Spam unwanted commercial e-mail torments people around the world, interrupting their work and congesting their computer networks. What s more, spam is spreading to cell phones, with annoying beeps to announce its arrival and sometimes a $0.20 charge to the recipient. A spammer pays nothing to send a million e-mail messages, but earns a profit if just a few people buy an advertised product. The first response to the spam problem was a system of e-mail filters to separate spam from legitimate e-mail. When that didn’t work, many states passed laws that made spam illegal. Despite these efforts, the spam problem persists.
The economic approach to spam is to establish a price for commercial e-mail. One idea is to follow the lead of snail mail and require a $0.01 electronic stamp for each commercial e-mail message. A bundle of one million e-mails would cost $10,000, so if a spammer expects just a few people to buy an advertised product, spamming won t be profitable. A second approach is to charge senders a penalty of $1 for each e-mail that is declared unwanted by a recipient. If each e-mail account has a credit limit of $200, the sender s internet service provider (ISP) would shut down an account once it receives 200 complaints. This actually solves the problem of viral spam because if a virus turns your grandmother s computer into a spam machine, her account will be shut down and the spreading of the virus will stop after 200 complaints. Of course, the ISP must be clever enough to quickly realize that grandma is not a spammer, and then reconnect her.