Ashley Dias is 26 years old. She has cystic fibrosis. About six weeks ago, her lungs gave out. She was rushed to the Cleveland Clinic and told she'd need a lung transplant to survive.

Lungs are a scarce resource. But unlike many scarce resources, lungs aren't for sale. So doctors have had to develop a system to allocate them.

Ashley's life depends on that system.

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Mark Zuckerberg is, among many other things, the highest-profile taxpayer on the planet today.

After today's Facebook IPO, Zuckerberg will owe nearly $200 million in California state taxes alone. That's "among the largest tax liabilities that a single individual has ever paid at a given point in time," says Jason Sisney of the California State Budget Legislative Analyst's Office.

Zuckerberg's profits will be taxed at a 10% rate in California. That's a much higher rate than in many other states.

In all, Facebook's employees and early investors are expected to pay about $2 billion in California state taxes over the next 13 months. But California is almost 16 billion dollars in the hole. Facebook won't solve that problem.

Would that big, bad JPMorgan Chase trade have violated the Volcker Rule?

It's too soon to say, despite the fact that the rule is part of a two-year-old law.

The Volcker Rule bans deposit-taking banks from making speculative bets. But it allows banks to make investments to hedge risks.

Whether the JPMorgan trade counts as a hedge gone horribly wrong (and therefore kosher under Volcker), or as a speculative bet (and therefore prohibited) depends in part on the details of how the rule is written.

And those details have yet to be finalized.

The rule was included in the Dodd-Frank act, the big financial-reform bill that Congress passed in 2010. It was a few pages long in the statute.

The proposed details of how the rule will be implemented run to hundreds of pages. Five different regulatory agencies are collaborating. And the banks are weighing in with their own, extensive comments.

This long, slow implementation isn't unusual at all. It's entirely typical. Dodd-Frank called for hundreds of new rules; only 27 percent of those have been finalized, according to this recent report (PDF).

The details of the Volcker Rule are likely to be finalized later this year. But the regulators recently said banks will have until 2014 to comply fully with the final rule — four years after Dodd-Frank was passed, and six years after the financial crisis.

Earlier this year, we wrote about Kings County Beef Jerky, an artisanal jerky company in Brooklyn (of course). Sure, it's easy to mock artisanal jerky companies. The jokes basically write themselves.

But the company may represent the future of U.S. manufacturing. We wrote:

The Kings County approach is a model for how manufacturers in many sectors can do better. Ignore low-priced commodity products. Focus instead on customizing high-quality goods for a select audience willing to pay a premium.

The same idea turns out to hold true for beer. Beer production has been flat in the U.S. for decades — it's actually a tiny bit lower than it was 30 years ago (find a comprehensive data set here). And the number of big breweries has gone down.

But over the same time, the number of small, independent breweries in America has exploded.

These new breweries are the beer version of Kings County Jerky. They are craft brewers who ignore the low-priced, commodity end of the beer market. They focus on making fancy beer for a select audience willing to pay more.

And it is indeed a select audience. Craft breweries account for more than 95 percent of the breweries in America, but they make just 6 percent of the beer.

Bonus Graphic: Here's a map of the states with the most breweries per capita.

Hat tip: Business Insider

Looking to get more popular on Facebook? Alex Melen will sell you 1,000 "likes" for about $75.

Melen runs an Internet marketing company. About six months ago, companies he worked with started coming to him more and more with a simple problem: They had created pages on Facebook, but nobody had clicked the "like" button.

"You would go there, and there would be two likes," Melen says. "And one of them would be the owner. And people right away lost interest in the brand."

For the right price, Melen can fix that.

Facebook knows an incredible amount about hundreds of millions of people — what they like, what they want, who their friends are, where they live. This is the key reason why investors think the company is so valuable. But that value only holds up if the data is real — if all those people actually like what they say they like.

 

When Melen sells likes to a company, he goes through an intermediary, who in turn could be working with people anywhere in the world. The people on the other end are just doing it for money. They get paid a very small amount — 10 cents, say — each time they like a company.

