The Answer Is Transaction Costs
This podcast explores how transaction costs explain virtually everything in economics and daily life. Host Michael Munger, a professor of political science and economics, breaks down complex ideas into accessible episodes. The show features short weekly episodes in summer and longer monthly interviews during the academic year. It also includes listener Q&A segments and occasional commentary on current events.
Episodes
The Main Course was Transaction Costs: Milton's Dinner with Ronald
Send us Fan MailWe tell the story of the Chicago dinner where Ronald Coase walks into a hostile room, and by the end everyone votes with him, led by Milton Friedman changing his mind in real time. Along the way, we unpack why transaction costs, not moral blame, often explain when law and institutions shape outcomes. • the Aaron Director dinner and the vote that flips • why Milton Friedman becomes
Regime Uncertainty: Political Risk is Transaction Cost!
Send us Fan MailWe walk through the weirdly powerful math that makes a stable $10,000 profit stream worth $50,000 in one world and $1,000,000 in another. Then we apply the same present value logic to politics and show how unpredictable rules raise transaction costs, inflate the effective discount rate, and freeze long-term investment. • the discount rate as the hidden driver of valuation • why the
The Senate Is The Enemy And Other Friction Stories
Send us Fan MailWe argue that “friction” is not always a flaw and can be a deliberate shield against bad collective decisions. We use Buchanan and Tullock’s public choice framework to show why supermajorities, veto points, and other transaction costs can protect rights while still leaving room for day to day governing. • contrasting cheap outrage with intentional institutional friction • explainin
Two Bakers Walk Into A Cartel
Send us Fan MailWe test a simple bakery price-fixing pact and watch it unravel, then use that failure to explain how transaction costs shape institutions, from unenforceable contracts to the rise of the corporate trust. We connect the common law doctrine of restraint of trade to the Sherman Act, modern merger fights, and a real-world egg pricing controversy where evidence is hard to untangle from
Contracting with Yourself: Akrasia and Transaction Costs
Send us Fan MailWe start with a simple mystery: how the same person can make a proud plan at night and break it in the morning, even while still believing the plan is good. We connect akrasia, free will, and moral responsibility to transaction costs, treating self-control as a contracting problem between competing versions of ourselves. • Jordan I and Jordan II as a model of divided preferences ov
When Mass Outrage is Cheap: TC Origins of Cancel Culture
Send us Fan MailWe trace a straight line from a 1697 blasphemy execution to modern cancel culture by focusing on one variable: the cost of turning speech into coordinated punishment. We break down how social media creates common knowledge at near-zero cost, making outrage faster, bigger, and harder to control. • Thomas Aikenhead’s case as a story about information and enforcement costs • Transacti
You are NOT "Sorry I'm Late"!!
Send us Fan MailWe tell a story about German academic quarter hours-- akademische Viertel-- and use it to argue that lateness is an economics problem of coordination, incentives, and transaction costs, not just manners. We lay out five rules that predict who shows up late, why the pattern spreads, and how to spot it before you commit to a recurring meeting.• the “academic quarter hour” as a rule
Transaction Costs Killed the Medical Stars
Send us Fan MailWe try to make sense of a real problem many of us feel: paying a lot for U.S. healthcare while still waiting months to see a doctor. We trace how engineered transaction costs, from the Flexner Report to modern residency caps, restrict physician supply and protect price power while leaving clinicians overworked and patients stuck. • getting “fired” by a health system and what it rev
Parasites And Property Rights
Send us Fan MailBIBLIOGRAPHICAL NOTE: The information in this episode comes from Red Flags Press. Their main web site is very useful for research purposes, and I recommend it!We follow the idea of the “social parasite” through socialist writing and show how it shifts from moral accusation to an enforceable legal category once society claims ownership over individual labor. We argue that the tran
Books Don't Bet, They Match
Send us Fan MailWe break down how sportsbooks function as brokers that match contracts, set prices through the point spread, and earn their living through the vig. Kevin Braig joins us to explain how law, technology, and property rights shape whether sports betting markets stay clean or slide toward corruption and bad incentives. • five reasons people gamble, from dopamine to positive skewness • w
Hereditary Monarchy: At Least You Know Which Idiot Is Next
Send us Fan MailHereditary monarchy seems like a ridiculous way to pick a leader, yet it dominates most of human political history. We argue the reason is transaction costs: succession systems survive when they settle “who rules next” cheaply enough to prevent recurring civil war. • Why hereditary monarchy is historically prevalent compared with democracy and universal suffrage • Why “divine right
Swollen Permits? Call Chile!
