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Monthly Archives: September 2012

ECONOMIC REPORTS Data to be released include the I.S.M. manufacturing index for September and construction spending for August (Monday); A.D.P. employment for September, I.S.M. service index for September (Wednesday); weekly jobless claims (Thursday); and unemployment for September and consumer credit for August (Friday).

CORPORATE EARNINGS Companies scheduled to report quarterly results include Family Dollar Stores and Monsanto (Wednesday), and Constellation Brands (Friday).

IN THE UNITED STATES On Monday, the United States Securities Industry and Financial Markets Association will have its annual municipal bond summit meeting in New York.

On Tuesday, automakers will report their North American sales for September, and the Securities and Exchange Commission will hold a daylong discussion on how to promote stability in markets that rely on highly automated systems.

On Wednesday, Meg Whitman, the chief executive of Hewlett-Packard, will discuss the company’s strategy and forecast in a presentation to analysts.

On Thursday, retailers will report their same-store sales for September, and the Federal Reserve will release minutes of its Sept. 12-13 policy-setting meeting.

OVERSEAS On Monday, leaders of South American and Arab countries begin a two-day meeting in Lima, Peru, to discuss increasing trade and investment between their regions; Mark Zuckerberg, the chief executive of Facebook, will meet in Moscow with Prime Minister Dimitry Medvedev of Russia; Prime Minister Yoshihiko Noda of Japan is expected to appoint a new finance minister; and Chancellor Angela Merkel of Germany and the country’s economics minister, Philipp Roesler, will brief reporters about the government’s plans to bolster electric vehicles.

On Tuesday through Friday, Ceatec Japan, a consumer electronics convention, will take place in Tokyo.

On Thursday, the European Central Bank and the Bank of England will issue decisions about interest rates. Mario Draghi, the president of the European Central Bank, may provide details about the bank’s bond-buying program.

On Friday, the Bank of Japan’s policy-setting board will meet, and Prime Minister Mario Monti of Italy will begin two days of talks in Malta with the leaders of France, Spain, Malta, Portugal, Morocco, Algeria, Libya, Tunisia and Mauritania.

The character is the talking garden gnome that has appeared since 2004 in advertising for the online travel agency Travelocity. It is known as the Roaming Gnome because, according to the character’s back story, it left the garden for good eight years ago in favor of the traveling life.

The brand mascot is the star of a campaign for Travelocity that began on Sunday with commercials during, appropriately enough, the reality competition series “The Amazing Race.” The campaign is to continue this week with a two-day event in Madison Square Park in Manhattan arranged in cooperation with NYC & Company, the marketing organization for the City of New York.

The centerpiece of the campaign is a contest, open to travelers ages 21 and older, with a grand prize of a trip around the world for two valued at $65,000 and a chance to appear in a Travelocity commercial. Consumers will be asked to produce video clips up to 60 seconds long and submit them to a Web site created for the contest to explain why they ought to be chosen to win.

The idea behind the contest is that just as the gnome was “nabbed” from the garden in 2004 to begin roaming, the winner will be taken from his or her hometown for the trip. That is underlined by the address of the special Web site, gnomenabbed.com, and the name of the contest, the Great Gnome Nabbing.

The character’s biography is meant as a metaphor to appeal to the “adventurous audience” of primarily leisure travelers at which Travelocity aims its advertising, said Brad Wilson, chief marketing officer for North America at Travelocity in Southlake, Tex., part of Sabre Holdings, which is owned by the Texas Pacific Group and Silver Lake Partners.

The gnome “is an aspirational traveler who is an evangelist for Travelocity,” Mr. Wilson said, and consumers “can relate to him for his first-day-of-vacation optimism and whimsical nature.”

The campaign consists of two firsts. It is the first major campaign for Travelocity since Mr. Wilson joined the company in May 2011 from Nutrisystem, where he had been senior vice president for marketing and brand management.

It is also the first campaign for Travelocity by its new creative agency, McKinney in Durham, N.C. Travelocity hired McKinney in August, shifting its account from Leo Burnett in Chicago, part of the Publicis Groupe, which had handled the assignment since September 2010.

In a twist, the agency that had created campaigns for Travelocity before Burnett was — surprise — McKinney. In fact, McKinney also came up with the Roaming Gnome.

“We really wanted to develop the story of the gnome further,” Mr. Wilson said, and the company decided the agency that was its progenitor would be best for the assignment.

