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How Visa, Using Card Fees, Dominates a Market
Posted by: AJ 9:48am, Tuesday, 5 January 2010
Every day, millions of Americans stand at store checkout counters and make a seemingly random decision: after swiping their debit card, they choose whether to punch in a code, or to sign their name.

It is a pointless distinction to most consumers, since the price is the same either way. But behind the scenes, billions of dollars are at stake.

When you sign a debit card receipt at a large retailer, the store pays your bank an average of 75 cents for every $100 spent, more than twice as much as when you punch in a four-digit code.

The difference is so large that Costco will not allow you to sign for your debit purchase in its checkout lines. Wal-Mart and Home Depot steer customers to use a PIN, the debit card norm outside the United States.

http://www.nytimes.com/2010/01/05/your-money/credit-and-debit-cards/05visa.html
Fraud U: Toppling a Bogus-Diploma Empire
Posted by: AJ 9:47am, Tuesday, 5 January 2010
A few days later he received a call from a man, speaking with what sounded like an Eastern European accent, who delivered a pitch for various degree options from Parkwood University. Gollin, who is 56 and has a BA from Harvard and a PhD from Princeton, listened in amazement as the man cheerfully explained how, for about $4,400, he could supply a PhD in systems engineering.

Or if that wasn’t to Gollin’s liking, he could offer a doctorate in Germanic languages. Gollin chuckled and shook his head. It was all rather amusing, the academic equivalent of a bad toupee — anyone who looked closely could see that it was a fake.

Still, Gollin’s curiosity was piqued, so he decided to look up Parkwood University online.

http://www.wired.com/magazine/2009/12/ff_fake_physics/all/1
Haggling for Hot Dogs
Posted by: manu_s 9:33am, Friday, 18 December 2009
Everything is open to negotiation. Everything. For three months, the author treated the world that way. This is what ensued.
So it was that while haggling over an eighty-hour TiVo at Circuit City, I blurted out, "It's for my son!" And, realizing that that made me about as remarkable as a sneeze, I added, without thinking, "He's narcoleptic!" A complete lie. First, I already have a forty-hour TiVo. Furthermore, my son is no narcoleptic. In point of fact, he might even be encouraged to watch a little less television. But I spun out a tale of a boy who needed to rewind television when he woke up from his sudden fits of sleep. It was all very sad, but we had learned to cope. The salesman called the manager. The manager told me there had been a kid like that in his French class in high school. I might need a bigger memory cache if my son slept more than thirty minutes at a pop. He made suggestions. "Does he fall asleep during sports, too?" he asked earnestly. Then he gave me a price, sixty dollars below list. I thanked him, told him I needed to talk to my ex-wife, then took the price and drove across the street to Best Buy, where I got them to knock off another twenty bucks.
manu_s says: Fun read.
http://www.esquire.com/features/money/ESQ0205NEGO_114_1
Are Republicans Serious About Fixing Health Care? No, and here's the proof.
Posted by: AJ 3:02pm, Saturday, 12 December 2009
Today the Medicare prescription-drug debate is remembered mainly for the political shenanigans Republicans used to get their bill through. Bush officials lied about the numbers and threatened to fire Medicare's chief actuary if he shared honest cost estimates with Congress. House Republicans cut off C-SPAN and kept the roll call open for three hours—as opposed to the requisite 15 minutes—while cajoling the last few votes they needed for passage. Former Majority Leader Tom DeLay was admonished by the House ethics committee for winning the eleventh-hour support of Nick Smith, a Michigan Republican, by threatening to vaporize Smith's son in an upcoming election. It's worth remembering these moments when Republicans criticize Democratic Majority Leader Harry Reid for his hardball tactics.
...
In their 2009 report to Congress, the Medicare trustees estimate the 10-year cost of Medicare D as high as $1.2 trillion. That figure—just for prescription-drug coverage that people over 65 still have to pay a lot of money for—dwarfs the $848 billion cost of the Senate bill. The Medicare D price tag continues to escalate because the bill explicitly bars the government from using its market power to negotiate drug prices with manufacturers or establishing a formulary with approved medications.

And unlike the Democratic bills, which won't add to the deficit, the bill George W. Bush signed was financed entirely through deficit spending. While Grassley and his colleagues accuse Democrats of harming Medicare through cost cuts, it is their bill that has done the most to hasten Medicare's coming insolvency. Between now and 2083, Medicare D's unfunded obligations amount to $7.2 trillion according to the trustees. Numbers like these prompted former Comptroller General David M. Walker to call it "... probably the most fiscally irresponsible piece of legislation since the 1960s."

http://www.slate.com/id/2238098/
A Hint of Hype, A Taste of Illusion
Posted by: Jonathan 2:25pm, Saturday, 28 November 2009
Given the high price of wine and the enormous number of choices, a system in which industry experts comb through the forest of wines, judge them, and offer consumers the meaningful shortcut of medals and ratings makes sense.