Send us Fan MailPermits feel like “just paperwork”, until they quietly become the biggest barrier to building, investing, and even basic economic growth. We use Chile’s fight with “permisologia” to show how bureaucracy creates delay, uncertainty, and political risk even when the stated goal is safety or environmental protection. • permits as transaction costs that quietly tax projects and entrepre
Honor Among Thieves: Anja Shortland and Ransomware
Send us Fan MailA talk with Dr Anya Shortland about the economics of ransomware and the gray-zone institutions that let extortion markets function when nobody can truly enforce trust. We dig into how cyber insurance quietly becomes a form of governance, why data leaks change the game, and what national security risks emerge as everything gets connected. • criminal markets that sit between legal fi
Are Transaction Costs Really Just Human Distance
Send us Fan MailWe connect Adam Smith’s moral psychology to the modern idea of transaction costs and argue that the biggest frictions in markets start with the cost of understanding other people. We show how sympathy, propriety, self command, and reputation turn separate perspectives into workable cooperation and why justice is the real precondition for a stable commercial order. • why transaction
Adam Smith's Wealth of Nations Episode 10: Always Contemporary
Send us Fan MailWe assess Adam Smith’s enduring ideas—moral authorization of commerce, division of labor, emergent order—and confront where his optimism breaks: how democratic politics and business fuse to create monopoly privilege. The result is a maintenance‑intensive commercial order that needs competition defended, not assumed.• presumption for markets under secure property, justice, and compe
Adam Smith's Wealth of Nations Episode 9: Spending, Taxing, and Debt
Send us Fan MailWe walk through Book Five of The Wealth of Nations to map a state that defends, adjudicates, and builds wisely, then pays for it without killing growth. From militias to standing armies, fee-based courts to salaried judges, turnpikes to basic schooling, and taxes to debt, we test what holds up now.• defense as a professional, civilian-controlled standing army• justice as predictabl
Adam Smith Episode 8: A Nation of Shopkeepers
Send us Fan MailSmith closes Book IV by dismantling mercantilism through the lens of colonial policy, monopoly, and rent seeking, then weighs physiocracy against the system of natural liberty. We trace why colonies grew despite Europe, not because of it, and how “wealth as money” broke policy and fueled war.• mercantilism’s definition of wealth and the balance of trade myth• monopoly and bounties
Parts is (Not) Parts: The Life Cycle Problem for Heavy Equipment
Send us Fan MailWe trace how Alex Schuessler, the once and once-again President of SmartEquip--also a scholar of expressive choice!--built a platform that makes machines more profitable by erasing the friction between parts, service, and uptime. The rental economy, Japan’s utilization model, and IoT diagnostics reveal why transaction costs, not price tags, decide who should own and who should rent
Money Killed Barter; Can a Platform Bring It Back?
