Sisolak recognizes reality of supply and demand

An emergency declaration doesn’t repeal the law of supply and demand. Gov. Steve Sisolak forced those seeking rides from Uber or Lyft to learn that the hard way.

On Friday evening before Memorial Day weekend, Gov. Sisolak issued an edict allowing transportation network companies to again use surge pricing, a practice under which companies such as Uber and Lyft increase their prices in response to heightened demand. Higher fares incentivize more drivers to work. This prevents overly long wait times or drivers not being available to meet demand.

Previously, Nevada regulations prevented transportation network companies from increasing prices from their base rates during an emergency. Gov. Sisolak issued his first coronavirus emergency order more than one year ago.

This regulation was in effect during the first months of the pandemic, but it didn’t make much of a difference. Gov. Sisolak ordered casinos to close. Tourism all but vanished.

Without demand for ride-sharing, there’s little reason to worry about the supply of drivers, which dropped dramatically. In March 2020, Nevada had more than 36,000 active ride-share drivers. One year later, the number had plummeted to fewer than 14,000.

But good policy looks beyond the immediate and into the future.

The lack of drivers became a problem when tourists began returning to Las Vegas. The supply of drivers didn’t meet the demand for rides. Normally, this would cause prices to increase, boosting wages for drivers. That would encourage more people to drive and current drivers to work longer hours.

When prices can increase in response to rising demand, supply will increase as well. That puts a downward pressure on prices and helps prevents shortages.

But that wasn’t an option as long as Gov. Sisolak kept Nevada in a state of emergency. Predictably, there were shortages. In April, an Uber spokesman said only 50 percent of requested rides in Las Vegas were completed. The Nevada Transportation Authority said wait times were up 225 percent during peak hours. Tourists complained.

That presented a problem for a tourist-dependent economy heading into a major holiday weekend. But Gov. Sisolak finally relented and issued a regulation removing pricing restrictions on transportation network companies. Not a moment too soon. During Memorial Day weekend, Uber said Mccarran International Airport was the most in demand location in the world.

Politicians may not like the law of supply and demand, but acting as if it doesn’t exist creates a host of unintended, but predictable, consequences.

The views expressed above are those of the Las Vegas Review-journal. All other opinions expressed on the Opinion and Commentary pages are those of the individual artist or author indicated.