Also, “McKinney had largely the same people there,” he added, including Philip Marchington, the creator of the gnome.

Needless to say, Mr. Marchington, who is a group creative director at the agency, was pleased by the turn of events.

“It’s just great to have him back,” he said. “To ‘re-gnome-ify’ my life was a blessing; I did miss it.”

The plot of the campaign is that the gnome is “repaying the favor done to him when he was nabbed from the garden,” Mr. Marchington said, by offering the trip to the contest’s grand prize winner.

While Burnett was creating campaigns for Travelocity, it did not change the character, which continued to speak with a prim accent supplied by the English actor Harry Enfield.

“We wanted a voice that epitomized the character being stuck in his ways, with a properness to him,” Mr. Marchington said, “a mix between Trevor Howard and the BBC World Service.”

(The gnome is a somewhat more refined counterpart to the Geico gecko, which has a cockney accent.)

The genesis of the Roaming Gnome was “the gnome-nabbing phenomenon,” Mr. Marchington said, also known as gnome liberation or the traveling gnome prank: swiping a gnome from a garden and photographing it on a trip, with the photos sent back to its owner.

In a way, the photos were an early version of social media, and to return the favor, the Travelocity gnome has a Facebook fan page and a Twitter feed.

To keep the gnome in the mood for travel, both Mr. Marchington and Mr. Wilson said they carry statues with them when they fly. The response from fellow travelers is “a barometer of where the brand stands,” Mr. Marchington said. “He takes the brand feeling out there.”

Travelocity spent $54.6 million to advertise last year in major media, according to the Kantar Media unit of WPP, compared with $47.3 million in 2010, $80.5 million in 2009 and $76.5 million in 2008.

The concept of an account coming back to an agency after it is lost to another agency is known as boomeranging. Another example came in September, when BBDO Worldwide, part of the Omnicom Group, won back, after seven years, the assignment to be the lead creative agency for Visa.

The chance to someday regain a departed client, however slim, may be why agencies usually try not to be too bilious when they are dismissed.

You know the rest, even if you don’t know you know the rest.

You’ve heard it — in the guitar riffs of Buddy Holly, Jimi Hendrix, George Harrison, Keith Richards, Eric Clapton, Pete Townshend, Bruce Springsteen, Mark Knopfler, Kurt Cobain and on and on.

It’s the sound of a Fender electric guitar. Mr. Fender’s company, now known as the Fender Musical Instruments Corporation, is the world’s largest maker of guitars. Its Stratocaster, which made its debut in 1954, is still a top seller. For many, the Strat’s cutting tone and sexy, double-cutaway curves mean rock ’n’ roll.

But this heart of rock isn’t beating quite the way it once did. Like many other American manufacturers, Fender is struggling to hold on to what it’s got in a tight economy. Sales and profits are down this year. A Strat, after all, is what economists call a consumer discretionary item — a nonessential.

More than macroeconomics, however, is at work here. Fender, based in Scottsdale, Ariz., is also being buffeted by powerful forces on Wall Street.

A private investment firm, Weston Presidio, controls nearly half of the company and has been looking for an exit. It pushed to take Fender public in March, to howls in the guitar-o-sphere that Fender was selling out. But, to Fender’s embarrassment, investors balked. They were worried about the lofty price and, even more, about how Fender can keep growing.

And that, really, is the crux of the matter. Times have changed, and so has music. In the 1950s, ’60s and ’70s, electric guitars powered rock and pop. Today, turntable rigs, drum machines and sampler synthesizers drive music like hip-hop. Electric guitars, huge as they are, have lost some of their old magic in this era of Jay-Z, Kanye West and “The Voice.”

Games like Guitar Hero have helped underpin sales, but teenagers who once might have hankered after guitars now get by making music on laptops. It’s worth remembering that the accordion was once the most popular instrument in America.

Granted, Fender is such a powerful brand that it can ride out the lean times. But sales of all kinds of musical instruments plunged during the recession, and they still haven’t recovered fully. Sales of all instruments in the United States totaled $6.5 billion last year, down roughly 13 percent from their peak in 2005, according to Music Trades, which tracks the industry.

Many of the guitars that are selling these days are cheap ones made in places like China — ones that cost a small fraction of, say, a $1,599 Fender Artist “Eric Clapton” Strat. Fender has been making its own lines of inexpensive guitars overseas for years, but the question is how the company can keep growing and compete profitably in a fast-moving, global marketplace. Its margins are already under pressure.