Send us Fan MailWe explore why money became the default middleman and how a modern platform can make barter practical by slashing the costs of search, matching, and trust. Founder Jassim Baqer shares the story behind Tbadel, what people actually trade, and how reputation, bundling, and scale (might) make swaps work.• Adam Smith’s "double coincidence of wants" problem and transaction cost
Adam Smith Episode 7: The Errors of Mercantilism--Bullion, Balances, and Bounties
Send us Fan MailTracing out Adam Smith’s Book IV, chapters 1–6, to show how mercantilism mistakes money for wealth, how protection creates monopolies at home, and why free exchange raises real prosperity. Smith defends two narrow exceptions—defense and tax parity—while rejecting bounties and politicized treaties that entangle trade with war.• mercantile vs physiocratic systems and their influence•
Adam Smith's Wealth of Nations Episode 6--Division of Land
Send us Fan MailWe trace how Adam Smith solves a historical puzzle: why Europe’s path to prosperity inverted the “natural order,” and how commerce quietly dissolved feudal power to make room for liberty. The story follows incentives, from primogeniture and entail to charters, free towns, and the market’s “silent and insensible” revolution.institutions as congealed preferences and elite incentivesw
Little's Law: The Transaction Costs of (Re)Drawing Lines
Send us Fan MailA conversation with Andrew Wagner, production and manufacturing engineer, now in aerospace, but with experience also in the auto industry.We trace how transaction costs shape production, from Adam Smith’s pin factory to Toyota’s SMED, and why empowering workers and redesigning tools can raise quality while cutting cost. An aerospace manufacturing engineer joins us to unpack Little’
Adam Smith's Wealth of Nations: Episode 5--The Text of Book II
Send us Fan MailThis episode explores Book 2 of Adam Smith's Wealth of Nations, focusing on his revolutionary concept of the "division of stock" and how capital accumulation drives economic growth.• Smith distinguishes between fixed capital (machines, buildings, land improvements) and circulating capital (money, goods in transit)• Money is described as "the great wheel of circu
Adam Smith's Wealth of Nations: Episode 4--Capital and Book II: Introduction
Send us Fan MailBook Two of Adam Smith's "The Wealth of Nations" provides the conceptual foundation for understanding how commercial society sustains growth through capital accumulation and the employment of stock. Smith challenges common misconceptions about wealth creation and offers profound insights on the role of capital in economic development.• Capital is not capitalism – Smi
The Innovation is the Exchange Itself!
Send us Fan MailChris Cornette, a longtime securities trader who grew up in the business, reveals how the most important innovation that made US capital markets preeminent in the world was the exchange itself.• Cornette's father worked in the P&S (Purchase and Sales) department on Wall Street, eventually becoming the controller of an American Stock Exchange specialist unit• The original B
When Bribes Become the System: Understanding Lock-In
Send us Fan MailCorruption persists not because people like it, but because it becomes embedded in the incentive structure of the state, creating feedback loops that reinforce themselves and resist reform. • A prebend is a type of benefice historically given to clergymen, now a useful concept for understanding corruption in developing nations• Douglas North extended Coase's concept of transac
Adam Smith's Wealth of Nations: Episode #3--Introduction and Book I
Send us Fan MailAdam Smith's "The Wealth of Nations" developed from decades of lectures on jurisprudence, examining how market exchange creates prosperity through division of labor and specialized skills.• Two core observations drive Smith's thinking: humans seek approval from others and have a propensity to "truck, barter and exchange"• Exchange is Smith's key c
Second Place Is The First Loser: Strategy Over Speed
Send us Fan MailThe ancient tradition of Il Palio in Siena showcases a complex system of strategic corruption, neighborhood rivalries, and high-stakes horse racing that has endured for centuries. This 90-second race around Siena's central piazza involves extensive bribery, intense negotiations, and centuries-old vendettas that make speed secondary to political maneuvering.• Horse assignments
When Bats Attack: Understanding Insurance
Send us Fan MailMike Munger explores insurance economics through the lens of transaction costs and risk management, culminating in an amusing case study about "bat-in-mouth disease."Insurance transfers risk from individuals to larger pools, reducing the expected variance of outcomesThe fair price of insurance equals expected value (probability × potential loss) plus transaction costsInfo