"Right now on the black market, you can actually buy and sell bundles of Facebook account credentials," says Ben Zhao, a computer science professor at UC Santa Barbara. "Tens of dollars or hundreds of dollars for hundreds or thousands of Facebook accounts."

In some cases, there are no people involved at all. Those fake accounts are controlled by robots and create fake data. (Melen says all his likers are real people.)

The people who pay Melen for likes range from an LED light bulb company to a publicity company for a reality show.

The show had 95,000 Facebook fans already, but it wanted about 25,000 more. These likes really matter to television networks, which sell advertising based in part on the number of likes they have.

Facebook knows this sort of thing is going on. And the company has created an elaborate system to root out bad data. It has social bot hunters whose job is to track down fake Facebook profiles and kick them off the network. But it's still happening.

Another company that sells likes showed us a Nashville country singer who was a client. She had a lot of likes — mostly from Egypt.

In his latest column for the New York Times Magazine, Adam Davidson writes about a peculiar thing companies do to get our attention: they burn money on frivolous ads. Economists call it "signaling," where a company shows its strength by spending an eye-catching fortune, on, say, a pop star:

 

or several stars:

or even a monkey:

None of these ads reveal a thing about the products (unless you think Nicki Minaj has better taste in soda than Carol Channing). What they do reveal is that the company has money to burn.

Wasteful as it may seem, many economists agree that these ads send a valuable signal to consumers. They show that the company is confident in its product and knows some customers will come back for more. If it were wrong, those costly ads would soon put it out of business.

Do we still need signaling in an information age, when anyone can look past the flashy ads and pull up product reviews on their smart phones? Read the full column here to find out.

Facebook will be valued at about $100 billion when it goes public this week. What would it take for that valuation to be justified?

As we noted yesterday, the value of a typical big, public company is 15 times the company's annual profit. So a company valued at $30 billion would typically have annual profits of $2 billion.

Facebook will be valued at 100 times its current annual profits. That's because investors expect the company's profits to go through the roof in the coming years.

For Facebook to achieve that kind of growth, some combination of two things will need to happen: The company will need to add more users, and it will need to get more revenue out of each user it has.

The company has been doing both over the past few years, though growth has been flagging recently.

 

For Facebook to live up to its valuation, that growth will need to accelerate. If we assume profit margins of 33 percent (lower than the company's current margins, but higher than those of most companies), here's how much revenue-per-user the company would need under different scenarios:

In other words, even if Facebook grows to include nearly half the people on the planet, it will still also need to increase the amount of money it gets for each user by nearly 50 percent.

For lots more Facebook graphics, see Facebook's Growth And Reach At A Glance

Read More Of Our Facebook Coverage: Is Facebook Worth $100 Billion? and How Facebook Can Live Up To The Hype

Michael Friedman and Greg Augarten sell New York-style pizza in New Orleans. Their operation, Pizza Delicious, is a takeout window between Piety Street and Desire Street. They're only open two nights a week. If you're in the know, you can call them up and order a pie.

Business has been good, and they're about to buy their own place. So for the first time they're considering paid advertising. They'd been thinking about advertising on Facebook but didn't know how to proceed.

Meanwhile, we were working on some stories about Facebook and wanted to get inside the Facebook ad campaign and see if it really worked.

So we hooked the Pizza Delicious guys up with Rob Leathern, a social media ad guru.

The key question they tried to answer: Which Facebook users should they target with their ad campaign?

 

Their first idea was to target the friends of people who already liked Pizza Delicious on Facebook. But that wound up targeting 74 percent of people in New Orleans on Facebook — 224,000 people. They needed something narrower.

The Pizza Delicious guys really wanted to find people jonesing for real New York pizza. So they tried to target people who had other New York likes — the Jets, the Knicks, Notorious B.I.G. Making the New York connection cut the reach of the ad down to 15,000.