“What possible niche is left unexploited by Fender?” asks Jeffrey Bronchick, founder of Cove Street Capital, an investment advisory firm in El Segundo, Calif., and the owner of some 40 guitars, including four Fenders.

Another big player on the American music scene, Guitar Center, has already had financial strains. Like Fender, Guitar Center, the world’s largest chain of instrument retailers, is also involved with private equity. It’s controlled by Bain Capital, Mitt Romney’s old firm.

Analysts say Guitar Center is crucial to Fender, accounting for roughly a sixth of Fender’s sales — and the ties between the two run deep. Fender’s chief executive, Larry Thomas, used to be the chief of Guitar Center. He sold the company to Bain at the top of the market in 2007 for $2.1 billion, including debt.

Guitar Center has been losing money since. Moody’s issued a junk rating of B2 on Guitar Center’s debt in October 2007, and has since downgraded the company two more times, most recently in November 2010, to Caa1.

THE change in American music is evident on West 48th Street — the “Music Row” of Manhattan. The block just east of Times Square was once home to dozens of music stores, practice studios and instrument repair shops. It was the place to go to buy a Fender in New York.

Now Music Row is being hollowed out by high rents and competition on the Web. Even Sam Ash, which has been there since the 1920s, is moving to West 34th Street.

Fender, too, has had to contend with changing tastes and markets. Once it looked like the Pan Am of guitars, a storied name that might simply vanish. Leo Fender sold his company to CBS for $13 million in 1965, but Fender struggled in the ensuing years to maintain its identity inside a big corporation. Analysts said that Fender, under pressure to meet quarterly earnings numbers, made a series of cost cuts that caused quality to suffer and sales to nosedive.

Yamaha of Japan, meanwhile, began grabbing market share with inexpensive, high-quality guitars. In 1980, the problems came to a head when Fender posted a $10 million loss on only $40 million in sales.

Six major American banks were hit in a wave of computer attacks last week, by a group claiming Middle Eastern ties, that caused Internet blackouts and delays in online banking.

Frustrated customers of Bank of America, JPMorgan Chase, Citigroup, U.S. Bank, Wells Fargo and PNC, who could not get access to their accounts or pay bills online, were upset because the banks had not explained clearly what was going on.

“It was probably the least impressive corporate presentation of bad news I’ve ever seen,” said Paul Downs, a small-business owner in Bridgeport, Pa. “This is extremely disconcerting.”

The banks suffered denial of service attacks, in which hackers barrage a Web site with traffic until it is overwhelmed and shuts down. Such attacks, while a nuisance, are not technically sophisticated and do not affect a company’s computer network — or, in this case, funds or customer bank accounts. But they are enough to upset customers.

A hacker group calling itself Izz ad-Din al-Qassam Cyber Fighters — a reference to Izz ad-Din al-Qassam, a Muslim holy man who fought against European forces and Jewish settlers in the Middle East in the 1920s and 1930s — took credit for the attacks in online posts.

The group said it had attacked the banks in retaliation for an anti-Islam video that mocks the Prophet Muhammad. It also pledged to continue to attack American credit and financial institutions daily, and possibly institutions in France, Israel and Britain, until the video is taken offline. The New York Stock Exchange and Nasdaq were also targeted.

On Friday, PNC became the latest bank to experience delays and fall offline. Customers said they had been unable to get access to PNC’s online banking site, and those that visited the bank’s physical locations were told it was because PNC, and many others, had been hacked.

Fred Solomon, a PNC spokesman, said Friday afternoon that the bank’s Web site was back online, but that it was still working to restore online bill payment. Asked why the bank was not better able to withstand such an attack, he said that while PNC had systems in place to prevent delays and disruption from hacker attacks, in this case “the volume of traffic was unprecedented.”

Representatives for other banks also confirmed that they had experienced slow Internet performance and intermittent downtime because of an unusually high volume of traffic.

Security researchers said the attack methods were too basic to have taken so many American bank sites offline. The hackers appeared to be enlisting volunteers for the attacks with messages on various sites. On one blog, they called on people to visit two Web addresses that would cause their computers to flood banks with hundreds of data requests a second. They asked volunteers to attack banks according to a timetable: Wells Fargo on Tuesday, U.S. Bancorp on Wednesday and PNC on Thursday.

But experts said it seemed implausible that this method would create an attack of this scale. “The number of users you need to break those targets is very high,” said Jaime Blasco, a security researcher at AlienVault who has been investigating the attacks. “They must have had help from other sources.”

