Slate eBook Club - Best of 2003

by Slate. com

  In the case of e-mail, the valuable resource at issue is my attention, and the problem is that access to it is essentially free. People who really want to talk to me need to make no more effort than people who merely want to waste my time. The result is a run on my attention. My inbox becomes less like a mailbox and more like a Dumpster, through which I must sift to find items of interest.

  Some people have proposed that the market-based solution to spam is to levy a public fee or tax for sending e-mail. In effect, the government would become postmaster general of cyberspace. But Webheads are understandably reluctant to make the government the conservator of e-mail. Government oversight could open the Internet to all kinds of regulation and tempt politicians to milk it for revenues. A bigger objection is that the government is notoriously bad at setting prices. Just imagine the equivalent of a Postal Rate Commission for e-mail. In fact, by definition no one-size-fits-all price could possibly be right, because we all place a different value on our attention. Some people like spam.

  Suppose instead that we gave me legally enforceable conservatorship of my mailbox. Then I could sue you for trespassing if you sent e-mails after I told you to stay out. This is not as farfetched as it may sound: Courts and legal scholars are already developing a nascent concept of cyber-trespass. Suing, however, would be massively inefficient, best left as a remedy of last resort. As for the remedy of first resort, I would charge you. Are you a stranger who wants to get into my e-mail inbox? Pay me.

  But isn't the great benefit of e-mail that it's free? Not exactly: Spam filters, missed messages, clogged mailboxes, and server overload, to say nothing of odious come-ons, are existing costs for using e-mail, and fast-rising ones. The whole problem is that e-mail is expensive, and the wrong people are paying for it.

  The solution is to make spammers pay their targets, instead of forcing the targets to pay for spam. Everyone could charge a different entrance fee for access to his or her inbox. If I like hearing about cheap Viagra, I could charge nothing or almost nothing. The higher my price per e-mail, the less spam I would receive—and a larger portion of the spam that I did get would be targeted, rather than random, so it might actually be interesting. If I set a very high price, I would receive no spam at all. By experimenting, I could find a price that suited me, and I could always adjust it to suit my needs. (Try that with the post office.) Friends and listservs and other "whitelisted" designees, of course, wouldn't have to pay me at all.

  Moreover, the system could be self-financing. Some portion of what I charge per incoming e-mail could be siphoned off to pay administrative costs. Furthermore, most people, and probably even most reputable companies, send and receive e-mail in roughly equal quantities. So, after administrative expenses, the costs would net out—except for people who do a lot of sending but not much receiving, namely spammers.

  I vetted this idea with a number of cyber-law specialists, and they raised some thorny technical issues, such as who would pay for bounce-backs. There is also the question of how to conduct billions of transactions without gumming up the system. One possible answer is proposed by an economist named David Friedman: reusable cyber-stamps. When I receive e-mail, I would collect the required cyber-postage—assuming, of course, you had attached enough. Unlike conventional stamps, however, these would be reusable. I would turn around and send them out again with my own e-mail.

  The pay-me approach is not actually as novel as it may sound. It's a variant of the so-called "digital handshake," but it replaces the handshake with a digital negotiation. In the handshake concept, unsolicited e-mail is answered with a request for a specific response. Only if the right answer is given is the mail delivered. The pay-me approach essentially replaces the question, "Who are you to deserve my attention?" with the question, "How much will you pay for my attention?" My software could be programmed to ask strangers for, say, 1 cent. Your software could be programmed to offer a maximum of, say, half a cent, or 1 cent, or 5 cents. If my demand was under your limit, you would pay and your mail would be delivered. If not, no deal.

  If all that sounds hairy, remember that the U.S. financial system settles hundreds of millions of transactions worth something like $3 trillion—more than a quarter of the annual GDP—every day, and no one thinks a thing of it. Once high-volume transactions become routine, the expense of processing them drops to near-triviality. Remember, also, that today's system is anything but free. You are already paying for it, and the costs are going only one way.

  So if you want to e-mail me, pay up. That, I guarantee, will get my attention.

  The Great Rebate Scam

  They owe you a $50 rebate. Here's how they will try to delay, trick, and bully you out of collecting it.

  By Carol Vinzant

  Posted Tuesday, June 10, 2003, at 12:27 PM PT

  I was recently lured into a Verizon Wireless store by a Web ad for a fancy Audiovox cellphone—only $50 after a $100 rebate. I really only needed a junky $50 phone to replace one I'd put through the wash, but for the same price, why not get the Audiovox with color screen and Ghostbusters-themed ringer? The Web site said the rebate offer lasted three months, and the only catch seemed to be that I had to send them my old phone.

  I sat down the next day with the rebate forms, pleased with my own consumer diligence. I felt I'd skirted a major obstacle when I saw that the form had to be returned within two weeks, not three months. Then I realized I'd made a rookie mistake: I'd thrown out the box with the UPC code. I called up the store and started to explain my predicament. The clerk cut me off: "You threw out your box, didn't you?" Apparently they'd seen my kind before.