Adam Smith's Wealth of Nations: Episode #2--The "Model"
Send us Fan MailTransaction costs provide the key to understanding Adam Smith's complete philosophical system and how his two great works form an integrated whole. • Smith's two essential claims: humans desire to learn proper behavior and have an innate propensity to truck, barter, and exchange• Sympathy in Smith's view means synchronizing feelings with others—not perfect emotional
Adam Smith's Wealth of Nations: Episode 1 (Background)
Send us Fan Mail(N.B.: This episode is cross-posted at our partner site, Adam Smith Works. There are lots of resources and background material there, if you want to delve deeper)The Scottish Enlightenment emerged as a remarkable intellectual movement that shaped modern economics, philosophy, and social science, with Adam Smith at its center developing a dual theory of human nature through his two
Nnnnooooo one expects transaction costs!! The economics of Monty Python
Send us Fan MailMike Munger explores how Monty Python brilliantly illustrated transaction cost economics through their legendary comedy sketches. The British comedy troupe's most famous routines provide perfect, hilarious examples of the frictions that make economic interactions costly and complicated in the real world.• Three definitions of transaction costs from Ronald Coase, Douglas North,
The Engineers of Exchange: Middlemen, Part Deux
Send us Fan MailMiddlemen are not parasites but essential "engineers of exchange" who create value by connecting buyers and sellers who might never find each other otherwise.• The word "monger" (and Munger) comes from a Saxon root--Mancgere-- meaning trader or merchant• Middlemen historically seen as parasites for buying cheap and selling dear without improving products• 11th-c
FA Hayek: Price Whisperer
Send us Fan MailThe price system solves a profound coordination problem by communicating dispersed knowledge that no central planner could ever fully access or comprehend. We explore Hayek's insight about how prices serve as both information and incentives, allowing self-interested actions to inadvertently benefit society.• The "knowledge problem" – why information needed for econom
The Price of Pennies: Make or Buy?
Send us Fan MailThe make-or-buy decision is a fundamental aspect of economics that applies to businesses, households, and nations, with the U.S. penny providing a fascinating case study in economic inefficiency.• It costs 2.72 cents to manufacture one penny, representing a loss of 1.7 cents per coin to taxpayers• The U.S. Treasury loses between $85-120 million annually due to penny production cost
Pretty Pigs and Talking Dogs
Send us Fan MailHow should we decide which political-economic systems are best for organizing society? Let's peer through the lens of the "Pretty Pig Problem," which highlights the flaws in comparing the actual implementation of systems we dislike with idealized versions of systems we prefer. The PPP shows that we must compare real-world options rather than theoretical ideals.Some
Barking Cats: On the "Nature" of Bureaucracy
Send us Fan MailTransaction costs are the friction in the gears of society, but the worst transaction costs are the ones that reflect government failure. You can see it in ever cliche about government, from the dreaded DMV lines to the passport control bottleneck. Drawing on Milton Friedman's "Barking Cats" essay from 1973, I explore why bureaucracy remains fundamentally immune to r
Pins: Division of Labor is Limited by Transaction Costs
Send us Fan MailAdam Smith's pin factory example from "The Wealth of Nations" demonstrates how dividing labor into specialized tasks dramatically increases productivity. Ten workers specializing in different aspects of pin-making could produce 48,000 pins daily, while individually they might struggle to make even 20 pins each—a productivity increase of at least 240 times. This divis
Commerce and Sociology: Novak on Entangled Political Economy
Send us Fan MailWhat happens when we stop seeing politics and markets as separate spheres and start recognizing their deep entanglement? Mikayla Novak, senior fellow at the Mercatus Center, challenges conventional economic thinking in favor of Dick Wager's "entangled political economy."Drawing from her fascinating career path through Australia's Treasury, free market think tank
The Paradox of Political Rationality: Lynch
