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by on July 29, 2010 at 12:25 pm in Web/Tech | Permalink

1 Kid Dynamite July 29, 2010 at 12:43 pm

hey tyler – i had the same question as a number of other commenters on Yglesias’s piece, which is regarding his sentence: “Credit card companies use interchange fees to cut into retailers’ monopoly rents and then rebate a share of the fee to consumers via reward programs,”

what does he mean by “cut into retailers’ monopoly rents?”

to me he’s somehow implying that credit card companies are acting as a kind of tax on retailers, while i’m of the contrary view that without credit card companies, many retail establishments would simply cease to exist (or at least, do much less business – is this even debatable?) – if consumers were unable to buy with credit. in other words – the ability to use credit greatly increases the ability to make purchases, and is good for retailers.

2 mww July 29, 2010 at 2:12 pm

CC companies have a virtual monopoly on one side of their business, retailers. Except for very few holdouts, every merchant out there has to accept Visa and Mastercard and just about all now accept AMEX.

CC companies do not have a monopoly, though, on their users. While you could call it an oligopoly, competition on rewards for card holders does hold down margins.

At the end of the day, it comes down to a transfer from cash consumers to card holders. Card holders can get away with this due to the menu costs for retailers to charge two different prices.

Card holders will increase their interchange fees right up to where they become more than the menu costs. At that point, when retailers do charge two different prices, the transfer from cash consumers will stop and card holders will only be paying for their own airfares through a very circuitous process.

It’s not a perfect, pretty process, but I believe it’s better than the government trying to “fix” it. Considering the convenience that credit and debit cards bring, it’s better to leave an inefficient market as it is.

3 Nathan July 29, 2010 at 2:48 pm

Regarding the Op-Ed on Haiti’s healthcare

“Perversely, by shoring up the capacity of the normally dysfunctional public health system during this crisis, the foreign doctors may be further damaging Haiti’s fragile medical sector. Once they leave, who will be left with the will and the capital to adequately care for Haitians?”

I love the adjective used to describe the unintended consequence of the foreign doctors on Haiti’s healthcare system: “Perversely”. If economics in general is the “dismal science”, than the economics of tampering with a free-market system is the “perverse science”. Its perverse because the value (both moral and financial) of the intervention seems to be inversely related with the value (again, both moral and financial) of the outcome.

The comparison is sometimes made to the butterfly in the coccoon: it must struggle to gather the strength to fly, and by assisting it’s escape one robs the butterfly of the strength it needs to survive.

The comparison is, itself, perverse in the context of healthcare in haiti – because the butterfly is a “healthcare system”, and the “struggling to gather strength” is measured in otherwise-preventable deaths.

4 Mike July 29, 2010 at 4:26 pm

On the altruism paper: I question the salience of the experiment, as experiment coupons could be redeemed only at campus eateries. This hardly a fungible commodity that is capable of manipulating incentives in the same ways cash does. I’m not going to argue that economic experiments are perfectly salient, but I think that they are substantially more salient than those described in Parks and Stone.

5 Bernard Guerrero July 29, 2010 at 5:59 pm

On the Amish population boom, I noticed that the states listed as having 5 or fewer church districts all have populations that are multiples of 75. Estimates?

6 anon July 29, 2010 at 8:16 pm

Over what time frame? Eventually someone has to pay the bill; the ability to make purchases (over all time) is not increased.

Irrelevant. The credit card relaxes a borrowing constraint, so it expands the set of possible choices relative to no credit. Credit cards are also a convenient alternative to cash payment, regardless of whether one always pays the balance in full or uses revolving credit.

7 Rubber Band Bracelets July 30, 2010 at 1:53 am

As we all know, The medical tool shape rubber Crazy Bands include 6 shapes and 6 colors

8 Rubber Band Bracelets July 30, 2010 at 1:53 am

As we all know, The medical tool shape rubber Crazy Bands include 6 shapes and 6 colors

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