When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants (6 page)

I’m not sure this one is real but I will assume that Kyle S., the reader who sent it in, is an honest man: “My State Farm agent’s name is Justin Case . . .” Enough said.

And finally, though I said we’d give just three prizes, there were so many aptonymous dentists that I think we have to stretch the winners to four. Here’s my favorite:

A reader named Scott Moonen writes: “My former dentist was named Eugene Silvertooth. From childhood he had the nickname Chip Silvertooth.”

(The honorable mention for dentists goes to a reader named Anshuman: “Unfortunately, I moved away from San Francisco and had to leave my dentist, Dr. Les Plack. He was born for the job, right?”)

©iStock.com/Kreatiw

If there is one thing economists think they know everything about, it is prices. To an economist, there is a price on everything, and everything has a price. Regular people think of prices as what you grumble about at the store; economists think of prices as the logic that organizes our world. So of course we’ve had a lot to say on this topic over the years.

There is a website—one that is so stupid I feel embarrassed to even give it free publicity—called www.WhoToHate.com. The idea behind the site is you pay them five bucks, write in the name of someone you hate, and the website writes to the person telling them that there is someone who hates them.

I got one of those hate mails today, meaning that someone hates me enough to be willing to pay five dollars to have me receive such an e-mail.

From an economic perspective, it is an interesting product they are providing. Does the person spending the five dollars get utility from the act of declaring (albeit completely anonymously) their hatred? Or does the utility come from the (real or imagined) pain on the part of the recipient when he or she discovers the depth of another’s hatred?

For someone who actively hates me, the only source of satisfaction would be the first channel. I already get loads of hatred coming my way every day—hatred that is far more vicious than this whimsical e-mail I received after they spent five dollars. Indeed, the fact that the person who hates me identified me as Steve Levitt from California (where I lived only briefly while visiting Stanford a number of years ago) actually gave me a good chuckle.

It got me thinking. Maybe the website would be well served to allow the hater to make a payment greater than five dollars. By paying fifty dollars to demonstrate their hatred, and relaying that information to the hated person, it could really send the message. Perhaps, though, haters prefer to send ten separate five-dollar messages to create the impression that everyone hates you a little, rather than one person hates you a lot.

What saddens me about the website is that where it could really have some bite is for some innocent teenager who is singled out for hatred by his or her peers. For a person
who only gets a few e-mails a day to begin with, receiving ten or twelve e-mails saying that anonymous people hate you might be pretty discouraging.

The good news is that apparently not many people feel enough hatred to want to spend five dollars to make that hatred known. The current list of the ten most hated people includes some well-known names (I’ve omitted the people I have never heard of, out of fear they are the innocent teens I mentioned). Here is the list, with their number of hatreds:

So even with all the people who hate George Bush, only seven people have been willing to pony up the five dollars! To make the top-ten list, you only need two people to hate you. That shouldn’t be hard for me. I’m already halfway there.

Not long ago, I was chatting with a physician in Houston, the sort of older gentleman family doctor you don’t see much of anymore. His name is Cyril Wolf. He’s originally from South
Africa, but other than that, he struck me as the quintessential American general practitioner of decades past.

I’d asked him a variety of questions—what’s changed in recent years in his practice, how managed care has affected him, etc.—when suddenly his eyes fired up, his jaw set tight, and his voice took on a tone of great exasperation. He began to describe a simple but huge problem in his practice: a lot of generic medications are still too expensive for his patients to afford. Many of his patients, he explained, must pay for their drugs out of pocket, and yet even the generic drugs at pharmacy chains like Walgreens, Eckerd, and CVS could cost them dearly.

So Wolf began snooping around and found that two chains, Costco and Sam’s Club, sold generics at prices far, far below the other chains. Even once you factor in the cost of buying a membership at Costco and Sam’s Club, the price differences were astounding. (Nor, apparently, do you need to be a member of either store to use their pharmacy, although membership does bring a further discount.) Here are the prices Wolf found at Houston stores for ninety tablets of generic Prozac:

Walgreens: $117

Eckerd: $115

CVS: $115

Sam’s Club: $15

Costco: $12

Those aren’t typos. Walgreens charges $117 for a bottle of the same pills for which Costco charges $12.

I was skeptical at first. Why on earth, I asked Wolf, would anyone pay $100 extra—probably every month—to fill a prescription at Walgreens instead of Costco?

His answer: if a retiree is used to filling his prescriptions at Walgreens, that’s where he fills his prescriptions, and he assumes that the price of a generic drug (or, perhaps, any drug) is pretty much the same at any pharmacy. Talk about information asymmetry; talk about
price discrimination
!

I had meant to write about this, and had collected a few relevant links: a
TV news report in Houston about Wolf’s discovery
; an
extensive price comparison
compiled by
a TV news reporter in Detroit; a
Consumer Reports
survey
; and
a research report on the subject
from Senator Dianne Feinstein.

But I had forgotten all about this issue until I read
a comprehensive
Wall Street Journal
article
that does a good job of measuring the difference in prices between chains. Most of the differences aren’t as drastic as Wolf’s example, but are often still huge. Perhaps the most interesting sentence is this one:

After a call from a reporter, CVS said it would drop its simvastatin price [from $108.99] to $79.99, as part of an “ongoing price analysis.”

So that’s what it’s called: “ongoing price analysis.” I’ll have to remember that the next time my kids catch me trying to buy a two-dollar toy when I’d promised one for twenty.

