Oxford Economics’s Ian Mulheirn writes that London’s housing market isn’t expensive because of a lack of building, and building more wouldn’t lower prices. I disagree. 

Claim one: housebuilding has outstripped household formation, so if anything we have a surplus of housing. 

Household formation is “endogenous” – it is determined, to some extent, by housing availability. My flatmate and I count as a single household, even though we might prefer, if we could afford it, to live separately. A young person who wants to leave home (creating a new household) may not be able to do so because it’s too expensive. A household might not be able to move to London at all if housing costs are too high.

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What if we look at something other than households? This chart (hat tip to Daniel Farey-Jones for it) comes from the GLA’s excellent Housing In London report and shows that in the last two decades the number of jobs in London has grown by 40% and the number of people by 25%, but the number of homes by only 15%. (I suspect this figure is also partially endogenous – more people would live in London if it was cheaper to rent or buy.) People-per-dwelling in London has been rising since the mid-1990s and the share of 20-34 year olds living with their parents in London has risen from 17% in the late 1990s to 23% today.

So it looks as if there is something to this endogeneity point. Since the first half of Mulheirn’s argument rests on household numbers being independent of house numbers, I think it’s wrong. 

Claim two: house price rises cannot be blamed on insufficient supply because rents did not rise by anything like the same rate.

Here Mulheirn is on firmer ground. Because house prices reflect their value as an investment as well as their value as a place to live, simple supply and demand views may be misleading. Rents, which only reflect the value of somewhere as a place to live, are a better reflection of supply and demand dynamics than house prices. 

Low real interest rates are probably a better explanation for the recent rise in house prices than a sudden change to supply and demand fundamentals is. Ben Southwood explains why here, but basically if the expected return from other investments falls, the value of housing rises as it becomes a relatively more profitable investment. 

But there are two things to say about this. One, the fact that rents have not risen much in London since 2005 does not show that there is no shortage of houses in London. Rents may have been very expensive already back in 2005, and by international standards it certainly looks that way – London is one of the most expensive cities in the world as rents go. 

Mulheirn does not ask why housing is such an important investment good in the first place. We don’t expect the price of other durable goods like airplanes or cars to rise when interest rates fall, because the supply of those things is relatively elastic so if the demand for them goes up due to cheaper borrowing, people simply meet that demand by making more of them. “Investing” in a car doesn’t make sense unless that car cannot be easily made in the future – so classic cars, yes, but 2017 Toyotas, no.

Not so with houses. The supply of houses, like gold or fine art, has become so inelastic that houses now do have a huge investment element to them. You want somewhere secure to live permanently? Sorry, you have to also invest in a hugely valuable financial asset that might rise or fall by 10% in value in the space of a year, producing a deposit for that and paying the interest on a loan to cover the costs. 

This is why building more homes would cut prices, even though recent price rises may not be caused by a fall in building rates. The price of housing-as-investment is determined by two blades of the scissors – both interest rates and tenancy rules acting as one blade, and inelastic supply acting as the other. Let supply respond to demand and housing stops being a useful investment asset. 

In a footnote, Mulherin makes a third point: 

Incidentally, it’s pretty much impossible to make a case that purely regional supply shortages can explain a boom in national prices in the absence of a national supply shortage. If there’s no shortage nationally then any growing demand in London, say, must come at the expense of falling demand elsewhere leaving average prices unchanged.

This is a very weird point and is obviously wrong. We don’t have a fixed amount of money to spend on housing nationally – we can raise our earnings by moving to different places, and we can shift expenditure from other things to pay for more desirable housing. If housing supply was entirely fixed in London then any rise in wages here would result in a rise in rents paid, without any money being shifted away from elsewhere.

It's difficult to understand what model he's using in his head – what does he think would happen to prices if we allowed many more houses to be built? Where does he think house prices come from? It's not clear how his points join up in his own argument. For me, though I admire Mulheirn’s contrarianism, I don’t think the case is made. Building more houses is still the best way of cutting housing costs that we’ve got.

