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I just booked an executive room at the Hilton Tokyo for $3 a night on Expedia. The rate includes breakfast.  (The rate on Hilton’s website appears to be ~ US$300 per night.)

Mistake fares and hotel rates happen all the time. The easiest way to learn about them is to sign up for emails from FareAlert.

Usually there’s a keystroke error somewhere and boom… One of my favorites a few years ago was a $55 refundable/changeable business class ticket to Puerta Vallarta. While I was laying on the beach at the Westin there I missed British Airways’ $20 fares from the U.S. to anywhere in Europe. Many of the fares show up at Flyertalk.com in the "Mileage Run" forum, and are then sent out by mass email on FareAlert. It’s been covered extensively in the media, though, and there are thousands of subscribers — so once you get an email you have to act quickly.

This Hilton rate won’t last long. This is what fare alert had to say a few minutes ago:

The Hilton Tokyo is offering rooms for only $2/night (and $3/night for executive level rooms which include breakfast). This offer appears to be valid at least through August 2006, and should work for all dates where the hotel is not sold out.

There’s always some chance that the rate won’t be honored by the hotel, so wait a few days before buying airline tickets…

Update 9:41 am: A quick call to United Mileage Plus and I have 2 first class award tickets to Tokyo (flying ANA) on hold, the plan is to stay a week and then go on to Bangkok (using Thai Airways on the same award ticket) for a few days.  It’s just on hold – I haven’t ticketed yet – I’ll wait to be sure the hotel in Tokyo honors the $3 rate.  And I’ll still check out award availability on a bunch of other airlines before settling on a plan.

Update 10:08 am: The Hilton Osaka is also available on the same rate glitch over at Expedia.

Update 11:29 am: The deal is no longer available at the Hilton Tokyo, Expedia shows no availability for any date.  However it does seem to still be bookable at the Hilton Osaka.

It’s free the first year and $30 thereafter, comes with a signup bonus of 6,000 points with your first purchase and up to 6,000 more for hotel stays, and offers points which can be used for hotel nights or converted 1:1 into most airline programs (it’s not a good option for accumulating United miles, since the ratio is 1:2 – BankOne, which provided a plurality of United’s debtor-in-possession financing, didn’t like competition from this card).

When you covert 20,000 points at a time into airline miles Starwood gives you 5,000 bonus miles — which means you’re really earning 1.25 miles per dollar on most every carrier, better earning than most airlines’ own co-branded offerings. The flexibility, though, is the best benefit. With, say, an American Airlines Mastercard you’re stuck with American Airlines miles. With the Starwood American Express you earn whatever miles you want and you don’t have to decide until later.

An example of the power of this card — spend $50,000 on the United Visa or American Mastercard, and you have enough miles for a coach ticket to Europe. Spend $50,000 on the Starwood American Express, and you can transfer those 50,000 points to Cathay Pacific in exchange for 60,000 Asia Miles which are enough for a business class ticket on British Airways from the East Coast of the U.S. to most destinations in Europe.

My own personal solution involves also carrying a Diners Club card and a Hilton American Express. This combination won’t work out as well for everyone, however.

The Diners Club card is now a Mastercard, so it’s accepted universally. I use the card with merchants that don’t take American Express. Their points program offers transfers into most airline and hotel programs. I can even launder United or American miles into other programs through this program (with some devaluation).

Since Diners Club became a Mastercard, it lost some of its unique features — such as two billing cycles to pay and a lower than usual foreign currency conversion charge. But it maintains its primary insurance coverage on rental cars (in many cases if you wreck a rental car paid for with this card your own insurance doesn’t need to know, in contrast most cards provide only secondary rental insurance), and since it’s a Mastercard it’s useful for airline and hotel promotions that require payments with that brand of card (such as Hyatt’s outstanding Faster Free Nights promo).

Downsides to the card are a charge for transferring points to airline miles (95 cents per 1000 miles) and a $90 annual fee. I rent cars enough to make this worthwhile.

I use the free Hilton American Express only for things where I earn bonus points (5 Hilton points per dollar instead of the standard 3). I use it at the grocery store and at restaurants and my cell phone bill is automatically charged to the card. I run no more than $1000 or $1500 a month on this card. If I ever run out of Gold status with Hilton, I’ll probably notch up the spending to reach $20,000 in a year which will requalify me for that level in the Hilton HHonors program.