Send us Fan MailWhy do harmful policies like tariffs keep coming back despite universal condemnation from economists? The answer lies in the dynamics of collective action and concentrated interests.In this eye-opening conversation with G. Patrick Lynch, Senior Fellow at Liberty Fund, Mike Munger explores the fascinating world of public choice theory and how it explains some of democracy's mos
Curation Bubbles, Verification, and the Splintering of Ideology: Green
Send us Fan MailWhat happens when we no longer consume scarce information through trusted, verified institutions, but instead through an abundance of unbundled content without context or curation? John Green, rising star in political science from Duke University, takes us on a tour of the rapidly evolving landscape of political information.Green challenges conventional wisdom about how ideologies
The Socialist Generation Debate: Boettke
Send us Fan Mail Join economist Peter Boettke as he discusses how transaction costs impact market efficiency and our everyday decisions. We delve deep into historical examples, particularly the Soviet Union, to highlight the consequences of centralized planning versus individual market actions.Through engaging anecdotes and rigorous analysis, Boettke reveals why understanding transaction costs is
Transaction Costs and Constitutions: India's Balancing Act, with Shruti Rajagopalan
Send us Fan MailWhat if transaction costs could shape entire political and economic systems? Join us for an insightful discussion with Shruti Rajagopalan, a senior research fellow at the Mercatus Center, as she takes us through her fascinating journey from the University of Delhi to George Mason University. Her research on India's economic liberalization shaped her understanding of economics
Political Capitalism and the Power of Elites: Randall Holcombe
Send us Fan MailThis episode explores the intersection of democracy and capitalism, focusing on the concept of political capitalism and its relation to cronyism. Randall Holcomb discusses transaction costs, charismatic leadership, and critiques the idea that democracy and separation of powers inherently checks coercion, stressing the need for competing elites to foster accountability.• Transaction
Prison Gangs and Governance: David Skarbek
Send us Fan MailCurious about how the world of prison economics operates? Get ready to uncover a hidden universe with our guest, David Skarbek, a leading voice in political economy. David takes us on a captivating journey from his early days in construction to his groundbreaking research at George Mason University, where he was inspired to explore the economics of unconventional spaces. His insigh
Certainty, Common Law, and Statutory Law: Todd Zywicki of Scalia Law
Send us Fan MailTodd Zywicky, professor at George Mason's Scalia Law School, challenges some conventional legal doctrine, taking up the views of Bruno Leone and Friedrich Hayek. What if the legal world has underestimated the power of spontaneous order? Todd's intellectual journey sheds light on how these groundbreaking ideas contrast sharply with the dominant constructivist views shaping
From Law to Legislation: A Natural Process
Send us Fan MailHave you ever wondered how common law rules and market prices both "emerge"? Inspired by the works of James Buchanan, F.A. Hayek, and Bruno Leoni, Donald Boudreaux explains how decentralized processes can lead to the emergence of effective norms, such as queuing and speeding rules, without the need for top-down legislation. We discuss the significance of individuals spend
Why Bosses Don't Wear Bunny Slippers: TAITC
Send us Fan MailEver wondered why firms exist in a market-driven economy? This month's episode promises to unravel this question by diving deep into Ronald Coase's seminal 1937 paper, "The Nature of the Firm." Join me, Mike Munger, as I reflect on our first 16 months of podcasting and share the insights and wisdom that have shaped our journey. You'll gain a thorough unders
Price Gouging or Price Information?
Send us Fan MailCan high prices during emergencies actually save lives? Using North Carolina as an example, we dissect the economic and legal implications of these laws, exploring the ambiguities in terms like "unreasonably excessive" and the chilling effect on commerce. Discover how artificially low prices can lead to resource misallocation, discourage stockpiling, and hinder the trans
All Housing is Affordable Housing
Send us Fan MailAre housing regulations making affordable homes a pipe dream? We promise you'll gain a deeper understanding of how transaction costs and regulatory hurdles impede new housing development, frustrating both market responses and the dreams of potential homeowners. We'll explore how the very laws intended to protect affordable housing often backfire, pushing developers toward
We Get Letters!