Those sources, Mr. Blasco said, would have to be a group with money, like a nation, or botnets — networks of infected computers that do the bidding of criminals. Botnets can be rented through black market schemes that are common in the Internet underground, or lent out by criminals or governments.

Last week, Senator Joseph I. Lieberman of Connecticut, chairman of the Senate Homeland Security Committee, said in an interview on C-Span that he believed Iran’s government had sponsored the attacks in retaliation for Western economic sanctions. The hacker group rejected that claim. In an online post, it said the attacks had not been sponsored by a country and that its members “strongly reject the American officials’ insidious attempts to deceive public opinion.”

The hackers maintained that they were retaliating for the online video. “Insult to the prophet is not acceptable, especially when it is the last Prophet Muhammad,” they wrote.

It is very difficult to trace such attacks back to a particular country, security experts say, because they can be routed through different Internet addresses to mask their true origin.

But experts said they had seen an increase in such activity from Iran and in the number of so-called hacktivists, hackers who attack for political purposes rather than for profit, based in Iran.

“We absolutely have seen more activity from the Middle East, and in particular Iran has been increasingly active as they build up their cyber capabilities,” said George Kurtz, the president of CrowdStrike, a computer security company, and former chief technology officer at McAfee. “There is also a strong activist movement underfoot, which should be concerning to many large companies. The threat is real, and what we are seeing now is only the tip of the iceberg.”

James A. Lewis, a computer security expert at the Center for Strategic and International Studies, said that in this case, the attack methods used were “pretty basic” to have been state-sponsored. But he added that even if the attacks were not the work of Iran’s government, the state would be aware of them because Iran monitors its networks extensively.

For Mr. Downs, the small-business owner in Pennsylvania, such half explanations were of little consolation.

“A major bank has a problem and gives no indication of what’s happening, when it started or when it will stop,” he said. “That’s pretty freaky if it’s your own business’s money and you need to do things with it.”

Michael Appleton for The New York Times

Last week, my brain played a cruel trick on me. While waiting for my flight to take off, I was reading The New Yorker, the paper version, of course — I know the rules. I became engrossed in an article and swiped my finger down the glossy page to read more.

To my surprise, nothing happened. I swiped it again. Nothing.

My brain was trying to turn the page the same way I do on my iPad, with the swipe of a finger. (I quickly realized that I had to physically turn the page.)

A few days later, my brain played another technology-related trick. In New York City, I hopped in a cab and told the driver, “59th and 6th, please.” I didn’t think anything of it when we arrived at my destination and I said thanks and hopped out of the cab, without paying.

The cabby yelled at me bluntly, clearly not very happy: “These taxis aren’t free. Are you gonna pay me?”

I quickly apologized and paid him — with a good tip — when I realized that my brain thought I was in an Uber car, not a taxi.

In San Francisco, where I live, I often use a car service called Uber when I go out for the evening. You order a car from your smartphone, it arrives, you get in, tell your driver where to go, and then get out at your destination. There is no money exchanged; your credit card is automatically billed after the trip, and you are e-mailed a receipt.

But I did spend a few moments standing at the curb trying to figure out if I was suffering from some sort of mental fatigue.

I called the closest thing to a technology doctor I know: Clifford Nass, a professor of cognitive science and communications at Stanford University, and the author of “The Man Who Lied to His Laptop: What Machines Teach Us About Human Relationships.”

“Brains love habits; brains are built for efficiency,” Mr. Nass said, noting that I wasn’t sick, maybe just a little too technological for my own good. “Our brains are built to put two things together in space and time and then say, ‘Great, I can remember that these go together.’ Then we execute on that, like you trying to scroll down a piece of paper with your finger.”

Although videos have been floating around the Web showing 1- and 2-year-olds trying to use a magazine like an iPad, you would think a 36-year-old man would know the difference. Gary Small, director of the Longevity Center this is its new name at the University of California, Los Angeles, has performed studies showing that the human brain adapts to technology in seven days, regardless of age.

I rarely read things on paper anymore. Magazines, news articles and books are all consumed on touch-screen devices like iPads, smartphones and Kindles. (The content is the same; the device is different.) Mr. Nass explained that my brain had been habituated to change the page by sliding my finger, no matter what I read. (This is also why I uselessly swipe ATM monitors or my laptop screen.) The same thing is happening with the taxi: my brain categorizes any car I am not driving as an Uber car.