One of the most important pieces of advice is to stay away from proprietary rewards programs, like the CapitalOne GoMiles card.

Proprietary miles programs have marketing appeal, offering "any seat on any airline" and tapping into the frustration that some feel trying to redeem their miles. But these programs turn the value proposition of miles on their head. Miles are most useful for tickets that would have been too expensive to purchase — international business or first class tickets, or even last minute cross-country flights (which aren’t as expensive as they used to be). Proprietary programs generally offer coach seats, which have to be purchased a few weeks in advance, and the amount of airfare that they’ll pay is usually capped.

Furthermore, proprietary miles can be earned only through credit card spending so it may be harder to earn enough points for a free ticket than it is with a traditional frequent flyer program. Airline and hotel points can be earned through a variety of partnerships, whether it’s telephone or internet or mortgage financing, let alone actually flying or spending the night somewhere.

Proprietary programs amount to a cash rebate card where you can only spend the rebate on specific travel offerings.

So What’s In Your Wallet? Comments are open.

In the Financial Times today or on John’s website.

US President George W. Bush made four assertions: there are large uncertainties about the science and the economics; the Kyoto agreement would involve large costs and negligible benefits for the US; proposals to deal with greenhouse gas emissions that exclude developing countries are ineffective; and that research and development on new technologies should take priority over expenditure for meeting emissions reduction targets. It pains me to say it but on all points Mr Bush is right.

If we accept that the risk of a greenhouse effect is large enough to demand action, the question is: what sort of action?

Greenhouse gas emissions are cumulative; it seems likely that more good will come of stopping the flow entirely later than slightly slowing it now. If only the faddish short-term fixes (such as offshore wind farms) were likely to lead to longer-term solutions (such as nuclear fusion, or solar after three more decades of Moore’s Law-type progress) – we wouldn’t have to make difficult choices today.

Collectively, of course not. But for the selfish individual is it worthwhile? It turns out that the quarterly road deaths in London last year averaged 54. 52 people were murdered in the July 7th attacks (and four times more people travel by tube or bus than drive, cycle or walk). Leaving public transport is only going to be safer if the terrorists strike much more often in future.

How likely is that? Since we were all told that attacks were inevitable in the end, the horrible fact that they finally happened shouldn’t really change our estimate of the chance that they will happen again. Experiences in New York and Madrid suggest that a sustained campaign is hard. Let’s hope so.

Aside: Gary Becker and Yona Rubinstein have a paper on the response to the fear of attacks. It seems that defying terrorists is a fixed cost, willingly paid by frequent users of planes, buses or cafes but declined by casual users. That accords with my experience: I have no worries about returning to live in London permanently, but am pleased that my baby daughter will be travelling in a car on our imminent visit.

As Alex mentioned, I’ll be blogging next week from Monrovia, Liberia.  I will try to post three to four times, but the reliability of "internet cafes" in Liberia is suspect at best.  Part of the problem is the lack of public electricity.  If I am able to blog, it will likely be courtesy of a gasoline generator.

Despite its naturally beautiful beaches on the Atlantic Ocean, Liberia is not exactly a popular vacation destination.  My time in Liberia will be spent lecturing on economic growth and visiting orphanages with my oldest daughter and a small group from my church.

Liberia may be the poorest nation in the world.  Recent estimates from the world bank indicate that per capita gross national income in Liberia is about half that of Rwanda. 

Some more facts about Liberia:

1. Liberia was founded by freed U.S. slaves.
2. Since 1980, the only "elected" leaders of Liberia (Samuel Doe and Charles Taylor) assumed power through bloody coups.
3. Carolyn Cole of the L.A. Times won a Pulitzer Prize in 2004 for these photos of the Liberian civil war, which raged off and on from 1989 until 2003.
4. Since the fall of 2003, U.N. troops have been stationed in Liberia to disarm the various factions, keep the peace, and oversee presidential elections (slated for this coming October).

By the way, Tyler’s sage advice to me before my first trip to Liberia was "beware of men wielding machetes."

My friend Nathan Mehl, having blogged his way through Vietnam, has posted a spectacular photo gallery with a title so clever I had to steal it for this post.

