Peak Demand is an Ubiquitous Problem

Recently an interesting article on Vox talked about how the U.S. has an increasing number of firefighters to fight a decreasing number of fires.  This is due to strong unions and the fact that “firefighters” are taking up other roles; in particular, first response to medical emergencies.  However, they are not any faster than the ambulance also dispatched or better trained.  So you are sending a huge firetruck full of redundant personnel with a decent chance that it is a false alarm.  Seems pretty wasteful to me.

The rebuttal is that you need all that, uh…, firepower to make sure that the few fires we have don’t become catastrophic.  This is certainly a valid concern, it’s the so-called peak demand problem that crops up in many other areas.  However, I question it’s relevancy here because we seemed to do just fine with fewer firefighters in the past when there were more fires.  The onus right now seems to be on proving that all these extra firefighters are preventing fires from being much worse.

However, that article is just a jumping off point to what I want to talk about which is peak demand.  This problem exists in many other contexts.  One of the biggest is power demand.  We unfortunately do not yet have good methods for storing large amounts of electrical power.  Thus our power generation is built to accommodate the maximum amount of power required by the populace.  However, there are good chunks of the day, like the middle of the night, when power demand is much lower and we have unused capacity in the system.  If we could store power, we can get by with much less capacity and presumably lower prices.  It would also make solar and wind power more useful as a primary detriment of those sources of energy is their unpredictable timing.  You can’t really depend on solar entirely because it might be cloudy, but if you could reserve energy its much less of a problem.

This is not the only place it crops up.  Taxis for instance are hugely popular Friday and Saturday nights and less so at other times of the day.  This follows the demand for road space.  Everyone wants beachfront property during the summer and not so much during the winter.  Something as simple as the fact that your car is parked most of the time is an example of the peak demand problem.  The convenience of a car is great, but the vast majority of the time you don’t need one.

In some of these cases we actually have very good tools for managing the problem.  Taxi service has seen the entrance of companies like Uber where prices respond to demand and supply thus inducing more drivers to enter the market when prices are high and so on.  Car sharing programs are recognizing that we can get by with a lot fewer cars if people share and its actually cheaper for its customers too.  Congestion pricing is a great idea for limiting traffic in an economically efficient way.

A lot of this is driven by a kind of second-wave tech boom, what I would liken to the economically important spin-off of social networks.  Uber works by connecting drivers and customers like Facebook connects you and your old friends.  It’s an extension of the immense amount of trust we put out in our internet relationships.

What is surprising is the amount of legislative interference in these activities.  Incumbent taxi companies are fighting tooth and nail to hold on to their bureaucratic monopoly on the relatively simple task of moving people around.  Similarly, everyone with a car thinks that they have a god given right to free roads.  Nevermind, that the poorest in our country overwhelmingly don’t own a vehicle or that all of our car infrastructure is really a massive subsidy to car owners.  Congestion pricing puts the onus on those who actually use roads and makes sure only the most economically efficient activities traverses them.  It should also be based on weight of the vehicle since heavy vehicles do massively more damage to roads.  Even in relatively liberal places like Denmark and Sweden, congestion pricing brings out a lot of acrimony.

Still, I have a lot of enthusiasm for these new technologies that are making life better for everyone and reducing our wastefulness.  Hopefully everyone else will get on board too.  Maybe we can even find some way to use it to fight fires…

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