Send us Fan MailWhat is it that beach parking lots are actually selling? Why do beer bottles cost more than cans? And just what are costs of the thing, as opposed to the costs of selling or buying the thing? Can you really separate them out?Mass MOCA: "Wilco's Solid Sound" Music Festival https://massmoca.org/event/solid-sound-2024/"To Consumers, ALL Costs are Transaction Costs.
Shibumi! Legit Idea, or Shady Dealings?
Send us Fan MailYou can throw shade, but can you own the idea of shade? Shibumi's sunshade has become an essential part of the coastal landscape, but that has sparked some fierce legal battles. We'll talk patents, beginning with the evolution of shade solutions from caveman ingenuity to Shibumi's wind-powered marvel. Plus, you'll get the inside scoop on the recent lawsuit where
Slavery, Indentured Servitude, and the Problem of Financing Education
Send us Fan MailNot everyone realizes that the modern financial system has enabled us to end historical practices such as indentured servitude and apprenticeship. This episode uncovers how financial systems tackled market failures and transaction costs, drawing on insights from Jeffrey Hodgson's "The Wealth of a Nation: Institutional Foundations of English Capitalism." We'll e
Bees, Oranges, and Externalities: The Answer is Transaction Costs
Send us Fan MailBees and Valencia oranges from my family's farm in rural central Florida provide a snapshot of externalities and transaction costs. A local beekeeper wasn't just a boon for our crops but also an illustration of Arthur Pigou's theories on the divergence between supply price and marginal supply price. Real-world practices, such as apple orchard owners paying for polli
Parking Lots, Transaction Costs of the Price Mechanism, and the Pork Pie Fedora Rogue
Send us Fan MailTwo seemingly similar parking lots at Wrightsville Beach, North Carolina, couldn't be more different in the emergent behaviors they foster. From the orderly lines of the 85-space lot to the chaotic dynamics of the smaller 19-space circular lot, discover how price rationing, queue formation, and transaction costs play critical roles in these everyday systems.Things take s a qui
Monkey See, Monkey App! And IP Walks Into a Bar....
Send us Fan MailThe method of much of social science is "comparative statics." There's an amazing natura experiment going on, after Hurricane Maria changed the environment for the rhesus macaques of Cayo Santiago. Sometimes, you need a simulation to understand something is only obvious after the fact. These primates, known for their fierce competition and rigid hierarchies, expanded
Baseball, Dollar Dogs, Apple Pie and Transaction Costs
Send us Fan MailWhy would a baseball stadium limit the number of $1 hot dogs per customer on Dollar Hot Dog Night? Find out as we work on this intriguing question posed by a curious high school student named HJ. Through the lens of transaction costs, we reveal how these promotional events are less about selling hot dogs and more about enhancing the overall (cheap!) game experience to attract new f
Dam Shame: It's not easy being government
Send us Fan MailI have been interested lately in a paper Bill Keech and I were working on a decade ago, It was called "The Anatomy of Government Failure."Was AC Pigou the first "Public Choice" theorist?There are two transaction costs problems in the background: 1. Information asymmetries and the problem of ignorance2. Incentive problems and institutional designMarket failure i
Corner Crossing Conundrum: Trespassing, Airspace, and Property Rights
Send us Fan MailWhat if crossing a mere corner of private land could land you in legal hot water? This episode tackles the thorny issue of corner crossing, where public and private lands meet at a single point, creating potential trespassing conflicts. We'll dissect Dave Schmitz's insights on the limits of property rights and the Roman law doctrine of ad coelum, which extends property ri
The Riddle is Transaction Costs: That's What the Money is For!
