Paradoxical Taxi Fares; J. Fulda

Sometimes, however, when we pass the air port on the way, an argument ensues. The driver points out that the fare to the airport is more ($30.00 minimum), yet the cost of that trip measured in time and mileage is less. So, he concludes, he has been had, despite his agreement to the terms and a clear, initial bid on my part stating the time involved (45 minutes) and the destination (Hempstead in Nassau County). Is he right or wrong? And why? The prime principle of economics is that prices are deter mined by supply and demand, not costs. Some products may cost a quarter and sell for a half dollar, while others go for a dollar yet cost only a dime to make. The second producer is neither a profiteer nor an exploiter, and the first pro ducer is neither a benefactor nor a patron. Both producers merely respond to market signals based on supply and demand. To return to the taxi fare, the market price for a commute to the heart of Nassau County is indeed less than the market price for the Joseph S. Fulda, a regular contributor to The Freeman, is Assistant Professor of Computer Science at Hofstra Univer sity and resides in Manhattan.

shorter, faster trip-in the same direction-to the airport. That this is so is evidenced by the very facts of the case: I can always obtain a taxi at the lower rate for the longer, slower trip. Why this is so is a bit more subtle. A taxi is the only sensible means of travel to the airport, especially during the wee hours of the morning. Commuting, on the other hand, can easily be accomplished by rail-much slower, yet much cheaper-or by car pools with other early birds. Moreover, people are willing to pay more for an occasional trip, when loaded down with baggage, than when they must make 'the trip several times a week. Furthermore, the number of gypsies emptily speeding about during these hours is very high. Many drivers consider themselves lucky to get any substan tial fare at that hour; a few have even suggested a regular contract! Put in economic terms, the demand for cabs at the time I commute is very low, especially for commuter trips. The choice facing a would be supplier is often not an airport trip or a com muter's trip, but a commuter's trip or no trip at all (or perhaps a few local trips). Later in the day, during rush hour, when the demand for taxis is far greater, the gap between airport fare and a commuter's fare narrows, for the demand for taxis is far closer to the supply of taxis available for hire.

The law of supply and demand can some times appear to have paradoxical results, but if one truly understands the principle and also knows,the market situation involved, the para doxes disappear. D CAPITALISM FOR KIDS by Karl Hess Enterprise Publishing, 725 Market Street, Wilmington, DE 19801 1987 • 247 pages •$14.95 cloth, $9.95 paperback Reviewed by Carl Helstrom K arl Hess has written a book for chil dren and for those who care about . children. He deals with the philosoph ical and practical problems of society and presents capitalism-the free market, private property systemas the best solution. As he sums up in a section for parents toward the end of the book, "The proposition of this book has been, simply, to put in terms that young people can appreciate, the meaning of capitalism and the free market, to encourage them not only to understand it but to become a part of it, to share its ethics of individual responsibility, and its rewards-and to do it while they are very young."