Elizabeth Warren leads leftist freakout over Wendy’s

Reports suggested this week that the fast food chain Wendy’s was considering “surge pricing,” or raising prices during peak hours when demand is highest as Uber famously does. Then all hell broke loose.

Left-wing social media influencers such as Robert Reich blasted the company’s “plans to price gouge you with Uber-style surge pricing,” and decried its “shameless corporate greed.” Even members of the federal government got in on the outrage, with Sen. Elizabeth Warren (D-MA) posting, “[Wendy’s] is planning to try out ‘surge pricing’ — that means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same.”

“It’s price gouging plain and simple, and American families have had enough,” the Massachusetts Democrat concluded.

Meanwhile, the internet freaked out, with memes such as this going viral:

It’s easy enough to see why this sparked so much outrage, as it played perfectly into the dominant cultural narrative of greedy corporations supposedly screwing over everyday Americans. The only inconvenient part of this story was that it happened not to be true.

The panic over “surge pricing” all stemmed from an earnings call Wendy’s held a few weeks ago in which leaders discussed switching to digital menus and enacting “dynamic pricing.” Yet they never actually mentioned raising prices during surges as Uber does — that comparison was injected by the media’s skew.

Instead, by dynamic pricing, they simply mean being able to change their prices regularly, whereas the current system of lettered menu boards takes six weeks to change prices on a product, which is clearly inefficient.

“We said these menuboards would give us more flexibility to change the display of featured items,” Wendy’s clarified in a statement. “This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants. We have no plans to do that and would not raise prices when our customers are visiting us most.”

Wendy’s pointed out that the dynamic pricing could even allow them to offer special, limited-time discounts, such as extra-cheap lemonade on a hot day or low-price ice cream on July 4.

So, it appears all this mania was unwarranted in the first place. But even if Wendy’s were implementing surge pricing, such as raising the price of a burger during a lunch rush, there’s actually nothing wrong with that.

Businesses, from Uber to airlines to concert halls, regularly raise their prices when demand is higher. Have you ever tried flying the week of Thanksgiving? Or getting an Uber on a college campus late on a weekend night? There’s nothing magical about fast food that makes a regular business practice somehow evil.

Besides, even in the “surge pricing” situation, consumers aren’t being “gouged,” as critics hysterically claim. That is, unless they live somewhere where there’s nowhere else to eat other than Wendy’s, and they have no grocery stores to buy food to cook at home, which, as far as I’m aware, describes approximately zero places in the United States. 

And guess what? If people really hated the practice of “surge pricing,” it wouldn’t stick around for long.

“If consumers like the results of the price-quality bundles available to them under dynamic pricing, then that firm will make higher profits,” economist Ryan Bourne explains. “But before Elizabeth Warren calls ‘gouging,’ remember that this will encourage more firms to enter and compete against it with similar approaches. If customers utterly reject this pricing strategy, in contrast, then firms that adopt it will make losses. Other restaurants will be deterred from doing it.”

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“In reality, we’re likely to see different types of restaurants price in different ways to attract different types of customers,” Bourne concludes.

So, yes, this whole saga is another reminder that Americans should probably double-check media reports before they start panicking about things that aren’t actually happening. But it’s also yet more proof that too many influential public figures desperately lack an understanding of basic economics.

Brad Polumbo (@Brad_Polumbo) is an independent journalist, YouTuber, and co-founder of BASEDPolitics.

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