I’m sorry I haven’t been posting weekly like I promised to. February has not been kind to me. But I wanted to quickly fire off a post relating to two topics I’ve recently seen in the news.

The first has to do with the infamous Wendy’s “surge pricing” announcement which the company has already walked back on. As I know not all my readers are American, I’ll explain both Wendy’s and surge pricing.

Wendy’s is a fast food burger chain just like any other American chain. Surge pricing meanwhile is what Uber and Lyft do when there is a very high demand all of a sudden, prices shoot up during that time, leaving customers to balk at paying 50$ for a ride home from a baseball game, when getting into downtown may have costed just 30$. Many Wendy’s customers likewise were furious at the price of a burger going up and down during the day, possibly meaning they’d pay for their food than someone who’d walked in just a few minutes earlier.

The story got so much traction that Senator Elizabeth Warren even tweeted about it, trying to play up her corporate greed narrative. Little does Warren know that we’re now living in the era of Corporate Generosity.

Nevertheless I’m always surprised that someone with the credentials of Warren is so economically illiterate. Surge pricing has been going on for decades, perhaps centuries even. The earliest examples I can think of are matinees, theatre productions (or movies) that are shown during the daytime for a cheaper cost than the evening. It costs exactly the same to run the shown at either time, so why is the daytime show cheaper? And if you’ve ever seen a bar with a “happy hour” or a restaurant with an “early bird special,” or Halloween candy sold half-off in November, you’ve also seen surge pricing in action.

What’s going in here is simple supply and demand. The price of a good or service is *not* based on the cost to make it, the price comes from the interplay of supply and demand. The price fluctuates even if the cost does not because sellers are trying to clear the market. Lower demand? Lower price.

But a restaurant also has service and shifts. Any server serving one customer must necessarily be not serving another. Yet at the same time, servers paid for 8 hour shifts, and few people would work a job where they’re only paid minimum wage for 2 hours. The cost of transport alone would eat into your wage. What this means is that if everyone only comes to eat during dinner (let’s say a 2 hour period from 4-6pm), then the servers are sitting around for 6 hours doing nothing, then madly scrambling for 2 hours. During those 2 hours, many customers might come in only to find the line is too long, or they might be able to eat but find the service poor due to overworked servers.

Thus, for decades restaurants have lowered prices during the “slow” parts of the day to entice people to eat at those times instead of during the rush. This is exactly the same mechanism as Wendy’s “surge pricing,” only it’s framed differently. But it’s still the case that they’re charging more at dinnertime even though their costs are the same.

Surge pricing like this is actually a very good thing. It evens out demand in service industries, allowing more people to be served during a day while still letting the wait staff work full 8-hour jobs. And certain customers can take advantage of this, getting a lower price at the cost of not eating during a “normal” time. Warren (and other outraged twitterati) are simply jumping on a poorly framed policy to score very stupid political points. In fact, Burger King decided to dunk on Wendy’s poorly framed surge pricing policy by highlighting their own better-framed surge pricing policy. Every restaurant is like this, and it’s actually A Good Thing.

Speaking of restaurants but not about Good Things, Gavin Newsom is quite nakedly corrupt. I had only heard mild criticisms of Gavin before, but there were some Democrats I know claiming he was basically the candidate-in-waiting should Biden not run. He is Governor of America’s largest and wealthiest state, and would surely win election because the only thing Republicans could ever say against him were tired tropes about “Commiefornia.” But actually it turns out here’s corrupt.

I know this because he handed a political kickback to his buddy who owns at least two dozen Panera Bread restaurants. California is set to raise the minimum wage to 20$/hr, except at restaurants that serve freshly bread baked. No, bagels and pastries do not count as “bread.” Panera is one of the very few restaurants that does this, and so they will still be allowed to pay their employees just 16$/hr.

You might think this would cause many restaurants to start opening up bakeries, but it gets even more corrupt: the restaurant must have been serving freshly baked bread in September 2023 to qualify. So only Panera is grandfathered in. Essentially, Gavin Newsom decided to directly use a government law to enrich his friend and confidant, and no one seems to really care.

Now of course he wasn’t handing his friend state money. But he was writing legislation that imposes costs on every single one of his friend’s rival businesses, while shielding his friend. That will allow his friend (whose name I just looked up is “Greg Flynn”) to profit much more than anyone else from fast food, since he can keep the same prices while paying his staff 80% less than the competition.

Some of the twitterati have tried to defend Gavin indirectly, saying that it’s obviously corrupt but that this carve-out won’t actually do anything. They say that since every other restaurant will have to abide by the 20$/hr minimum wage, it means no one will ever work for Panera for less than 20$/hr either. But that ignores that people take jobs based on more than just the wage. Maybe the Panera is closer to you than the Taco Bell, maybe you hate the smell of fried foods and are loathe to work at McDonald’s, maybe you don’t own a car and the Panera is the only restaurant in walking distance. Or maybe you have classes and Panera can offer you hours that better fit your schedule.

And Greg Flynn knows this. He knows that he will likely be able to find at least some workers willing to work for just 16$/hr, that’s why he asked Gavin to put that in the bill. But corruption and friend-dealing has never been punished too strongly in America, no matter how much partisans rage about how “the other side” is corrupt. Still, the naked corruption on display may have hurt Gavin in a national election, so Democrats are probably happier he didn’t decide to challenge Biden.