But what if the successive judgments of the same wine, by the same wine expert, vary so widely that the ratings and medals on which wines base their reputations are merely a powerful illusion? That is the conclusion reached in two recent papers in the Journal of Wine Economics.

Francesco Grande, a vintner whose family started making wine in 1827 Italy, told me of a friend at a well-known Paso Robles winery who had conducted his own test, sending the same wine to a wine competition under three different labels. Two of the identical samples were rejected, he said, "one with the comment 'undrinkable.' " The third bottle was awarded a double gold medal.
Jonathan says: Even if wine ratings were completely random, I wonder if they would still have the benefit of increasing enjoyment of high-rated wines more than they decreased the enjoyment of low-rated wines. (But I guess there would still be the ethical issue of the adverse economic impact on vintners with randomly low-rated wines.)
http://online.wsj.com/article/SB10001424052748703683804574533840282653628.html
Malcolm Gladwell, Eclectic Detective
Posted by: AJ 5:56pm, Monday, 16 November 2009
Have you ever wondered why there are so many kinds of mustard but only one kind of ketchup? Or what Cézanne did before painting his first significant works in his 50s? Have you hungered for the story behind the Veg-O-Matic, star of the frenetic late-night TV ads? Or wanted to know where Led Zeppelin got the riff in “Whole Lotta Love”?
...
The banalities come from a gimmick that can be called the Straw We. First Gladwell disarmingly includes himself and the reader in a dubious consensus — for example, that “we” believe that jailing an executive will end corporate malfeasance, or that geniuses are invariably self-made prodigies or that eliminating a risk can make a system 100 percent safe. He then knocks it down with an ambiguous observation, such as that “risks are not easily manageable, accidents are not easily preventable.” As a generic statement, this is true but trite: of course many things can go wrong in a complex system, and of course people sometimes trade off safety for cost and convenience (we don’t drive to work wearing crash helmets in Mack trucks at 10 miles per hour). But as a more substantive claim that accident investigations are meaningless “rituals of reassurance” with no effect on safety, or that people have a “fundamental tendency to compensate for lower risks in one area by taking greater risks in another,” it is demonstrably false.
AJ says: Pinker nails this one, for the most part. But he wades into murky waters. It gets interesting: a partial response by Gladwell.
http://www.nytimes.com/2009/11/15/books/review/Pinker-t.html
Overspending on Debit Cards Is a Boon for Banks
Posted by: AJ 1:45am, Monday, 14 September 2009
Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.

In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.
...
And when a consumer does overdraw an account, banks have found a way to multiply the fees they collect by rearranging the sequence of transactions, critics say.

Ralph Tornes, who lives in Florida, is pursuing a lawsuit against Bank of America for charging him nearly $500 in overdraft fees in 2008 after it rearranged his purchases from largest to smallest. In May 2008, for instance, Mr. Tornes had $195 in his account when he made two debit purchases for $8 and $13; the bank also processed a bill payment of $256.

He claims that Bank of America took his purchases out of chronological order and ran the biggest one through first. So instead of paying $35 for one overdraft fee, he was stuck with three, for a total of $105.

AJ says: The numbers were way larger than I thought.
http://www.nytimes.com/2009/09/09/your-money/credit-and-debit-cards/09debit.html
Did Texas execute an innocent man?
Posted by: Jonathan 8:56am, Friday, 4 September 2009
Yes.
Gilbert took the files and sat down at a small table. As she examined the eyewitness accounts, she noticed several contradictions.
Jonathan says: A fascinating, devastating case study of injustice.
http://www.newyorker.com/reporting/2009/09/07/090907fa_fact_grann?currentPage=all
Believers Invest in the Gospel of Getting Rich
Posted by: AJ 11:09am, Sunday, 16 August 2009
Onstage before thousands of believers weighed down by debt and economic insecurity, Kenneth and Gloria Copeland and their all-star lineup of “prosperity gospel” preachers delighted the crowd with anecdotes about the luxurious lives they had attained by following the Word of God.

Private airplanes and boats. A motorcycle sent by an anonymous supporter. Vacations in Hawaii and cruises in Alaska. Designer handbags. A ring of emeralds and diamonds.