The IMF did not say that Britain should raise taxes

The International Monetary Fund has said that some countries have the room to raise taxes, at little cost to economic efficiency, in order to reduce inequality. Everyone and their grandmother is now shouting that Britain can raise taxes in that manner.

This is not what the IMF said. It is what the papers are saying though:

The International Monetary Fund has called for higher income taxes on the rich to help to balance budgets and arrest the political threats posed by inequality in a sharp break with its prevailing orthodoxy.


Yet, in its latest fiscal monitor, that is precisely what the IMF has done. Not explicitly, of course. The report is careful not to say which countries should be thinking about raising the top rate of tax. Still less does it say that the right level should be the 50% proposed by Labour.

But that doesn’t really matter because what the IMF has done is provide some high-level support for Labour’s basic approach.


Labour seized on the report, calling for higher taxes on the rich, citing the IMF’s intervention as evidence of the need for a fairer tax system.


The pro-taxation stance in the fund’s bi-annual “Fiscal Monitor” was well received by Labour’s shadow chancellor, John McDonnell, however. “The IMF support the argument we made in the General Election for a fairer tax system,” he said.

He added that there was no evidence to support “those who scaremonger about the effects of making the rich pay fairer tax”.

The point being that this is not what the publication says, at all. What it does say is that, as we all know, there's a trade off between the damage done to economic efficiency by high taxation and the reduction of inequality by that tax and the subsequent spending. That's not exactly news. They then go on to explore where and when, in their opinion of course, the trade off in the loss of efficiency becomes too great for the value of the reduction in inequality.  

About which they say this:

Empirical evidence suggests that it may be possible to increase progressivity without adversely affecting economic growth, for instance, by raising marginal tax rates at the top in countries with relatively low rates and progressivity.

That is, places with low tax rates and little progressivity in their tax systems can raise those rates and progressivity - but only those currently at the low end. 

Which leaves us with the question, well, where is the UK? That's discussed on page 7. And the UK is slap bang in the middle of the countries studied. Both in how much inequality is reduced through the tax and spending system and also in how much of that is done by tax itself and alone. We're average, not low, that is. And thus the idea that we've the room to do more about inequality through higher taxes on the better off without damage to economic efficiency does not apply to us.

All of which usefully agrees with earlier findings from the same source. Our index for the inequality is the Gini and we can shift that by something in the range of 12 to 14 points without doing too much damage to that economic efficiency. More than that and we do indeed make us all poorer to no good end. The UK shifts the Gini by some 14 to 15 points by these calculations. We're doing about what we can without the damage becoming excessive already. 

The IMF said some people can further reduce inequality through their tax and spend systems. Accurate observation tells us that they've not said this about the UK. 

Ubers, not social ambulances for me please

The rather eerie Instagram post of Michael Fallon at Conservative Party Conference looks like my Dad, or even Grandpa has got hold of the Party’s account. Combine this with Robert Halfon’s suggestions on Monday of “social ambulances" and it looks like the Tories are having a midlife crisis. 

Here’s Halfon:

“But this is not just a ladder by itself, it’s a ladder that is grafted by government, it is a ladder that the people are brought to by government, it’s a ladder that has a social ambulance always there at the bottom, ready if people fall off. It’s a ladder that has hands around it, to help people every step of the way.”

Halfon is right that Tories need to do more to appeal to younger voters. However, free bus passes, fuel cards and free insurance for those on lower incomes really aren’t the way forward: it concedes Labour the argument. Why vote Tory if they're going to copy Labour policies on tuition fees, the public sector pay cap, and energy price caps anyway? Might as well go for the Real Red Thing! May and co. have also clearly been reading the same economics books as the Labour Party with their £10bn pledge for Help To Buy

So what should the Tories do to get the youth vote?