All of these brain changes hasten the adoption rate for technologies, Mr. Nass said. It’s what happened with the telephone or the use of cruise control in cars. “You no longer drive a car,” he said. “You use a car.”

What is now happening with reading, we will soon experience with paying for things without cash, check or credit cards. And it will happen quickly.

The slowest part of the process may be convincing businesses to produce the changes. “This is where businesses have a difficult time adapting to what’s happening in society,” Mr. Nass said. It wasn’t publishers, for example, who introduced electronic reading devices. “People entered the publishing industry because they loved the feel and smell of books.”

But if they don’t recognize the speed of these changes, their brains are playing tricks on them, too.

The overall economy is sluggish at best, and unemployment has remained above 8 percent since early 2009. Yet despite a decline last week, stock investors have been on a roll. In the three months ended on Friday, the Standard & Poor’s 500-stock index rose 5.8 percent. In Europe, stocks fared even better for the quarter, with the Euro Stoxx 50 index up 8.4 percent. Japan was a laggard, as the Nikkei index dropped 1.5 percent, but in Hong Kong the Hang Seng index rose 7.2 percent.

During much of this period, the Federal Reserve and other central banks have been flooding the planet with money. Cause and effect is hard to prove, but it seems reasonable to assume that the central banks have had something to do with the markets’ buoyancy. “Clearly central bank actions have been a major factor in the market rally,” Ethan Harris, chief North American economist at Bank of America Merrill Lynch, wrote in a recent report. News reports of “super dovish” announcements by the Fed and the European Central Bank correlated neatly with stock market climbs, he found.

On Sept. 6, for example, Mario Draghi, president of the European Central Bank, said that under certain conditions it would buy unlimited amounts of government bonds, a move that could lower borrowing costs for Spain and other troubled countries in the euro zone. Stocks immediately rose around the world.

The next week, the Fed met the market’s expectations, and then some. It extended its plans for maintaining near-zero short-term interest rates into the middle of 2015. And it announced that it would increase its bond-buying to a total of $85 billion a month for the rest of the year, with a focus on mortgage-backed securities, a program aimed at giving the housing market another lift. What’s more, the Fed linked the duration of its loose policies to the state of the job market. As long as the unemployment rate remained unacceptably high, the Fed planned to maintain its expansionary monetary policy, Ben S. Bernanke, the Fed chairman, said in a news conference.

“We will be looking for the sort of broad-based growth in jobs and economic activity that generally signal sustained improvement in labor market conditions and declining unemployment,” Mr. Bernanke said.

Last week, however, the markets gave up ground. The central banks aside, it’s easy to see why the bullish mood might darken quickly. A partial list of dangers includes rising tensions in the Mideast, a contentious election campaign and a looming “fiscal cliff” in the United States, an unresolved and multifaceted financial crisis in Europe, and a global economy that is far from robust.

Little of this would appear to augur well for stocks, except that the central banks have tilted the odds on the bullish side, at least for now, some analysts say.

“A modestly growing economy with the cyclically sensitive sectors at still-depressed levels is a relatively stable and safe, if not exciting, environment,” said Larry Kantor, head of research at Barclays, in a recent report. “When this is combined with a central bank committed to aggressively supporting growth through higher asset prices, it amounts to a very attractive environment for taking risk.”

In fact, Barclays calls the current version of its flagship quarterly research publication “Global Outlook: Don’t Fight the Fed.”

OF course, no one knows where the markets are going day to day. After their recent run upward, and even without the emergence of any nasty news, stocks could easily “consolidate,” that is, decline for a while before moving upward again. And because the global economy is already rather weak, an external shock — a disruptive geopolitical event — could alter perceptions abruptly.

Some analysts are not upbeat even now. The Economic Cycle Research Institute, an independent forecasting organization with an excellent record, says it believes that the United States is already in recession, and that action by the Fed won’t change that. “Unfortunately, the economy is just going to have to ride out the business cycle,” Lakshman Achuthan, chief operations officer of the institute, said recently. “The Fed’s actions have been increasingly ineffective.” The relationship between the economy and the stock market is complex, he said, and it’s not always clear whether the market is predicting the direction of the economy, reacting to it or responding to other factors.

Robert Rodriguez, managing partner and chief executive of FPA, an asset management firm in Los Angeles, says it’s possible that fund managers, seeking to bolster their returns, will “continue to pile into stocks in the remainder of this year and push them to even higher levels.” But he says he believes that the market is already overextended, and his firm has begun to reduce its stock exposure.