  I was out of luck—even though they knew for sure I had the phone, since it was on their service. That, however, wasn't the point of the rebate. They were trying to thin out the rebate pool; they succeeded.

  Over the last five years, rebate volume has been skyrocketing. The actual volume is hard to pin down because it is only tracked by guesstimaters in the industry. One of those guesstimaters, Michael Leonard, vice president of marketing at Continental Promotions Group, says the volume of rebates is about $4 billion today. Back in 1999 it was reported at just $1 billion.

  Rebates are surging not because of manufacturers but because of retailers. You only have to visit an electronics store or leaf through a Sunday newspaper insert to see how far rebate-mania has gone. In a recent Best Buy ad, about one-third of the merchandise came with rebates.

  When a manufacturer offers a rebate, you needn't be too suspicious. The manufacturer wants to lower the price temporarily (to move an old product or combat a competitor's new low price), but doesn't have faith that the retailer will pass on the savings. But if it's a retail store that is offering the rebate, ask yourself a simple question: Why isn't it just on sale? The store doesn't have any good reason to offer a rebate, since it could just as easily have a sale—if it in fact wanted you to have the product at a lower price. It doesn't, and that's the point. When you see that a store is offering you a rebate, remember that back at HQ some executive is betting against you, rooting for you to slip up, calculating the odds that you will lose the receipt, go on vacation, write in a wrong number.

  A store offering a rebate must pay a fulfillment center anywhere from 40 cents to $1.75 to process each claimed rebate. When you figure in that extra cost and hassle for the store—not to mention the shopper's inconvenience and irritation—how can rebates be worth it? Economically, they make sense only if stores can count on not actually giving the rebate to a large portion of consumers. "They can get all the benefits of advertising a lower price without necessarily having to deliver on that price to everybody," explains David Aron, assistant professor of marketing at DePaul University.

  Even with the most attractive rebates, 10 percent of consumers fail to get their act together to turn in the form. Often the failure rate tops 90 percent. Women are better at closing the rebate deal than men. The success rate goes up as the rebate gets more valuable.

  Stores use secret actuar
ial calculations to figure out what kind of rebate they can offer. And, increasingly, they employ brutal tricks to prevent shoppers from cashing in. It's fair enough for retailers sit back and hope consumers trip themselves up. But stores are erecting ever-more-elaborate obstacles to screw consumers out of their discounts.

  Many rebates, such as my Verizon one, lure people in with the claim that the rebate offer will last a leisurely several months. Only if they read the fine print do consumers realize that they have only days after the transaction to send the forms in. (For another recent rebate, the store delayed sending me the right forms for so long that I only had one day to get them postmarked in time.) Some rebates require you to cash the check almost the minute you get it.

  Other stores offering rebates don't manage to send the check at all, perhaps relying on the forgetfulness of the customer. If you do remember that the check hasn't come, and you contact the store, it will often respond that it has no record of your rebate application. You're thinking, "Here comes that tip to be cautious and keep copies." Well, no, because often the rebater specifies it won't accept copies. (The super-aware who return their rebate forms by certified letter or Fed Ex are often out of luck, because many companies won't accept those deliveries.)

  Many rebates demand multiple kinds of documentation (forms, receipts, UPCs) or require you to complete elaborate forms for each component (printer, monitor, desktop). Sometimes you have to circle a date or price to get your cash back. Many rebaters refuse to give the discount to more than one person in the same household. Some insist on access to your credit record before they'll give you the discount.

  Perhaps the most notorious consumer rebate was one offered by Microsoft last year for people upgrading to Visual Studio or Visual Basic. [Note: Slate is published by Microsoft.] To get the $300 rebate, customers had to send in part of the box—from the original program bought years before. One small rebate company ran a program for stores that required the consumer to send in forms by registered mail every six months for three years, an exercise they call a "memory test." After complaints, they now only demand a form at the beginning and end of three years.

  I have become so alert to these practices that I have become a paranoid rebate shopper. When I bought some software from Staples recently, I was so girded for battle with the rebating authorities that I filled out the rebate form even before I loaded the software on my computer.

  All of this hoop-jumping fuss—the paperwork, the postmarking, the sales slips—is quite unnecessary, says Leonard. Fulfillment centers can now do it all online—whether or not the purchase was online, with a credit card, or with cash. They don't need the UPCs or the old phones or any such nonsense. The sales receipt could contain a unique code number that the consumer could enter into a Web site. Think of that the next time you are dissecting a box to get a lousy UPC code.

  Fantasy Economics

  Why economists are obsessed with online role-playing games.

  By Robert Shapiro

  Updated Tuesday, Feb. 4, 2003, at 11:26 AM PT

  The most popular article in the leading economics Web archive doesn't concern tax policy, international trade, or the theory of the firm. It's about an online fantasy game.

  During the past year, nearly 16,000 people have downloaded a 40-page economic analysis of EverQuest, Sony's popular online fantasy world of Norrath. "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier," by California State Fullerton economics professor Edward Castronova, is the No. 1 article in the history of the Economics Research Network, an Internet library of tens of thousands of professional journals and research papers in economics. The article, which you can download here, not only outpaces the online works of every Nobel laureate, it is also the fourth-most popular article on the entire Social Science Research Network, which contains more than 75,000 professional articles and abstracts in range of social sciences.

