Algorithms price gouge us. This guest wants to change that

Brian Lehrer (0:05)

From WNYC, I'm Brian Lehrer. This is my Daily Politics Podcast.

It's Friday, October 2nd.

Well, everybody's talking about inflation as the number one issue in the midterm elections, inflation and affordability. But does inflation always reflect the seller's costs? Like, is it always about the war and the tariffs and things like that? We're going to talk to Lindsay Owens now, author of a new book called Gouged, The End of a Fair Price and What That Means for Your Wallet. She argues in the book that companies use junk fees, loyalty programs or own data and other things to raise prices on us unnecessarily. Besides being the author of the book, Lindsay Owens is president and CEO of the Groundwork Collaborative and Economic Policy Think Tank in Washington. Lindsay, welcome to WNYC.

Lindsay Owens (0:59)

Thanks so much for having me.

Brian Lehrer (1:00)

Let's start here. You write that price gouging has a legal definition and an everyday one. What's the difference?

Lindsay Owens (1:08)

Well, the legal definition, of course, is charging unconscionably excessive prices during an emergency, like a pandemic or in the wake of a hurricane. But colloquially, I think most Americans know when they're being gouged or being ripped off, and you don't really need a legal definition to know that. You can sort of use the duck test, right? If it quacks like a duck and walks like a duck, it's a duck. You know when somebody is charging you more than they should.

And in my book, I'm really pointing to a new reason why prices are high in the US right now. It's not just Trump's war in Iran. It's not just the tariffs. It's the fact that companies are reinventing the ripoff. Pricing is now a highly engineered science.

No longer is it enough to figure out how much it costs to make something at a profit margin and put a sticker on it. Companies are hiring AI specialists and physicists and engineers to help them get better and better at emptying your wallet. And my book really documents all of the new high tech ways that companies are doing just that.

Brian Lehrer (2:19)

Let's take an example from the book. Wendy's set off a backlash in 2024 just by telling investors it would test dynamic pricing on its digital menu boards. What did that mean?

Lindsay Owens (2:33)

Yeah, so this is the idea that companies can set up an algorithm at headquarters and then ship price changes and price hikes to restaurants or retail locations all over the country in a New York minute.

I'll give you a couple of other examples. Children's museums are now charging more for admissions on rainy days, which means moms of toddlers like me are going to have to fork over more to find shelter from the storm and a place for our kids to run around. Expedia charges more when you log on from a wealthy zip code. They'll charge you more for a hotel room. Walmart now has filed for a patent that lets them use smart cart technology to increase the price of mayonnaise once you've put tuna in your cart under the assumption that you're planning to make tuna salad. So all of these new technologies make it possible to vary pricing in sort of very niche and precise ways. But I think the upshot is pricing no longer just tethered to the underlying costs of the item, but instead carefully calibrated to reflect exactly how much they can get away with charging you, how much they think you'll fork over in any setting.

Brian Lehrer (4:01)

Boy, if people want to tick off before hearing those examples, I'm sure they are now, like at the children's museums on rainy days.

I mean, most of those are non-profit organizations. Correct me if I'm wrong. I know there are some for-profit play spaces and stuff out there as well. And if you're buying tuna, then the price goes up on mayonnaise because they think you're going to need it. If you're buying the mayonnaise, I mean, that's crazy.

Lindsay Owens (4:27)

Yeah. I mean, I think there's almost a kind of a strange ethos in pricing right now, where if you're pricing the old-fashioned way, you're sort of a, you're sort of a rube, right? Oh, you're leaving money on the table. Why wouldn't you be charging more on a rainy day if you're a children's museum? Why wouldn't you be charging more on a sunny day if you're a zoo, right?

This is revenue management or yield management or price optimization. This is just how pricing works these days. But I think the end result, of course, as you say, is angry customers and thinner wallets. And amidst all of the pressures that we face right now, from very real phenomenon like wars and tariffs, it really just adds insult to injury.