Mr. Rodriguez anticipated the subprime mortgage crisis and the financial crisis. But, as he acknowledged ruefully in an interview, he “was early, and got out of the market too soon, and could well be doing so again.” Still, he says he fears what he calls “the unintended consequences of the expansionary activities of the central banks.”

Another credit bubble is likely if the banks persist in trying to prop up the global economy, he said. As he sees it, the fundamental problem in the United States can’t be solved by the Fed. “We must get our fiscal house in order,” he said, “and we have only a limited amount of time to do it.”

For the next several months, though, he suspects that Wall Street’s fascination with the Fed may well keep stocks rising.

In a nutshell, the fewer deductions and other “tax expenditures” we have, the lower the rates can be. That part is simple.

The problem is that cutting rates is more popular than closing loopholes, especially those like the mortgage-interest deduction that are used by millions of taxpayers. But there is a possible solution.

I call it the modified Reagan 28 plan, or just the “28 plan” for short. It is a simple framework for thinking about tax policy. Though I’ve named it in honor of Ronald Reagan, it is similar in many ways to the ideas proposed by the Bowles-Simpson commission, which is a good starting point for any serious discussion of tax reform.

My first premise is that we should devise tax policy from the top down. As everyone now knows, nearly half of American households do not pay any income tax, though they do pay Social Security taxes, sales taxes and so forth. And many households that earn enough to start paying some income tax are essentially on a flat-tax system, because few itemize their deductions. That means they mostly just pay a percentage of their income above the threshold where taxes kick in. So let’s think about how to tax the rich, then work our way down the income ladder.

For this discussion, let’s define a household as rich if its income exceeds $1 million a year. In fact, my plan applies only to the income such households earn above that threshold. And I can state my idea in just one sentence: All income above $1 million a year for a household will be taxed at 28 percent. There are no deductions, and all income, including capital gains and dividends, is included. President Reagan favored something like this approach. His 1986 tax plan also taxed dividends and capital gains at the same 28 percent rate, as would the Bowles-Simpson proposal.

While we’re at it, let’s make the corporate tax rate 28 percent, too, because our current rate is high by international standards. Oh, and the estate tax exemption? On amounts above $3.5 million for individuals, the rate would be, of course, 28 percent.

What would this plan accomplish? First, by establishing the same marginal rate on all income sources, the incentives disappear for shifting from one source of income to another. Although there is much discussion about how taxes affect people’s willingness  to work, most people don’t have much flexibility about how many hours they’re employed. For the rich, however, it can be relatively easy to switch income from a highly taxed category to one that is taxed at a lower rate. One reason that Mitt Romney’s taxes have been so low — he paid an effective federal income tax rate of only 14 percent in the two years for which he has disclosed his returns — is that venture capitalists have figured out a legal way for the incentive fees they receive to be treated as capital gains income, currently taxed at a rate of only 15 percent. If we tax all income at the same rate, these games will end.

But what about the argument that taxing capital gains and dividends at the same rate as ordinary income will discourage investment? I don’t find this claim convincing. People are willing to buy bonds issued by corporations even though the interest is taxed as ordinary income, and I don’t see why investors need a special tax break to induce them to put money in the stock market, which has historically paid high returns. One bonus from adopting this plan would be a short-term windfall to the Treasury from investors realizing their capital gains now, in order to pay the current, lower rate. (Also, I do think that capital gains taxes should be adjusted for inflation.)

Wouldn’t nonprofit organizations suffer if we eliminated the charitable deduction for the wealthy? There might be some effect, but notice that by reducing the marginal rate to 28 percent, the tax incentive to donate would already be quite a bit lower than at current rates of 35 percent or more. And if this political season has taught us anything, it’s that rich people don’t need a tax deduction to contribute to causes they believe in. (Political contributions are not deductible.)

We could pay for the reduction in the corporation income tax by broadening that base as well. There are many special deals — like subsidies to oil companies — that could be eliminated.

OF course, I haven’t said what would happen to the households in the middle, or what the taxes would be on the first $1 million for the rich, but the Bowles-Simpson commission offers a comprehensive plan that is in the spirit of my suggestion. One possibility is to scale back deductions smoothly, starting at household incomes above $250,000, and completely eliminate them for incomes above $1 million. That would leave the popular deductions fully in place for those earning less than $250,000. A more radical plan, curtailing deductions for this large group, is probably politically infeasible, at least for now.