By youth vote I mean, graduates under 30. Yes, telling under 47s you voted Tory is like saying you killed their dog, but how to win back under 47s is another blog post. So, they could start by listening to the message of rising stars like Kemi Badenoch MP. Speaking the ASI on Tuesday, she made the case for free markets to a large crowd of young people. I implore you to watch her maiden speech where she reminded the Conservatives of their identity: defenders of liberty and free enterprise, and champions for a meritocratic society, aspiration and personal responsibility.  

My 3 suggestions...

Firstly, build on the Greenbelt & transform restrictive housing policies. It’s pretty simple economics: there’s a massive lack of housing supply in London, and there’s land we could build on but don’t because we think it’s sacred. It’s not. A considerable amount is made up of carparks, hardly Constable’s land. And if we built on just 3.7% of it, that would provide us with 1 million homes. Build out and up. 

This is really important for scooping up the youth vote: rents in London gorges on about 50% of young people’s disposable income in exchange for rabbit hutch in zone 4. And buying a house is simply not on the table: I would have to earn £200,000 in today’s money to reflect the proportion of income spent on mortgage payments comparatively to someone in the 1950s. 

Home ownership provides people security and used to be engraved into every Conservative manifesto. 

Secondly, embrace social liberalism: legalise cannabis, decriminalise prostitution and for God’s sake drop the xenophobia. Firstly let’s look at legalisation of cannabis. If you legalise it you can regulate it, rake in tax, reduce the figure of £10.7bn that’s currently spent on drug related incidences and lower gang crime. 

Decriminalisation of prostitution is the right way to tackle the injustice in this industry. My arguments for this echo my arguments for legalisation of cannabis. Decriminalising it allows you to regulate it, rake in tax, but most importantly provides sex workers with independence and liberty to work in safe environment: they can report violent customers and work with more than one person - this is currently not allowed, leaving sex workers more vulnerable to assault. 

My housemate Sarah, a staunch Labour voter, always refers to me as “nice Conservative”: I think this is mainly due the fact that she perceives me as socially liberal. And that data proves that Sarah is representative of the electorate. The Tory Party have a massive PR problem with potential metropolitan voters liking their economic policies but thinking they're nasty or racist. Introduce policies along these lines, and the electorate will see that Conservatives are the party that give you personal freedom and choice. 

Finally, back the likes of Uber and AirBnB. Voting Labour and using Uber is incredibly hypocritical. Unfortunately not everyone understands why this is hypocritical: if they did, perhaps they’d be a neoliberal. But the fact is not enough people made the connection with the fact that regressive and protectionist policies are hallmarks of the Labour Party. 

The Conservative Party took 3 days to respond to the Uber ruling, doing nothing to bolster this connection. Gig economy firms are the epitome of free enterprise: many Uber drivers who are accountants, shopkeepers, students etc use Uber as a second source of income, indicating the Uber workers are enterprising, opportunistic and aiming for maximum utility with their time. And the same goes to renters or homeowners who rent out their rooms on AirBnB whilst on holiday, they’re prepared to work outside their normal remit to earn that extra bit of money - just like Deliveroo drivers too.  

There are some people Tories may never be able to win, but it should be easy to win over success-driven and well-off young creatives and city workers. The Tories have got to get yuppies openly saying “Maybe the Tories aren’t that bad. They’re reason I can get home safely this evening and the reason I’ve got more disposable income is because I can rent my room out when I go home for the weekend.” 

In summary, the Conservatives need to return to its best instincts instead of dressing themselves in red clothing. With things like energy price caps, and more taxpayer funded social housing, they’re trying to be something they’re not - what’s next, rent controls? Instead of harping on about socialist Venezuela, a concept most people struggle to see the relevance with, the Conservatives should make a positive case that they are  the party of economic and personal liberty. Then and only then will they have a chance to ward off Corbyn and his band of merry pinkos. 

