The Best Economists Uber Could Buy

The Best Economists Uber Could Buy

Why would some of the world’s leading economists overstate driver incomes?

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A former Uber executive has leaked more than 124,000 documents to The Guardian and other news outlets, revealing a long campaign of lying, lawbreaking, and other chicanery that helped make the company a worldwide giant—though one that has yet to turn a real profit. The executive, Marc MacGann, saw the leak as a form of expiation for his previous work. As he told The Washington Post, “I was the one talking to governments, I was the one pushing this with the media, I was the one telling people that they should change the rules because drivers were going to benefit and people were going to get so much economic opportunity. When that turned out not to be the case—we had actually sold people a lie—how can you have a clear conscience if you don’t stand up and own your contribution to how people are being treated today?”

Among other things, the documents detail the company’s strategy of invading new markets whether it was welcome or not. It was especially not welcomed by existing taxi drivers, who often attacked Uber cars and their operators. Uber’s founding CEO, Travis Kalanick, welcomed the attacks. He told his team, “Violence guarantee [sic] success.” It would make Uber look like a bold disruptor of the status quo, as if “legacy” cab drivers were a privileged class.

Of particular interest to someone on the economic beat is the company’s purchase of friendly research from esteemed economists. According to The Guardian’s article, it doesn’t seem that Uber had to work too hard to find takers. The company’s model is a neoliberal economist’s dream, a world where, like the stock market, everything is frictionlessly traded at freely floating prices, and employers are untroubled by the need to provide anything like job security or benefits.

Several high-profile German and French economists were eager to play. One hired hand, Augustin Landier of the Toulouse School of Economics, told Uber’s publicity team that he’d be happy to write a report that would be “actionable for direct PR to prove Uber’s positive economic role,” for 100,000 euros. It worked. In March 2016, the Financial Times, drawing on the work of Landier and his collaborator, MIT business school professor David Thesmar, reported that Uber was “a route out of the French banlieues” (the impoverished suburbs where much of the country’s immigrant poor live)—“but a regulatory clampdown looms.” The FT didn’t disclose the company’s sponsorship of the research, nor did it mention that the income figures it reported didn’t deduct the drivers’ costs.

In the US, Uber hired Alan Krueger, a distinguished Princeton economist, to write a paper on the company and especially its “driver-partners” (Uber’s term at the time). Krueger’s coauthor was Jonathan Hall, an Uber staff economist, and the 2015 paper was based on a company-sponsored survey of its drivers. The survey had a dismal response rate of 11 percent, so there was no way to know how representative it was, but that didn’t stop Krueger from using it. It was also poorly designed, with leading questions and numerous other flaws, as Janine Berg and Hannah Johnston showed in a 2018 paper. Uber spent a fortune trying to get riders to trust the company. Thanks to these leaked docs, we now know that Uber lied as a routine business strategy—though, as is often the case with leaks, they just confirm what we knew all along.

When I first read Krueger’s paper, I was pained to see the economist—who died by suicide in 2019—producing such propaganda. Though no radical, Krueger was a decent liberal who’d done important work in the 1990s with David Card, the Berkeley economist, showing that raising the minimum wage didn’t result in job loss, undercutting a classic right-wing argument against labor-friendly legislation. That history made him an especially attractive target for Uber, which was eager to fight its image as a ruthless exploiter of its drivers—Krueger wasn’t some Chicago school priest of laissez-faire. Yet like their French counterparts, Krueger and his Uber coauthor didn’t deduct driver costs, yielding preposterously inflated income estimates. According to The Guardian, Krueger and Hall’s paper was “widely quoted in support of Uber as a creator of good jobs…. Internal Uber emails note that [Krueger] was ‘helpful with the press.’”

When I interviewed drivers for my 2015 article on “the sharing economy” in The Nation, I asked several how much they made. When they offered some numbers in response, I asked if that was their gross—or net of their costs. Several had no idea and hadn’t thought about it. There’s currently a thread on an Uber drivers’ Web forum where they’re confronting the challenge of calculating costs. One would expect, though, that prestigious economists would understand these basic accounting issues.

In his essay “The Dismal Science,” H.L. Mencken, no anti-capitalist, argued that economists were the least free of academics. Unlike archaeologists or bacteriologists, they deal with a subject that “hits the employers of the professors where they live”—economists didn’t dare cross the rich trustees who run universities if they wanted to remain employed. Over the decades, mainstream economists have done plenty to make the plutocrats feel good about themselves, and to persuade the rest of us to feel good about the plutocrats. But could even Mencken have imagined that 100 years after his essay was published, economists, rather than seeking the truth, would happily flatter their employers for a nice six-figure consulting fee?

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