According to Tillinghast, twenty four cents of every dollar spent in the tort system covers a non-economic loss, such as pain and suffering. Non-economic damages have been a target for reformers for years but concern with capping them has always been that it’s easy to avoid the caps by reclassifying the non-economic damage portion of the award as compensatory. A recent report by RAND indicates that California’s $250,000 cap is effective at reducing awards. It finds that “Defendants’ liabilities were reduced by 30 percent.”

This does not, however, mean a 30% reduction in payouts to plaintiffs. Because of limitations on attorney fees, which result in a reduction of payments to plaintiff’s attorneys of 60 percent, plaintiff’s recoveries fell by only 15%.

My take: California has made a good start but did not go far enough. Since consumers ultimately pay for any damage payments in higher prices for goods and services, damages in the tort system’s coverage should mirror private insurance markets. Private insurance markets reveal the preferences of consumers for insurance and hence certain types of compensation. Consumers find it worthwhile to purchase insurance against economic loses. However, as Paul Rubin explains

No direct insurance policy covers this class of loss, but tort damages commonly do pay them. But the ability to receive payments for nonpecuniary losses is not a benefit to consumers; it is a cost. The reason insurance does not commonly cover them is that consumers are not willing to pay the cost of the coverage, even given the small loads commonly associated with direct insurance. (The theory of rational insurance can explain that reluctance.)

But if consumers are not willing to pay voluntarily for direct insurance against pain and suffering, why should they benefit if they are forced to buy the same insurance as part of their medical payments? The answer is that they would not benefit. By forcing payments for nonpecuniary losses on consumers as part of medical insurance, we would not be creating a net benefit for them.

For Rubin’s theory see John Calfee and Paul H. Rubin. “Some Implications of Damage Payments for Nonpecuniary Losses.” Journal of Legal Studies 21 (1992).

Interesting piece (subscription required) earlier this week in the Wall Street Journal on how independent bookstores are competing successfully against Barnes & Noble and Borders by actually getting bigger.

The 46-year-old bookseller [Neil Van Uum] has managed to prevail thanks to an unusual retailing strategy: combat the giants by being even more giant. His Joseph-Beth Booksellers in Cleveland is bigger than the Borders, sells merchandise ranging from toys to quilted handbags and boasts a restaurant where flank-steak salad goes for $9.95.

He’s one of a hardy group of survivors that has emerged from the independent bookstore shakeout by supersizing. In Michigan, Schuler Books & Music boasts a 35,000-square-foot flagship in Grand Rapids. In West Chester, Pa., Chester County Book & Music Co. owns a 49,000-square-foot store that includes a New Orleans-style restaurant.

The six stores owned by Joseph-Beth average 30,000-square-feet — or 5,000 square feet more than a typical Barnes & Noble.

It isn’t size alone, though. What the really successful independent stores do is combine consumer friendliness in terms of design, space, and amenities with the kind of knowledgeable and dedicated staff that’s traditionally thought of as characteristic of independents. I think there’s a plausible argument that independent stores underestimated initially how important the experience of shopping was to customers. But that’s no longer the case at the stores the Journal’s talking about, a list to which you’d want to add stores like Powell’s in Portland, Tattered Cover in Denver, and Stacey’s in San Francisco.

These stores are also taking advantage of a genuine market opportunity by being active intermediaries between their customers and book publishers. (Amazon does it via collaborative filtering, while brick-and-mortar rely on staff members.) The real challenge for readers today is figuring out which of the tens of thousands (or more) of books published every year is worth their time. Stores that customers can count on for reliable recommendations should be able to build reputational capital and profit from it. It’s a hard business, though: net profit margins rarely get above 3-4%.

From the Rocky Mountain News:

Former Nebraska star [running back] Lawrence Phillips was seen in Las Vegas recently pawning one of his Big Eight championship rings — reportedly for $20. “He said he was stuck in Las Vegas,” pawn shop owner Steve Gibson told the Las Vegas Review-Journal. “He said, ‘I need to get out of town.’ Gibson then sold the ring on eBay for a reported $1,700.

Perhaps that’s the definition of desperate: accepting a price that represents a 99% discount to market value. The inevitable next question is: Has Phillips learned from experience and put his other rings up for auction? (As of now, no.)