Send us Fan MailCan a single $100 bill solve an entire town's debt crisis? This riddle is a window into transaction costs. I rely on Jeffrey Rogers Hummel's insights, adding a few thoughts of my own. And a cool letter: Ever wondered why you haggle for a car but not for your morning Starbucks's coffee? Plus, a book recommendation: Nobel Prize-winning economist Edmund Phelps' &q
From Commons to Coase and Beyond, With Steven Medema
Send us Fan MailWhat if understanding the hidden costs in every transaction could revolutionize how we see economics? Stephen Medema of Duke University opens up about his academic pivot from computational tax policy to the history of economic thought, weaving in tales of detective-like intrigue and the thrill of uncovering the makers and movers behind economic theories.Beginning with John R. Comm
Desert Town Dilemmas and the Problem of Property Rights
Send us Fan Mail We embark on a journey through the lenses of Hume, Smith, and Coase, piecing together the roles of observation and empirical study in shaping our understanding of societal conventions and moral philosophy. David Schmidtz recounts a defining moment from his academic path, sparking a robust discussion on the fusion of economics with moral considerations in the realm of ownership and
Caldwell: Hayek's Intellectual Journey
Send us Fan MailCome along on a journey through the corridors of economic history and methodology with our esteemed guest, Bruce Caldwell from the Center for History of Political Economy at Duke University. Caldwell's personal voyage, from the nuances of economic methodology to his deep dive into Austrian economics, sets the stage for an enthralling discussion on the workings of institutions
Making Deals With Shadows: The Economics of Ransomware and Cybersecurity
Send us Fan MailThe digital realm is rife with invisible threats, and this episode doesn't shy away from the gritty realities of ransomware and the burgeoning industry of cyber insurance. We tackle the conundrum: How do these defensive expenditures impact our economy when they don't actually produce anything tangible? From the early days of cyber insurance to the ongoing battle against h
Current Event: Smart Grids, DERs, and the Economics of Energy
Send us Fan MailUnlock the secrets of the energy market evolution with economist Professor Lynn Kiesling, who brings her expertise on transaction costs and the digital transformation of the electricity industry to our table. Our energized discussion orbits around the innovative world of Distributed Energy Resources (DERs), where we explore the shift from consumers to proactive producers, thanks to
The 5G Revolution, Huawei Controversy, and Global Trade Dynamics
Send us Fan MailTAITC tries to navigate the complex world of 5G, Huawei, and the telecom revolution with special guest John Pelson, author of the thought-provoking book, Wireless Wars. With Pelson's unique insights from his time as a corporate executive in the wireless tech industry, we explore the pivotal role of rapid, reliable communication in promoting cooperation and exchange. We'll
Permissionless Innovation: Unshackling Potential or Unleashing Chaos?
Send us Fan MailWhat limits innovation? Is that good? I talk to Adam Thierer, senior fellow at the R Street Institute, exploring the concept of permissionless innovation and its far-reaching implications. From ancient Mesopotamia to the digital revolution, we unpack how policy context shape the trajectory of innovation and, consequently, our society.With Aaron Wildavsky saying "Go!" and
Neutrality, Security, and Ethereum: the Future of Global Transaction Costs
Send us Fan MailAre you intrigued by the transformative potential of blockchain and Ethereum? This conversation with Ryan Berckmans, an Ethereum enthusiast and savvy investor, will unravel world that remains mysterious to most. We also reflect on Ethereum's potential as a geopolitical tool and the enticing prospect of stablecoins. As we venture into the world of privacy technologies like zero
Effective Altruism and the Transaction Costs of Maximizing Expected Value
Send us Fan MailA thought-provoking conversation about Effective Altruism (EA) with technologist Ben Goldhaber, as we explore its intersections with utilitarianism and transaction costs. We'll try to navigate the tricky terrains of libertarianism and the more "directed" world of EA, balancing directional and destinationist solutions, and the role of strong leadership and community d
Motives and Morals of Taxes, and an Homage to Bob Barker
Send us Fan MailThere are three reasons to impose taxes, it seems:1. To discourage behavior "we" don't like2. To raise revenue for things "we" want 3. To achieve a pattern of social justice in the distribution of resourcesWhat does transaction cost analysis have to tell us about all this?And Bob Barker, and the 99 cent price point.Have you even read Marx?And a new letter.
All You Can Eat, or By the Ounce?
