National Public Radio recently aired a segment on the evils of “Surveillance Pricing” — the practice of employing customer data and AI to tailor prices for individual consumers. The coverage, predictably, is overwhelmingly negative: an interviewee warned that it would let corporations prey on people’s vulnerabilities, as the Federal Trade Commission frets about “privacy, competition, and consumer protection.”
On air, NPR concluded with the dire prediction that feckless private companies will, if left unchecked, ultimately “decide what you will pay.”
Considering the emotional charge of topics like privacy and commerce, congressional intervention was practically inevitable. And sure enough, Representative Greg Casar, leader of the Progressive Caucus, has introduced legislation that would ban the practice wholesale. “AI is a developing part of our lives” he says, “but we need to make sure that it’s used for good and not being exploited. We’re already starting to see that, and if we don’t intervene now and ban these sorts of price gouging and wage suppression right now, then I think it’s just going to spread all over the economy.”
Such pearl-clutching theatrics play well for election-cycle soundbites, but they miss (as usual) a basic and crucial understanding of the nature and role of prices themselves. Prices, after all, are not “set” by merchants. Sure, the rest of us are often deluded into thinking they do, since it’s the shopkeeper who applies the price tags or the airline that adjusts the electronic fare. But those decisions are not made in a vacuum. Instead, merchants change prices in the context of competitive pressures, consumer behavior, and resource constraints, and always carefully monitor the price environment they must compete in.
As a vendor you are certainly free (and should remain so) to move the price dial however you wish, but no sentient entrepreneur does so without a good deal of agonized self-reflection, market comparisons, and canny reading of local conditions. My daughter once felt that charging $35 a cup for lemonade would be an easy get-rich-quick scheme, but soon discovered the world doesn’t work that way.
The Price as Signal
Prices reflect what Alfred Marshall termed the “blades of scissors” of supply and demand. Though taken for granted in mainstream discourse, this is a tremendously critical, and often overlooked point: they are a reflection, an outgrowth, an emergent feature of comparative information sharing between suppliers and consumers. As such, they are phenomenal information-encoded vehicles. They are tiny pinpoints of light in an otherwise inscrutable abyss of global resource allocation. They’re magic.
When prices are free to move, they communicate scarcities, opportunities, and desires in ways that no bureaucrat could ever hope to replicate. A sudden surge in demand for eggs, for instance, pushes up prices and nudges farmers to increase supply. An unexpected shortage of microchips hikes their price, signaling manufacturers to adjust their production. Far from being arbitrary or exploitative, prices are a social language — a coordination mechanism across millions, nay billions, of strangers.
Where Dynamic Pricing Fits
Enter “surveillance pricing.” In truth, this is simply a scary name for something we already know: dynamic pricing. Airlines, ride-share companies, hotels, and supermarkets have been doing it for years. Arguably, it has been done since time immemorial: I have little doubt that Arab traders offered “special” prices for visiting Englishmen to Jumma Bazaars — and I know this because they still do, from Kuwait to Karachi. I myself have been known to offer a “dynamic” rate to those I believe could use a break. Is it annoying when the cost of an Uber surges during a rainstorm? Certainly. But it’s an important reason drivers bother to slog through traffic and actually show up in the first place. Far less annoying to pay a tailored “surge” fare than to walk a mile in the rain (though you are certainly free to do so!). The fact that dynamic pricing exists is a net win to all of us.
Dynamic pricing, especially when aided by AI and granular data, enhances the accuracy of these signals. It enables companies to adjust more rapidly to real conditions, and in many cases, it lowers barriers for consumers who are more price-sensitive. Consider budget airlines. The reason some passengers can fly cross-country for under $100 is precisely because other passengers are willing to pay $500 for the same route at a peak time. Data-driven price discrimination allows marginal consumers into markets that would otherwise be priced out entirely.
The Consumer Still Decides
Lost in the scrum of “protecting” people (from companies that wish to sell us the things we want!) is the recognition that dynamic pricing will tend to actually lower prices for everyone. As companies refine their pricing models toward ever more individually tailored rates, and do so in the midst of a competitive market space, they are practically forced to reduce prices. As always, it is the consumer who ultimately “decides what they will pay.”
If an airline charges you $1,000 for a ticket that competitors sell for $500, you will walk away. If an online retailer shows you a higher price than Amazon, you click elsewhere. Digital transparency and comparison tools make consumer exit easier than ever before. Ironically, the same technology that enables targeted pricing also empowers consumers to reject it.
Misplaced Fears
Critics argue that individualized pricing is “unfair” — that some people will pay more than others for the same good. But this is true of virtually every product in every market already. Seniors get discounts at restaurants. College students pay lower rates for software licenses. Loyal customers earn reward points. Nobody calls these practices sinister “surveillance” — they are just finely tuned forms identity-specific pricing.
What really bothers regulators, it seems, is not that prices vary — it’s that they vary in ways government cannot predict or control. Bureaucrats prefer neat uniformity, even if it comes at the cost of higher prices or restricted access. The history of price controls should remind us of their futility: from Nixon-era gas lines to rent-controlled housing shortages, the results of government “protections” are invariably worse than the disease.
A Clarifying Force
The reality is that dynamic, AI-driven “surveillance” pricing doesn’t muddy the signals of the marketplace — it clarifies them. It allows resources to flow with greater speed and precision, ensuring that goods and services reach those who value them most at that moment. It also pressures firms to innovate continuously, since the ability to analyze consumer data does not shield them from competition. In the process, we all benefit, as the price of goods and services in general becomes ever more affordable.
The real threat comes not from companies tailoring prices, but from lawmakers trying to ban the practice. Such interventions substitute political theater for economic literacy. If Congress insists on treating every technological refinement in pricing as exploitation, consumers will pay the cost — in higher prices, reduced choice, and stifled innovation.
Prices are not fetters imposed by heartless corporations; they are signals of freedom, discovery, and exchange. The more precise and responsive they are, the better society can coordinate scarce resources, and it is invariably the poorest who benefit the most. Far from being the dystopian horror conjured by NPR, “surveillance pricing” is simply the next step in the evolutionary refinement of this marvelous mechanism.