In 2017, a terrorist attack unfolded in Martin Place, Sydney. People were terrified and desperate to leave. Many opened Uber. They saw fares spiked as the algorithm had kicked in. There was instant and furious backlash. Uber had to refund the money, issue an apology, and introduce emergency price caps for crises.
Surge pricing wasn't new then. People knew about it. They would have paid higher prices if this were a concert. But the crisis-like situation changed the context and people's perception. Such situations make the business's position difficult to navigate.
Buyers can afford to be morally inconsistent because their choices are private and personal. Sellers cannot. Their actions and prices are visible while motives and profits are scrutinised.
In the first part, we looked at how people behave differently, changing social norms and economics around various vices and virtues. Today, we turn the tables. We will get into the shoes of businesses and the governments.
The Seller's Morality
Entrepreneurs innovate and aim to solve society's problems. They take risks that others don't, invest capital, and often spend years building a business. Naturally, they expect to earn a profit. How much profit is "fair", however, is where the debate begins. Consumers may argue that a company earning a 40% profit margin should reduce prices. The entrepreneur may argue that those profits are needed to expand, innovate, and survive future competition. There is rarely an objective answer.
That's where demand and supply come into play. From the seller's perspective, prices are more than just numbers, they are signals. If consumers are willing to pay a higher price, it suggests strong demand. This invites other businesses, and eventually, prices fall. That's also the logic of surge pricing. A higher price is, therefore, not always seen as exploitation; sometimes, it is the market's way of signalling that more supply is needed.
Competition Is Moral
A similar dilemma arises during water shortages. When private tanker operators charge higher prices during droughts, it feels exploitative. Yet those higher prices also create an incentive to transport water over long distances and serve areas that would otherwise receive no supply. If prices are capped, suppliers may stay away, leaving people with no water at all. If prices are left completely free, water reaches the market, but only those who can afford it benefit.
This is where economics and morality collide. In theory, high prices are meant to solve shortages. If water tankers earn higher profits during a drought, more suppliers should enter the market, increasing supply and eventually bringing prices down. That is how competitive markets are supposed to work.
But reality is often different. Crisis markets are rarely competitive. A handful of tanker operators may control an area, or corruption may prevent new suppliers from entering. In such cases, higher prices no longer reward risk-taking — they become a form of exploitation. Profit is not the problem; the absence of competition is.
This is where governments step in. They may cap prices, subsidise transport costs so suppliers still have an incentive to deliver, or take over distribution altogether. None of these solutions is perfect. Price caps can discourage supply, while government intervention can be slow, inefficient, or vulnerable to corruption. The moral question, therefore, is not simply whether prices should rise or fall, but which imperfect solution creates the least harm.
That is why doing business is not automatically immoral, as many perceive. The moral problem begins when businesses rely on monopoly power, coercion, misinformation, corruption, or activities that discourage competition.
The State's Morality
Governments face a much more complicated moral dilemma than individual consumers. They may believe tobacco and alcohol are harmful, yet keep them legal because they generate tax revenue, support millions of livelihoods, and are easier to regulate than prohibit.
This is why governments appear hypocritical. But the hypocrisy is, at least partly, structural. A private citizen can think in moral absolutes. A government doesn't have that luxury. It has to think about public health, individual liberty, tax revenue, jobs, enforcement costs, black markets, organised crime, and political realities — all at the same time. Governments are also made up of politicians and bureaucrats, not philosophers. Elections, lobbying, political funding, business interests, public opinion, and fiscal pressures all influence policy.
So what looks like moral inconsistency is often the result of competing incentives rather than a black-and-white choice.
Moreover, when all the participants, viz. buyers, sellers and the governments, operate together, the moral responsibility gets divided. Buyers tell themselves they are not responsible for making it; they want a cheap product. Sellers tell themselves they are merely responding to demand. Government, on the other hand, cares only if something is illegal or completely unacceptable to society or if someone fails to comply with rules and taxes. Because each participant sees only one part of the transaction, it becomes easier to overlook the broader moral consequences.
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Final Take
If we focus only on values, we may ignore incentives and end up creating shortages, black markets, or unintended consequences. If we focus only on economic efficiency, we risk overlooking dignity, fairness, and exploitation.
We must understand that every price, ban, tax, and regulation is an attempt to balance both economics and morality, and that balance evolves with society.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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