Send us Fan MailThere are many different pricing and packaging schemes for serving food in restaurants, and they all seem to coexist. But there are some significant differences, and thinking in terms of transaction costs and adverse selection can help us understand why.Plus, a TWEJ on the eternal optimism of Keynesians: THIS time it might work!Some links:Yoram Barzel, Measurement Cost and the Orga
The Devil Went Down to Grievance: Tuh, Taxes, and HOAs
Send us Fan MailAre HOAs an argument for anarchy, or an example of it?Ex post recontracting as a form a of aggression, when the enforcer of contracts is also a party to the contract.And of course the TWEJSome Links:How to pronounce “Tiebout” Why you should care about TieboutMunger on Wealth Taxes, and "Tuh" the Dog Makovi on "Cookie Cutter Covenants"NH property owners say HOA
The Red Dots Three, Parsley, and Counting Sheep
Send us Fan MailThe listener letter last week asked about the the three "red dots" that are used to identify liquor stores in South Carolina.Turns out that this kind of "shibboleth" is a way of identifying and discriminating, in ways that can be useful, or harmful.Red Dots in South Carolina:The Robert Moss (SOUTHERN SPIRITS) versionSouth Carolina Encyclopedia (from Moore, John
Packing Out Your Trash, Brown M&Ms, and $100 Bills on the Sidewalk
Send us Fan MailHow do you trade off your own interests against the interests of others? And what role do transaction costs play? A discussion of our "interest" in the welfare of others, and the complexity that adds to economic indifference curves. Things take an interesting turn, going toward how transaction costs can shape our institutions and preferences, ranging from a marine fishe
Academic Publishing, Talking Frogs, and Nailing Your Head to the Floor
Send us Fan MailWhat do Monty Python, George Akerlof, and the academic publishing industry have in common? They're all part of the explanation for the way academic publishing works. High transaction costs and the race for tenure often push scholars to prioritize quantity over quality. So, if you've ever wondered why professors seem to produce endless streams of research, this episode i
Faith and Loyalty through the TC Lens
Send us Fan MailTransaction costs can help institutions build loyalty and commitment among their members. Starting with the biblical story of Abraham, we delve into the delicate balance of setting transaction costs to neither alienate nor diminish values. Then: loyalty filters. The civil service of imperial China. Email spam. "The Word of Wisdom", a LDS dietary and lifestyle principle.
Lettuce Again, and Lumber
Send us Fan MailHow is buying lettuce like buying lumber? Each is idiosyncratic, and has to be sorted. Imposing the sorting costs on the buyer is actually a way of price discriminating.Clement Atlee and Winston Churchill, for the best TWEJ ever.And a cool new letter, about using transaction costs to separate by type, when type is "private information."Links:"Measurement Costs and Pr
Conventional Wisdom, Chesterton Fences, and "Excuse me"
Send us Fan Mail(NOTE: SORRY for audio glitch earlier. Fixed now!)BR asks about the economic content of "old sayings."We talk about habits, character, and "thinking fast and slow."Plus, TWEJ takes on cultural norms.Some links and background:F.A. Hayek on habit and informationB. Hooker on Rule ConsequentialismMunger on Pave the Muddy PathsMunger on Rule UtilitarianismRuss Robert
Dollar Hot Dogs, Coupons, and Bidding for Wallets
Send us Fan MailLast week's letter asked about the role of transaction costs in rationing discounted products, or "sales," like "Dollar Hotdog Night!" at the ballpark. As the listener correctly pointed out, this relates to price discrimination, which is a great topic.And....coupons!Some additional links and info:The $21 "Dodger Dog" at Chavez RavineThe "Mon
Women in Prison, and ALL Costs are Transaction Costs
Send us Fan MailLast week's letter asked if charging prices below the "market" price might be rational, but might be an antitrust violation. The TWEJ is a joke about women in prison for having violated rules against "moral" pricing. The actual cartoon is here, preserved for posterity by the good Timothy Taylor. Some links, for more information:Russ Roberts and Michael Mun
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