The classic 1997 behavioral economics paper, Labor Supply of New York City Cabdrivers: One Day at a Time, had a simple explanation for why finding a cab is hard when it rains in New York. More people want taxis when the weather’s lousy, but fewer are on the road. Demand up, supply down. The study’s authors speculated that the reason cabs get off the road is that drivers set themselves earnings targets, and they reach them sooner on rainy days. Their conclusion wasn’t flattering: Drivers were either irrational or naive to leave extra earnings on the table. Princeton economist Henry Farber thinks otherwise. For a paper issued in October, Why You Can’t Find a Taxi in the Rain and Other Labor Supply Lessons From Cab Drivers, he used data on 5 million shifts and 8,800 drivers from 2009 to 2013 from the New York City Taxi and Limousine Commission. Farber crunched data on the length of each ride to calculate drivers’ wages per minute. Then he compared trips against the daily rainfall records for Central Park. Farber says demand for cabs does increase in the rain: Occupancy rates are about 4.8 percent higher, he estimates. Supply also decreases, as the number of cabs on the street drops by 7.1 percent. But Farber argues that reaching income targets early has nothing to do with this pattern. “Some drivers stop simply because it is less pleasant to drive in the rain, and there is no additional benefit in continuing to drive,” he says. As New York taxi drivers explained in an informal survey for this story, the probability of being in a costly accident is higher with precipitation. Said one cabbie: “Pedestrians act crazy and unpredictable when it rains. I am afraid I’ll hit someone.” Driving in the rain is also less profitable than previously thought, because rain slows cars down, resulting in more traffic. Farber estimates cabbies drive 2.4 percent fewer miles with a passenger when it rains. The number of miles traveled on a fare makes up the largest part of a driver’s earnings. Picking up customers in rainy weather means more time stuck in traffic, not more income. Says Farber: “That miles traveled per hour with a passenger are lower despite the fact that the occupancy rate is higher is clear evidence that driving conditions are worse in the rain. This is the factor that offsets the increase in demand and results in no change in average hourly earnings when it is raining.” Farber offers a good explanation of why New Yorkers can’t get a cab in the rain. But what’s the solution? For an answer, Farber turns to Uber, whose popular app allows a customer to order a car and track its location and estimated time of pickup. Uber practices surge pricing, using an algorithm that pushes fares up as demand for the service rises—on a rainy day, say—and then lowers fares when demand returns to normal. Such pricing could potentially relieve the taxi shortage, giving incentives to cabbies to keep driving in the rain, even if it’s unpleasant.
Posted on: Fri, 14 Nov 2014 02:30:00 +0000
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