Alex’s mention of Richard Posner’s blogging at Larry Lessig’s blog gives me an excuse to bring up one of the stranger examples of intellectual-property appropriation I’ve ever come across. With the exception perhaps of the first two Batman movies, I think the best superhero film ever is Alex Proyas’ brilliant Gothic fable The Crow. The movie’s plot is completely straightforward — it’s a revenge tale — but it’s visually overpowering, and Brandon Lee (who died near the end of filming) is great to watch. Anyway, the basic narrative conceit of the movie is that, after having been murdered, Lee has been brought back to life in order to hunt down the killers. As one of the characters explains, when a person dies, a crow carries away his soul. But if the death needs to be avenged, “Then sometimes, just sometimes, the crow can bring that soul back to make the wrong things right.” It’s hardly T.S. Eliot, but the coda is memorable enough.

I was, then, a little disconcerted earlier this summer to see the trailer for Catwoman — a movie about a woman who, after having been murdered, is brought back to life to hunt down her killers — and hear this: “It’s been said that when a person dies, a cat can bring back their soul to make the wrong things right.” And things got even weirder last week when, watching the trailer for the Zhang Yimou film Hero — which Miramax has finally gotten around to releasing here two years after it came out in China — I heard the the voiceover describing Jet Li’s character as a hero who has returned — you guessed it — “to make the wrong things right.”

Now, I tend to be in the Lessig/Posner camp when it comes to intellectual property, so I’m not suggesting that anyone start talking about legal remedies here. And, to be fair, “make the wrong things right” may not be the most unusual sequence of words imaginable. But is it too much to ask for at least a cursory effort at originality from studios, and perhaps a less blatant lifting of others’ words? On the other hand, maybe the references were intended as clever homages to Proyas’ masterpiece, and I just missed it.

I await the outrage. The Economist recently noted that…

“According to army figures dug up by the New Yorker, over the past three-and-a-half years military surgeons have performed 556 breast enhancements and 1,592 liposuction procedures on soldiers and their close relatives. Soldiers have to pay only the cost of their breast or, potentially, buttock implants; family members must cover other expenses. Face-lifts and nose jobs are also available.”

My take: The military provides lots of valuable training to soldiers in exchange for which soldiers take a pay cut. It is even possible the practice is efficient. Unlike private employers the military can force those it provides a valuable skill to continue working at a wage below their current market wage. I suspect most doctors enter the military to receive a medical education. If that education is more valuable because they can perform plastic surgery and military doctors’ wages are low enough, the service may be beneficial to tax payers as well as the doctors, and one assumes, the soldiers.

A colleague of mine at CMC is valiantly continuing his crusade against the notion of public goods (A public good is not rival in consumption; my using it does not diminish your use of the good and not excludable). My colleague has two issues. First, he has never come across a good that fits the description well enough to deserve the label and second, almost any discussion of public goods inevitably leads to a discussion of the need for government provision. I find his argument persuasive. It doesn’t take long in government to hear about countless public goods crying out for government provision.

Thus it is with some trepidation that I mention a candidate for the textbook public good. The Global Positioning System, GPS, which provides location information for both military and civilian uses, is currently provided by the US government at no direct cost to users. GPS was constructed to be non-rival and non-excludable. The way the GPS system works is that a series of signals allow a receiver to triangulate the user’s location without the user needing to communicate back to the satellite. The military nature of the system means that users do not actually want to be found; hence GPS is designed for passive use only. It also makes it very difficult to charge end users for using the signals.

The US government has picked up the cost of providing the system and, according to the Economist

“…after spending $20 billion, the Pentagon has built a global system that is a key ingredient of NATO defense. But it is also an essential prop to countless civil applications: for every military user, there are now 100 civilian users. GPS provides not only satellite-navigation systems in cars and boats; it is used by internet service providers, by banks and by surveyors. One day it might be used by air traffic control systems to permit “free flight”, in which pilots of commercial aircraft find their own route and stay clear of other aircraft, without the cumbersome business of radio telephone contact with controllers on the ground.”

So is this a lighthouse or not? The debate is currently more than academic. The Economist details the European Union’s solution to the provision of position navigation and timing services. The EU’s proposed system,

“…will be in part a commercial system. A concessionaire will get the right to operate the system for a fixed period in return for plunking down two-thirds of the deployment costs–around $2.8 billion.”