Seemed perfect. But 12 hours later, Michael called us. "It was all zeroes across the board," he said. Facebook doesn't make money till people click on the ad. If nobody clicks, Facebook turns the ad off. They'd struck out.

So they changed the target to New Orleans fans of Italian food: mozzarella, gnocchi, espresso. This time they were targeting 30,000 people.

Those ads went viral. They got twice the usual number of click-throughs, on average. The ad showed up more than 700,000 times. Basically, everyone in New Orleans on Facebook saw it. Twice. Pizza Delicious got close to 20 times the number of Facebook fans it usually gets in two days. The guys were stoked.

The campaign cost them $240 — almost $1 for each new Facebook fan they got from the campaign.

"Is that feeling of exhilaration worth $240?" Michael said. "I don't know — hopefully that translates into new business."

It didn't.

After a long night of asking every single customer where he found out about Pizza Delicious, not one said it was through Facebook.

But while Greg took the garbage out, he checked his phone. And there was a message:

"Just found out about you guys via a sponsored Facebook ad if you can believe it. Super excited about your new place — happy to toss in a few bones over the top."

That guy kicked in $10 to support the new restaurant.

"And that was cool," Michael said. "We got some return on our ad."

That return — $10 on a $240 investment — isn't much.

Maybe at some point, the new Pizza Delicious fans will show up and buy some pizza. But social advertising is so new that nobody knows for sure. It's still unproven, untested and largely unstudied.

Some companies, like Ben and Jerry's, say they have gotten a big return. Others say they haven't. On Tuesday, GM said it was pulling its Facebook ads because the ads haven't done enough to generate new business.

Read More Of Our Facebook Coverage:

• Is Facebook Worth $100 Billion?
• How Facebook Can Live Up To The Hype

Every single dollar bill in the world — every $20, every $100, everything — is printed on paper made at one small mill in Massachusetts. That's been the case for 130 years.

On today's show, we visit the mill. We hear the story of the guy who jumped out a hotel window to win the government contract to print all that paper. And we ask: Will anybody be using paper money in 50 years?

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When Facebook goes public this week, the company will be valued at roughly $100 billion.

It will be the highest valuation ever for an initial public offering of a tech company. Is Facebook really worth this much money?

One way to frame the question is to consider a single fraction.

 

The number on top of the fraction is the total value of the company. The number on the bottom is the company's profits over the past year. This fraction is called the price-to-earnings ratio. It's widely used by investors in stocks.

Over the past century, the average price-to-earnings ratio for big U.S. companies has been 15, according to Anant Sundaram with the Tuck School of Business at Dartmouth. The ratio for Apple is about 15. The ratio for Google is a bit higher.

One way to think about that: At current levels, it would take the average company 15 years to generate enough profit to pay for itself.

The picture for Facebook is very different. Facebook's price-to-earnings ratio is 100. At current levels, it would take Facebook 100 years to generate enough profits to pay for itself.

"Its price-to-earnings earnings ratio is astronomical," Sundaram says. "Off the charts."

That number is so high is because investors are betting Facebook's profits are going to explode.

Sundaram says judging from this price these investors seem to believe that the company's profits will double, and then double again, and then double again — all within the next few years.

For that to happen, Facebook will need to attract 10 percent of all advertising dollars spent on the planet "across all media – print, billboards, radio, television, Internet," Sundaram says. While this is theoretically possible, Sundaram says it's "an extremely low probability."

Last year, Facebook had just over $3 billion in global ad sales. TV ad sales in the U.S. alone last year were $68 billion.

But Facebook is trying to convince potential investors that it will grow into an incredible platform for ads. There are three key parts to this pitch.

1. Nearly 1 billion people now use Facebook.

2. The company knows a ton about its 1 billion users. If you're on Facebook, there's a good chance the company knows your age, gender, where you went to school, what you like, where you live and who you are dating or married to. That means Facebook should be able to do an incredible job of targeting ads to you.