There's a lot of serendipity in an economy

David Byrne tells us of the existence of a cluster, a centre of excellence, out in the Pennsylvania Dutch (ie, Amish etc) farmlands. The cluster, the centre, for producing stage sets for arena touring musical shows. As he says, we might expect there to be some reason for this:

What I get from this story is that, for the most part, my assumed explanations as to why this music and tech complex sprouted and grew here, were wrong. Probably like most people I assumed there were practical and rational economic factors that explained why this and why here. A confluence of nearby interstate highways maybe, allowing easy access to markets and resources. Or maybe it was not even highways, but proximity to a sizable number of markets-—Philadelphia, Baltimore, DC, NJ, Cleveland, Pittsburgh and more. Maybe there was a university or some institution nearby that was turning out trained audio engineers—Lehigh University maybe?

Those factors (except the last one) did help the business flourish once it was established, but they don't explain why it started here.

That such a centre is likely to happen is obvious enough, clustering is a well known economic phenomenon. The industry is where the industry is and once it is if you want to be in it you'll go there. Sheffield and Rotherham are where you go in the UK with specialty metals, Stoke on Trent to be a pottery, The City for finance, elsewhere LA for movies, Nashville for turgid dirges and so on.

But as Byrne points out, they why of the specific place can be serendipitous. It was simply Frankie Valli's anger at being snubbed over the use of a sound system, the first people he could find to provide him with his own coming from this area. And that really was the start.

All of which is just another example of why that economic planning is so difficult. Because things really do just happen. Or, as we might put it, the economy is something emergent from those things which just happen rather than something we've guided into being.

How much do Uber drivers value flexibility?

Uber drivers often explain why they choose to drive for the company in terms of more flexible working arrangements. Last month, an independent poll revealed that 80% of Uber drivers in the UK would prefer to remain as contractors, but the unions campaigning to give these drivers worker status don’t seem to care about the views of the people they’re claiming to help.

In most U.S. cities, Uber’s ride-hailing model provides greater flexibility than traditional taxi models because (among other things) it doesn’t use a medallion system. Most taxi companies make money by renting medallions to drivers, who pay a daily or weekly fee for the right to drive. Instead, Uber charges a percentage commission on each journey, which means drivers who only want to do a few rides can do so without losing out. To assess how much drivers value the commission fee model over the medallion system, two MIT economists and an in-house economist from Uber offered 1,600 randomly selected Uber drivers in Boston the opportunity to lease a virtual medallion that eliminates Uber’s commission-fee. People might be sceptical of a working paper co-authored by an Uber economist, but their study was released on the reputable, non-partisan NBER last month. The other co-authors are also eminent, non-partisan economists.

The researchers offered Uber drivers a range of medallions at different prices, recording their opt-in rates and logging the amount they worked. Using this data, they were able to estimate how much these drivers prefer Uber’s commission model to a traditional taxi medallion system. This can be expressed in monetary terms as “compensating variation” (CV): how much money it would take for Uber drivers to be indifferent between the commission model and the taxi medallion system.

Using the most realistic estimates of wage gaps between Uber and taxi drivers, as well as medallion costs, the study finds that average CV is $437 per week. Boston’s Uber drivers place significant value on a more flexible commission model. For Uber drivers who don’t spend many hours working per week, this makes intuitive sense. The fixed cost of a medallion would outweigh the gains from driving fee-free. But even among drivers who would have expected to earn more per week with a medallion system, many did not opt to use it. This could be explained by a combination of loss aversion and risk aversion: the former being the idea that “the decision to buy a lease may be a gamble that drivers hate to lose” and the latter being drivers’ reluctance to gamble money upfront in exchange for uncertain gains during the week.

Although the study’s conclusions are more directly relevant to U.S. lawmakers, they are also a reminder to UK regulators that Uber’s more flexible working arrangements are highly valued by its drivers. They care about having greater freedom to choose their own hours: so much so that they are willing to trade off potentially higher earnings in order to preserve that freedom. The same is also true of Uber's customers, who benefit from the influx of supply during predictable peak hours that Uber's flexible surge-pricing model makes possible. If Uber loses its appeal against last year’s ruling that its UK drivers are workers rather than contractors, many of the benefits of flexibility will be lost.