I look forward to the day when a Principles of Economics textbook uses GPS as an example of public good. Whether Pigou or Coase wins this one I cannot predict.

In the weeks leading up to Google’s IPO, few people had anything good to say about the company or its decision to go public using a modified Dutch auction. (Here’s one notable exception.) But now we’re seeing a welcome backlash to the anti-Google backlash, with a host of articles arguing that, glitches notwithstanding, the IPO worked. (My take is here, but unfortunately you need to subscribe to the Financial Times to read it.)

Most discussions of the IPO have focused, appropriately, on the fact that Google maximized the amount of money it raised by reducing the commissions it paid its investment bankers and by getting itself a fairer price than it would have under the traditional system. (Even though Google’s price did jump 18% on the first day, that was a relatively reasonable discount given all the fear and uncertainty Wall Street had tried to sow about the company and the offering.) As Alex wrote last week, the true test of the success of an IPO is the “cost per dollar of raised funds,” and by that standard Google did well.

But the offering was also a success for another reason, which is that it forced institutional investors to compete, for once, on a level playing field. The problem with the current IPO system isn’t just that companies end up leaving billions of dollars on the table when they go public, but that select mutual-fund and hedge-fund managers (as well as well-connected individuals) are handed what amounts to free money. In a traditional IPO, the investment bank underwriting the offering controls the allocation of shares. In the late 1990s in particular, that allocation process became a way of doling out favors and securing future business. For instance, if you were a mutual-fund manager who funneled a lot of trades through an investment bank — or who agreed to do so — then you were more likely to get a hefty allocation of IPO shares.

This made money managers look a lot smarter than they were — even if you set the bubble aside, there are lots of fund managers whose returns from the late nineties need an asterisk next to them — and it wrecked the price-setting process, since there was no real attempt to let the price reflect the real demand for a stock. It also sabotaged one of the best things about capital markets, which is that in theory they aggregate the opinions of anyone with enough capital and enough risk tolerance to participate, and not just the opinions of those with the right connections. (There should be no velvet ropes in capital markets: if you can pay, you can play.) Google turned all this around: the only way to get shares in the Dutch auction was to do the valuation work and make a reasonable bid. The traditional IPO relies on the power of cronyism. Google’s IPO, flawed as it was, relied on the power of markets. Bad for the Street, good for everyone else.

At this point, it seems clear that Venezuelan president Hugo Chavez won a definitive victory in the recall referendum that the country held a week ago Sunday. The opposition, though, continues to insist that there was massive fraud. There doesn’t seem to be any proof of this, but one piece of evidence that Chavez’s opponents seized on almost immediately was the curious fact that at hundreds of polling stations around the country more than one voting machine recorded the exact same number of “yes” votes (“yes” was a vote for Chavez’s removal). For instance, the Wall Street Journal reported that at one polling station in Bolivar, two machines each recorded 153 “yes” votes while recording 215 and 237 “no” votes.

The opposition argued that this was proof that the number of “yes” votes had been “capped,” so that after a certain number of votes had been recorded, every additional “yes” vote was changed to a “no” vote instead. (Venezuela uses computerized touch-screen voting machines.) And at first glance, this might seem suspicious. But at second glance, it seems like a simple product of chance, as the Journal pointed out:

Aviel Rubin, a computer-science professor at Johns Hopkins University, said he calculated odds of roughly one in 17 that two of three computers at a voting table would have identical results. That compares to about one in 15 that so far have shown similar results in Venezuela’s referendum.

In other words, with twelve thousand voting “tables,” many with multiple machines, it was inevitable that some would end up with matching scores. (It’s similar to the fact that if there are 23 people in a room, the chances are 50-50 that two of them have the same birthday.) Not surprisingly, then, when international observers audited a sample of the results, they found that while there were 402 tables with matching anti-Chavez votes, there were 311 tables with matching pro-Chavez votes, too. What seemed to be proof of fraud was most likely just a statistical artifact.

This is a classic example of what Nassim Taleb calls being “fooled by randomness,” in his intriguing book of the same name. We think that randomness means there will be no clusters or sequences of similar behavior, and therefore when we see them we assume they’re evidence of some hidden pattern. (You can see this in the way people interpret everything from clusters of cancer cases to hitting streaks in baseball.) But they’re really just evidence of the numbers working themselves out.