  For cybergaming naifs—most males over age 30 (me included) and almost all women—virtual worlds are elaborate, multiplayer, role-playing online environments in which each player's actions can affect many others. At any given moment, 50,000 or more people from more than 120 countries are online at EverQuest, moving their personal "avatars"—wizards, trolls, amazonlike women, and a dozen other types—through the fanciful landscapes of Norrath. These dramas unfold on more than 40 dedicated Sony servers, each accommodating up to 2,000 players interacting with the program and each other. (EverQuest is only one of several popular MMORPGs—"massively multiplayer online role-playing games." The oldest, Ultima Online, has 225,000 players; and the largest, Lineage, has more than 4 million subscribers, mostly in Korea.)

  What intrigues Castronova and other economists about EverQuest—beyond the fact that more than 500,000 people pay Sony $13 a month to participate—is that something resembling a nascent economy has emerged in Norrath. Inadvertently, EverQuest has become a virtual experiment in some of the fundamental questions in economics: What are the necessary conditions for markets; how much government does capitalism require; and how do equality and inequality affect economic development?

  According to Castronova's account of it, EverQuest has something to gratify economists of all political stripes. For natural-law types, Norrath suggests that the conditions for vibrant markets to develop are pretty minimal. Libertarians can delight that "government," in the form of rules restricting a player's activity, is also limited in Norrath. And liberals can take heart that Norrath's market and society rest on initial conditions of radical equality.

  The most basic condition for market activity built into EverQuest is that resources in Norrath are limited. In particular, a player chooses his avatar's initial traits, but a character with the power to heal wounds, for example, will lack agility; and another smart enough to decipher codes will be physically weak. Unlike real life, therefore, everyone in Norrath starts out with roughly equal resources.

  The second basic condition of self-regulating economic life in this virtual world, as in our own, is that nothing is free. An avatar's initial assets aren't enough to make much headway in the game, so players intent on navigating Norrath's challenges have to work at either developing new skills or earning new assets.

  The intriguing part is that most MMORPG players expand their assets and abilities not through violence or chicanery, the modus operandi of a typical single-player computer game, but through virtual market transactions. Hundreds of thousands of EverQuest players spend most of their time in Norrath trading or cooperating with other avatars, buying goods from creatures ("bots") built into the program, or using auction sites inside the game. To facilitate this, EverQuest adopted two other key conditions from real economic life: A currency called "platinum pieces," or PP, can be earned by completing various tasks, and there are rudimentary rules for buying, selling, and bartering.

  These few conditions are apparently all it takes to precipitate capitalism in cyberspace. As in a real economy, virtual market conditions change in response to how players behave. For example, shrewd players who know Norrath's nooks and crannies will purchase goods in a game zone where they've become abundant and then sell them in another where they're in greater demand.

  The kicker for economists is that these virtual economic relationships have broken into the real U.S. economy. When players found EverQuest's bartering rules inadequate, they started exchanging the armor, spells, and other Norrathian objects of value at real-world auction sites. These transactions are conducted not in Norrathian PP but in U.S. dollars and then completed between avatars inside the game. (You pay in dollars at a real-world site, then the seller's avatar gives your avatar the goods in Norrath.) You can even buy another player's avatar, complete with its accumulated skills and assets. Sony tried to stop all these transactions and persuaded eBay and Yahoo! Auctions to bar them on the grounds that they involve Sony's intellectual property. But this kind of protectionism is hard to enforce whether the goods are real or virtual: Trade in Norrathian goods and services simply
migrated to other sites.

  The exchange of goods and services in Norrathian PP, inside the game, and U.S dollars, outside, creates an exchange-rate relationship between the two currencies. Based on surveys of these market exchanges, Castronova calculated that one unit of PP was worth a little more than one U.S. penny. That technically makes Norrathian PP a "stronger" currency than the Japanese yen or Italian lira, albeit a thinner and less liquid one. (But Sony apparently could use lessons in central banking: As in real-world Japan, price deflation has hit the market for Norrathian goods.)

  The economic dynamics of EverQuest also allow Castranova to calculate wage levels in Norrath. Take the PP value of an average avatar's skills and assets, divide it by the average number of hours required to accumulate those holdings, and an average avatar "earns" 319 PP/hour, or $3.42/hour at the prevailing exchange rate. (This doesn't sound like much, but Norrath's deflation means that "real" wages are actually rising.) Castronova estimates that Norrath's per capita GNP is higher than India's or China's.

  The similarities to real-world market behavior certainly owe much to the fact that EverQuest players know how real markets work and probably believe in markets. In this respect, Norrath resembles the more successful transitional economies of Central Europe, whose citizens had a history of capitalism to draw on when their communist regimes crumbled. (Russia, by contrast, had no history of market capitalism and has struggled to make the transition to free markets.)