3. In the long run, Facebook wants to figure out how to use your friends to help sell you stuff. So if your friend buys something — a meat grinder, a seltzer maker, whatever — and raves about it on Facebook, that can become an ad.

That last one — turning word-of-mouth recommendations into a massive new advertising system — is at the core of Facebook's long-term strategy.

Will this be the bomb that explodes advertising as we know it? Do social ads work?

"I don't think they have nailed that exact formula yet," says Rob Leathern, who advises big brands that advertise on Facebook.

Google is the obvious comparison here. The company started as a search engine, but turned into a cash cow when it set up automated auctions for ads that run next to search results. Those ads transformed the whole advertising industry.

Facebook isn't there yet. It doesn't have a cash cow. Leathern thinks the company will get there, but it's not a done deal.

In this week's New York Times Magazine, Adam Davidson profiles Paul Romer, an economist at NYU who has convinced Honduras to try a radical new experiment in development economics: Build a city from scratch — and get foreign governments to help run it. We asked Romer and his research associate, Brandon Fuller, to explain how it can be done. Their response is below.

Today, it is widely assumed each country must establish the rule of law on its own. There's just one problem with this prescription, which Gordon Brown summed up nicely: in establishing the rule of law, the first five centuries are always the hardest. Some societies have already been down this long and arduous path. Why can't Hondurans leverage their experience?

With broad political support, the congress in Honduras recently created a new legal entity: la Región Especial de Desarrollo (RED). A RED is an independent reform zone that will offer jobs and safety to Honduran families that have neither. Officials in the RED will be able to partner with foreign governments in such critical areas as policing, jurisprudence, and transparency.

 

In Honduras, the support for a new approach springs from a stark understanding of the existing challenges. The rule of law is grounded in trust and shared norms, but establishing trust and shared norms is impossible if people live in fear – rural farmers fear repression; landowners fear expropriation; businesses fear that rivals will gain advantages through bribery; government officials fear that businesses will break contracts with impunity; urban residents fear violence from criminal gangs.

By building a new city on an undeveloped site, with rule of law anchored in the systems of trusted third parties, Honduras can fast-track reforms that could otherwise take centuries to achieve. By making the RED accessible to all citizens but forcing the new system on none, Honduras can harness the power of voluntary migration.

We see this power of opt-in when an immigrant chooses to live under the system of rules and norms in the United States. It stands in sharp contrast to the failures that result when the United States attempts to impose the rule of law by force elsewhere in the world.

Honduras is showing the way toward a cheaper and more effective form of development assistance, one in which nations work together to bring credible governance to places where millions of people could move—institution building by invitation rather than invasion.

Of each dollar the federal government spends, how much goes to defense? How much goes to Social Security? How much goes to interest on the debt? And how has this sort of thing changed over time?

The graphic below answers these questions. It shows the major components of federal spending 50 years ago, 25 years ago, and last year.

A few notes:

 

Everything else is everything not listed separately on the graphic. That includes education, science, NASA, energy, natural resources, justice, and agriculture, among other things.

Defense spending has shrunk significantly as a percentage of total government spending. But it remains the largest single category of federal spending. The figures in the graph include veterans' benefits as well as funding for current operations.

Medicaid, Medicare and other health services are the huge gainers here. Together, they make up a quarter of government spending. Fifty years ago Medicare and Medicaid didn't even exist, and federal spending on other health-related services made up a tiny sliver of the whole.

Safety net programs include unemployment compensation, food stamps and housing assistance. Spending on these programs surged during and after the most recent recession, as unemployment rose sharply.

Interest refers to interest the government pays on the national debt. In 1987, the interest rate on 10-year Treasury bonds was around 9 percent, driving up the share of government spending that went to interest. Today, the rate on 10-year Treasuries is roughly 2 percent.

Bonus Numbers! Federal spending has grown roughly as fast as the overall economy over the past 50 years. In 1962, federal spending was $707 billion and accounted for 18 percent of U.S. GDP. In 2011, federal spending was $3.1 trillion and accounted for 24 percent of GDP. (The dollar figures are adjusted for inflation.)