And what if the resulting revenue falls a bit short of what we need to start trimming the deficit? I suggest that we get our gasoline tax more in line with those of the rest of the world. Gradually raising it to something like $1 a gallon would both bring in revenue and help reduce emissions. In the long term, we could set the rate as a percentage of the price at the pump. Maybe 28 percent?

Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago.

Opinion »

Editorial: An Unfinished Campaign Against Polio

Eradicating the virus should be a top priority of the United Nations.

But innovations in their design and manufacture may play an important role in creating a fleet of more environmentally sustainable cars and trucks.

Taylor Hopkins, 24, was part of a five-student research team at Ohio State University that recently created three novel designs for shipping pallets. Ordinary pallets are made of wood; the students’ prototypes are made of aluminum, which lasts longer.

The aluminum pallets are also much lighter than wood pallets, which saves fuel during shipping.

“We were presented with the problem of, try and come up with a new pallet that we thought could make an impact environmentally,” Mr. Hopkins said. “We ended up going with aluminum just because it’s very widely used and it’s lightweight.”

Aluminum is also significantly more expensive than wood, which means that the students’ designs are unlikely to become the industry norm soon. But the technology behind them could be useful to carmakers, which have started to embrace aluminum as a means of building lighter, more fuel-efficient vehicles.

“This project is such an interesting microcosm of the challenges that the transportation industry in total is facing, in moving from heavy steel to lightweight aluminum,” said Randall Scheps, automotive marketing director of Alcoa, and chairman of the aluminum transportation group at the Aluminum Association. Mr. Scheps said the student team looked at various methods of joining, or bonding, metals. It also looked at forming, or bending, metals, and at recycling. “These are all issues that the auto industry is facing,” he said.

Companies and foundations have been looking to young innovators for environmentally sustainable and cost-effective solutions to real-world problems. In the case of the shipping pallets, the project was funded with a grant from the Alcoa Foundation, which wants future engineers to think about use of lightweight materials. (Although the use of aluminum clearly benefits Alcoa, an aluminum company, it did not have to be used in the project.)

It’s an issue that has taken on urgency in Detroit in anticipation of Obama administration fuel-economy regulations that will require American vehicles to average 54.5 miles per gallon by 2025. Ford, for instance, that producer of macho, all-terrain trucks, is working on an aluminum version of its popular F-150 pickup.

Dr. Glenn Daehn, a professor of materials science and engineering at Ohio State and the students’ research adviser, says the aluminum shipping pallets are an example of “using simple projects to inject ideas into how we might make lighter-weight door systems or seats” — research that Ohio State is working on with companies like Honda and General Motors.

Mr. Hopkins said welding is an issue in dealing with aluminum. “There’s just a certain property of aluminum that if you heat it up too much, or for too long, it loses a lot of its strength,” he said.

To get around that, the students relied on “conformal interference joining technology,” a method of joining metals through a process involving electromagnetism, as opposed to heat.

Then there was the question of how to make the pallets cost-effective. Aluminum pallets on the market can cost more than $200 each, in part because they are welded by hand. Aluminum pallets are used to ship materials that must be kept sterile, or that will be stored for long periods.

But the students’ models are all estimated to cost less than $75 each. That was achieved by making the designs simple enough so they could be mass-produced.

“They weren’t some crazy designs that would take 20 hours to produce, where you’d have to do it one at a time,” Mr. Hopkins said. “Our designs can be automated. They only have two, separate pieces in a couple of them.” That makes it possible to “knock them out in a short amount of time,” he said.

WHILE the project could eventually affect how cars are manufactured, it may not change the world’s shipping pallets. According to Edgar Deomano, technical director of the National Wooden Pallet and Container Association, wood pallets, which account for 90 percent of the domestic market, are not going away, mainly because of cost.

“A recycled, or repaired, wood pallet could go for as low as $3 each,” Mr. Deomano said.

As for the argument that wooden shipping pallets are responsible for deforestation, he said: “That’s a false impression. Our industry is able to recycle pallets again and again. You don’t have to cut down more trees, you just have to repair existing pallets.”

Dr. Daehn says he remains hopeful, however, that a company will “step forward and commercialize” the new aluminum shipping pallets.

“We need more than a student project to do that, but I think we’ve shown them the promise is there.”

In the meantime, the project has already served Mr. Hopkins well. After graduating from Ohio State in June, he was hired as a metallurgist at Valbruna Slater Stainless in Fort Wayne, Ind.