“God knows where the money is, and he knows how to get the money to you,” preached Mrs. Copeland, dressed in a crisp pants ensemble like those worn by C.E.O.’s.
...
Many in this flock do not trust banks, the news media or Washington, where the Senate Finance Committee is investigating whether the Copelands and other prosperity evangelists used donations to enrich themselves and abused their tax-exempt status. But they trust the Copelands, the movement’s current patriarch and matriarch, who seem to embody prosperity with their robust health and abundance of children and grandchildren who have followed them into the ministry.

http://www.nytimes.com/2009/08/16/us/16gospel.html
The alleged grifter who duped corporate giants
Posted by: AJ 9:58am, Wednesday, 5 August 2009
Dina Wein Reis certainly lived like gentry. She has luxurious homes in Westhampton Beach, N.Y., Bal Harbor, Fla., and Jerusalem. Her Manhattan townhouse was featured in Architectural Digest. On a loan application she estimated her own net worth at $200 million, according to the government, although that figure is probably exaggerated. She cultivated friendships in New York society, hosting lavish parties for the Whitney Museum of American Art. With her polish, bling, and porcelain skin, she made a striking first impression. Said one former employee: "She looked like she stepped out of a Beyoncé video."

For sheer dollar damages, her alleged thievery cannot come close to matching that of Bernard Madoff or R. Allen Stanford. She didn't steal outright, fudge the books, run a Ponzi scheme, or leave investors destitute. She didn't rob charities.

But what she is accused of doing was fabulously brazen; she had the temerity to sting some of the world's biggest corporations -- not just once, but again and again. Her targets were middle- and upper-level marketing executives, including division heads and presidents. It was a simple scheme, though brilliantly choreographed, according to court records and people familiar with the investigations. Here's how it worked: Wein Reis persuaded the executives to sell her merchandise at huge discounts, promising to include the products in knapsacks or boxes of free samples to be handed out at schools, senior centers, Native American reservations, or military bases. She promised the sellers that if the sampling program were successful, the companies would gain exclusive access to these hard-to-reach markets through her "National Distribution Program." But there was no National Distribution Program, according to the deposition of a senior Wein Reis lieutenant. It was a fantasy. Instead, Wein Reis and her team sold nearly all of the goods to middlemen, who sold them to big retail chains, grocery stores, and wholesalers.

http://money.cnn.com/2009/07/31/news/companies/dina_wein_reis_fraud_trial.fortune/index.htm
Why We Must Ration Health Care
Posted by: AJ 1:31am, Thursday, 23 July 2009
You have advanced kidney cancer. It will kill you, probably in the next year or two. A drug called Sutent slows the spread of the cancer and may give you an extra six months, but at a cost of $54,000. Is a few more months worth that much?

If you can afford it, you probably would pay that much, or more, to live longer, even if your quality of life wasn’t going to be good. But suppose it’s not you with the cancer but a stranger covered by your health-insurance fund. If the insurer provides this man — and everyone else like him — with Sutent, your premiums will increase. Do you still think the drug is a good value? Suppose the treatment cost a million dollars. Would it be worth it then? Ten million? Is there any limit to how much you would want your insurer to pay for a drug that adds six months to someone’s life? If there is any point at which you say, “No, an extra six months isn’t worth that much,” then you think that health care should be rationed.

AJ says: Singer's lucid prose hits home again. I like it when he appeals to a mainstream audience like this. (I still think Animal Liberation is a classic, but most people are afraid to read it.)

Minor complaint: he suggests that QALY be modified to account for disabilities by asking able people to value their lives in a disabled condition. But many studies have shown that people consistently undervalue disabled lives. (In other words, it's not as bad as you think. People are more resilient than they predict.) A simple fix would be to discount for this factor.

http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html
Deep in Bedrock, Clean Energy and Quake Fears
Posted by: AJ 11:03pm, Wednesday, 24 June 2009
Markus O. Häring, a former oilman, was a hero in this city of medieval cathedrals and intense environmental passion three years ago, all because he had drilled a hole three miles deep near the corner of Neuhaus Street and Shafer Lane.

He was prospecting for a vast source of clean, renewable energy that seemed straight out of a Jules Verne novel: the heat simmering within the earth’s bedrock.

All seemed to be going well — until Dec. 8, 2006, when the project set off an earthquake, shaking and damaging buildings and terrifying many in a city that, as every schoolchild here learns, had been devastated exactly 650 years before by a quake that sent two steeples of the Münster Cathedral tumbling into the Rhine.

AJ says: Pretty remarkable stuff. The story is about a similar project in California. Check out the great accompanying interactive feature.
http://www.nytimes.com/2009/06/24/business/energy-environment/24geotherm.html
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