For More: See the full data set from the Office of Management and Budget.

See more posts from our Graphing America series:

• What American Women Do For Work

• The Ideas America Sells To The World

• What America Owes In Student Loans

• What America Pays In Taxes

• What America Does For Work

Banks that take deposits from ordinary people shouldn't be allowed to make risky, speculative bets! (But they should be allowed to protect themselves against the risks they face in the course of their business.)

This, basically, is the Volcker Rule. It sounds reasonable enough. But it's proving very tough to put into practice — a fact that's illustrated by the $2 billion trading loss reported last week by JPMorgan Chase, the biggest bank in America.

 

The Volcker Rule, part of the big finance overhaul Congress passed two years ago, is not yet in effect (more on that below). But JPMorgan says the money-losing trade was in compliance with the rule.

The trade was so big that one of the guys behind it was known as the "London Whale." Bank officials say trade was a giant hedge, intended to insulate the bank from potential losses elsewhere in its business.

The Volcker Rule as passed by Congress allows "hedging activities in connection with ... individual or aggregated positions ... that are designed to reduce the specific risks to the banking entity ..."

But when you have a bank as big as JPMorgan, a bank that is deeply intertwined with the world economy in a thousand different ways, almost anything could count as "hedging activities" related to "aggregated positions."

"I could argue very easily that everything is hedging," Lawrence Kaplan, a Washington, D.C., lawyer who specializes in financial regulation, told me this morning. "It's a loophole that's probably very big. It's a whale-sized hole."

So how do regulators figure out what's a hedge (allowed) and what's a speculative bet (banned)?

That's still up for debate. The part of the original law describing the Volcker Rule was a few pages long. Federal regulators from five different agencies recently wrote up a proposal to implement the Volcker Rule. The proposal ran to 300 pages, Kaplan said. And the details are still being hashed out.

The rule was supposed to take effect this summer. But the regulators recently said banks would have until 2014 to come into compliance.

On today's show, we visit beautiful Lafayette College in Easton, Pennsylvania.

Price of one year at Lafayette: $55,688. Up 63 percent from the price a decade ago.

At least, that's the sticker price — the price you get if you add up tuition, room and board, and all the fees listed on the school's website.

But there's a huge gap between the sticker price and what the average student actually pays after figuring in grants and scholarships.

That's true at private colleges around the country. Nationwide, the average sticker price is more than twice as high as the price students actually pay, and the gap is getting wider.

It turns out, it makes economic sense to have a high sticker price and offer lots of discounts. On the show today, we explain why.

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At private colleges, the sticker price for tuition, room and board has gone through the roof over the past decade. You know this.

But there's a huge gap between the sticker price — the price that colleges list on their websites and brochures — and the average price students actually pay after accounting for scholarships and grants.

 

For the current school year, the average sticker price for tuition and fees at a private, nonprofit college is $28,500, according to a report from the College Board.

The average price students actually pay is less than half that — $12,970. That's almost identical to the $12,650 that students paid, on average, in the 2001-2002 school year. (These are inflation-adjusted dollars.)

Of course, this is just the average. What students actually pay varies wildly. If you happen to be trying to figure out where to go to college, what you really want to know is what the price at a given college is likely to be for you.

There's a tool that can help you figure this out. It's called the "net price calculator." And all colleges are now required to post a net price calculator on their website.

The calculator asks a series of questions about the student and the family's financial situation. At the end, you get a page that shows the school's sticker price, the scholarships and grants you'd be likely to qualify for, and the price you'd be likely to pay.

One big caveat: This is not a binding offer of financial aid or scholarships. It's just supposed to be a rough estimate.

But a rough estimate can be a helpful way to focus less on sticker price and more on a price that's closer to what you'd actually pay.

For More: See our story, How Colleges Fight For Top Students.