“It was definitely one of my résumé highlights,” he said.

E-mail: proto@nytimes.com.

Travelers with complex travel plans may have noticed, however, that the search results aren’t necessarily consistent. This has created a business opportunity for Flightfox, a start-up company based in Mountain View, Calif., which uses a contest format to come up with the best fare that the crowd — all Flightfox-approved users — can find.

A traveler goes to Flightfox.com and sets up a competition, supplying information about the desired itinerary and clarifying a few preferences, like a willingness to “fly on any airline to save money” or a tolerance of “long layovers to save money.” Once Flightfox posts the contest, the crowd is invited to go to work and submit fares.

The contest runs three days, and the winner, the person who finds the lowest fare, gets 75 percent of the finder’s fee that the traveler pays Flightfox when setting up the competition. Flightfox says fees depend on the complexity of the itinerary; many current contests have fees in the $34-to-$59 range.

Travelers’ savings can be considerable. In a contest for a long, complex trip that began in Sydney, passed through Barcelona and then many South American destinations before returning to Sydney, the difference between the lowest fare, $6,538 a person, and the third-lowest was about $1,400. Why couldn’t every human searcher find the same fare that the winner did? The fact that the travelers specified 15 destinations for their four-month-long trip meant that no single search engine had all the needed information.

Flightfox asks travelers who have already found a good fare on their own to make clear at the outset that they will award the finder’s fee only if a better price is found. The site also encourages travelers to consider awarding a finder’s fee for flights that may not be less expensive but have fewer stops or shorter layovers.

Human searchers can find flights that handle special requests, like traveling with a pet or a surfboard, to which a travel search engine remains oblivious. Todd Sullivan, a software developer and co-founder of Flightfox, says, “There are too many variables for it to be economically feasible to build an algorithm that covers every aspect of travel.”

Mr. Sullivan says the company has about 900 researchers, which it calls “experts,” who search fares on behalf of the sponsoring travelers. Anyone can apply to be an “expert”; Mr. Sullivan says applicants need only show evidence of the ability to find good fares.

About 20 percent of the Flightfox researchers are travel agents. Another large group are what Mr. Sullivan calls “flight hackers,” people who enjoy the sport of fare-hunting and frequent sites like FlyerTalk. “They do this at sites like this for free anyhow,” Mr. Sullivan says. “We’ve commercialized it.”

The other large group of researchers comprises frequent travelers seeking ways to make money to finance their travel. Mr. Sullivan says he and his co-founder, Lauren McLeod, were in this category when they started the company early this year.

The two say they have raised $800,000 in seed funding from Silicon Valley and Australian investors.

One of Flightfox’s experts is Michael Roizman, a medical student at the University of Queensland in Australia, who has not done a lot of traveling himself. Nonetheless, he won a contest that Flightfox set up for fun, challenging searchers to find the lowest possible fare for an itinerary that would begin and end in a North American city and would touch all other continents except Antarctica. Mr. Roizman’s winning fare was $1,730 for a trip that included stops in Guyana, Morocco, Istanbul, Kuala Lumpur and Perth, Australia.

“A flight search engine is blind to the opportunity to break up a complex itinerary into separate segments that originate in low-fare markets,” Mr. Roizman says.

He gives an example of a flight from Sydney to Germany. It’s much cheaper, he says, to start with an inexpensive flight from Sydney to Southeast Asia, then fly on to Germany on any of several low-fare carriers.

The contest for the 15-destination trip from Sydney was won by Monique Krestyn, a Flightfox expert in Massachusetts whose days are mostly filled with looking after five young children. “I have a cousin who is a computer geek,” she says, “and he once said that the only thing I could do better on a computer than him is find good flights.” He ran across an ad for Flightfox and brought it to her attention.

Ms. Krestyn recalls, “At first, I thought, ‘Where in the world are these experts finding these fares?’” It took about a week, she says, to become familiar with smaller airlines that don’t show up in travel search engines. She also discovered that fares “are priced differently depending on where you look — and where you are looking from.”

In that contest, she made $100, but more typically the winnings are $20 or $30. “It doesn’t sound like much, but it really does add up,” she says. “In three months, I’ve made $4,000 and that’s just utilizing my downtime when home and family aren’t demanding me.”

It’s most heartening to see that in the domain of travel planning, humans still manage to hold their own. Every contest concluded at Flightfox is a small win for the species.

Randall Stross, a professor of business at San Jose State University, is the author of “The Launch Pad,” published this month.