My car is ten years old, so I went out to buy a new one this weekend. In
Freakonomics
and
SuperFreakonomics,
we write a lot about how the Internet has changed markets in which there are information asymmetries. Buying a new car gave me the chance to see firsthand these forces at work in the new car market.

I was not disappointed. I already knew what kind of car I wanted. Within fifteen minutes and at no cost, using sites like
TrueCar
and
Edmunds
, I not only had a good idea of a fair price to pay for the car, but also was able to notify some local car dealerships that I was interested in quotes.

Just a few minutes later, one car dealership offered to sell me the car at $1,300 under invoice. That seemed like a good place to start, but before I could even round up the kids to drag them to the dealership, another dealership called, and when they heard the offer from the first dealership, they beat that offer by a few hundred dollars. I called the first dealership back and got voice mail, so we headed off to the second one. I figured I was still far away from a final price, but I was off to a good start without even leaving our house.

I learned a lot about buying cars the last time I bought one—the various lies that dealerships tell with respect to invoice prices; the ridiculous game of cat and mouse with the salesperson trotting off to talk to the manager, etc. I abhorred the process the last time we needed a car, but this time, thinking about it more intellectually, I was eager to take part in the elaborate ritual associated with buying a new car.

Perhaps my willingness to haggle stemmed from my unlikely triumph the last time around. I had gotten an estimate faxed to me—this was pre-Internet—of what a fair price was to pay for the car. Stupidly, I left the sheet of paper at home, but I thought I remembered the price. I fought hard for that price: threatening repeatedly to leave, back and forth and back and forth, and finally I got the dealer within a few hundred dollars of the price I remembered. When I got home, I discovered that my memory had transposed two digits; the price on the fax was actually $2,000 higher than the one I managed to bargain. Mistakenly believing a fair price was $2,000 lower than it really was, I had bargained incredibly hard and gotten a ridiculously good deal. Leaving that fax at home was worth thousands of dollars.

So I got to the car dealership and sat down to bargain. The salesman explained to me that the price they were offering was well below invoice, discreetly showing me some pricing documents stamped “confidential,” emphasizing how much money they were going to lose on the car. I replied that he knew as well as I did that the invoice price he was quoting
me was not what the dealership paid for the car. I asked him to simply give me his best offer. He disappeared for a while, ostensibly to talk to his boss, but probably to catch up on who was winning the baseball game.

He was gone just long enough for a third dealership to e-mail me a price quote. This one was $1,500 lower than the current best offer from the dealership where I was sitting. He came back and said the best he could do would be to go $200 lower. I said, “That’s not going to work because another dealer just offered to beat that price by over $1,000.” I handed over my phone to show him the e-mail. He disparaged the other dealership for a while, and then he went and found the boss. The boss assured me that their last offer was the very best they could do—it was a generous offer for a dozen different reasons.

I said, “That’s all fine, but if you don’t do better, I’m going to walk out of here and go to the other dealership.”

By my estimation, we were now about halfway through the mating ritual. In about fifteen minutes, after a lot of huffing and puffing, we would get the car for the price the third dealership had offered. That would still probably be paying way too much, but I was willing to accept that outcome.

“So I’m going to walk out,” I reiterated.

“Okay,” the manager said. “If it doesn’t work out at that other dealership, come back and we will sell you the car at the price we offered before.”

I stood up and began to gather the kids, all part of the tough bargaining act. They simply watched me, as if they
had forgotten that this was all part of the ritual. Even if they had forgotten their lines, I still remembered mine. “We both know that if I walk out of here today, I am never coming back.”

To which the guy simply said, “We’re willing to take our chances on that.”

And I walked out.

I was shocked. This dealership had sent me a price over the Internet, come down only $200, and then smiled as I left to buy a car from another place. Given that, I figured the new dealer must be giving us a really good deal. I didn’t have the energy to start another mating dance with the new dealership, so I simply accepted their offer without bargaining. I pick the car up on Tuesday.

At least for me, there are not too many questions that would lead me to respond, “For twenty-five million, no way—but for fifty million I’ll think about it.” Twenty-five million dollars is so much money that it’s hard to think about what you would do with it. It sure would be nice to have the first $25 million but I’m not sure why I’d need the second $25 million.

The U.S. Senate is hoping there are some folks in Afghanistan or Pakistan who don’t see it that way. Frustrated by the failure of the $25 million bounty on Osama bin Laden to
lead to his capture,
the Senate has voted 87–1
to raise the bounty to $50 million. (The lone dissenter was Jim Bunning, a Republican from Kentucky.)

At one level, you have to applaud this move by the government. To a Pakistani peasant, $50 million is an unthinkably large amount of money. To the U.S. government, which is spending $10 billion a month in Iraq, $50 million is next to nothing. If one of the major goals of the Iraq war was to get rid of Saddam Hussein, think how much cheaper it would have been to offer a reward of, say, $100 billion to anyone who could get him out of office by whatever means they saw fit. Saddam himself might have graciously accepted the offer and traded the hassles of running a country for a pleasant $100 billion pension and a well-appointed French manor.

Indeed, we have written before about the virtues of offering big prizes to encourage people to work on problems, whether it is
curing disease
or
improving Netflix’s algorithms
.

On the other hand, if I can’t tell the difference between $25 million and $50 million, I can’t imagine that upping the ante will push a wavering Pakistani over the edge of collaborating with the U.S. government.