The Answer Is Transaction Costs

Send us a textThe 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 costs• There are approximately 130 billion pennies in existence, but only 5-10% actively circulate• Most pennies end up sitting idle in jars, drawers, and coin collections after minimal use• Arguments against pennies include production costs, inflation reducing value, transaction inefficiency, and environmental impact• Canada successfully eliminated the penny in 2012, rounding cash transactions to the nearest five cents• A potential alternative: buying back existing pennies at a price below manufacturing cost• The Federal Reserve could implement a system paying $1.50 for 100 pennies, still saving over the $2.72 production cost• This system would utilize the billions of idle pennies while maintaining the existing distribution infrastructureGrass seed:  Expensive!Book'o'da'week: Abortion, Baseball, and Weed Join us next week on Tuesday, July 1st for a new episode with a fresh topic, letters from listeners, and of course, a hilarious new TWEJ.If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textHow 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 details:• Only three social systems are viable at scale: authoritarianism, capitalism, and democratic socialism• Every system has both an ideal form and a corrupted form that must be considered• The "Pretty Pig Problem" highlights our tendency to unfairly compare real systems to idealized alternatives• People on the left note market problems and conclude state intervention is necessary without examining real state actions• People on the right highlight state problems and assume markets are better without considering actual market performanceAnd....TWEJ!  And Book'o'da'week!Listen next Tuesday, June 24th, for a new episode of Tidy C with a new topic, letters, and another hilarious TWEJ.LINKS:Peter Boettke on EconTalk and a "Living Economics"Brooks' Law of Software EngineeringIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textTransaction 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 reform efforts, regardless of which political party holds power.The frustrating reality is that bureaucracies operate with completely different incentives than private businesses. While companies balance money costs against convenience to attract customers, government agencies focus solely on their budgets while taxing citizens with enormous "trouble costs." North Carolina's DMV perfectly illustrates this dysfunction—appointments require six-month waits while the state proudly touts its budget savings. Most maddening is that these aren't even genuine services, but rather artificial permission requirements the government imposes before allowing us to live our lives.This represents a textbook government failure—what economists call a Pareto inferior outcome. Most citizens would gladly pay slightly more in fees or taxes to avoid wasting hours (or months) of their lives in bureaucratic purgatory. That additional revenue could easily fund more staff and faster service. Yet the system has no mechanism to capture these preferences or respond to them.The problem isn't partisan, and it can't be fixed by shuffling leadership or staff. As Chris Rock might say about bureaucracy—"that tiger ain't go crazy, that tiger went tiger." Bureaucracy simply acts according to its nature. Reformers who believe they can fundamentally change how these institutions function are like people who want cats that bark—they fundamentally misunderstand the beast they're dealing with.Listen in for insights on why bureaucratic inefficiency persists despite our best efforts, complete with revealing (but not really funny) quotes from political thinkers ranging from Schumpeter to Trotsky. Have your own bureaucratic horror story to share? Let me know in the comments or on social media.Links:Friedman article 1973Keech and Munger article 2015Chris Rock, "Tiger!"Parkinson's LawMichael Munger: The "Trouble Tax"If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textAdam 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 division of labor, Smith argued, is limited by the extent of the market.Transaction costs—expenses associated with exchanging goods across distances—determine this market extent. As railroads, steamships, and eventually air freight reduced these costs, pin manufacturing evolved from numerous small local producers to global consolidation. The largest pin producer today, Prim-Dritz Corporation (headquartered in South Carolina), conducts most manufacturing in Asia. Modern pin factory workers now produce approximately 800,000 pins daily—200 times more than in Smith's era.This transformation wasn't about "exporting jobs" but rather the natural evolution of specialized production. Multiple attempts to form price cartels in the pin industry failed as producers leveraging greater division of labor could always undercut competitors. The pattern we see in pins repeats across countless industries: as transaction costs fall, markets expand, allowing for increased specialization and productivity.Understanding this relationship between division of labor and market size helps explain why some manufacturing concentrates geographically, why attempting to "bring back" certain industries is economically challenging, and why consumer prices have fallen for many goods. Smith's insight continues to provide a framework for understanding economic trends in our increasingly interconnected global economy. Links:Dutton, H. I., and S. R. H. Jones.  “Invention and Innovation in the British Pin Industry, 1790-1850.”  British Business History.  57 (1983):  175-193. Jones, S. R. H.  “Price Associations and Competition in the British Pin Industry, 1814-40.”  Economic History Review.  26 (1973):  237-253.   Jones, S. R. H.  “Hall, English, and Co., 1813-41:  A Study of Entrepreneurial Response in the Gloucester Pin Industry.”  Business History.  18 (1976): 35-65.  Liberty Fund: Adam Smith's Pin Factory. McNulty, Mary.  “How Straight Pins are Made.”  How Products are Made.   ENotes.  Pratten, Clifford J.  “The Manufacture of Pins.”  Journal of Economic Literature.  18 (1980):  93-96. Stigler, George J.  “The Division of Labor is Limited by the Extent of the Market.” Journal of Political Economy, 59(1951): 185-193. If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textWhat 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 tanks, and her pursuit of multiple courses of study, Novak offers unique insights into institutional economics and political networks. Her background bridges disciplines in ways that embody Hayek's wisdom that "you can't be a good economist by just being an economist."We consider Boettke's distinction between "mainstream" economics—with its equilibrium models and market failure diagnoses—and the "mainline" tradition that views economies as dynamic processes shaped by institutions. This conversation reveals how Richard Wagner's entangled political economy theory helps understand policy failures. When government and markets form complex networks rather than separate spheres, simplistic reform attempts like "just cut spending" are disastrously unsuccessful.The discussion vividly illustrates why transaction costs matter deeply for institutional analysis. We examine how political networks form with elites enjoying low-cost access while ordinary citizens remain at the periphery. This structural understanding helps explain why some inefficient policies persist despite their obvious flaws—they benefit the well-connected core of our political-economic system.Mikayla Novak's page linkRichard Wagner: Entangled Political Economy Research NetworkBuchanan's Liberal TheoryPolitics as a Peculiar BusinessPrevious TAITC Episodes of Relevance:Randall Holcombe and Political CapitalismDonald Boudreaux on Law and LegislationLate Bloomers book, by Rich KarlgaardMunger on tariffs and costsIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textWhy 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 most persistent puzzles. Lynch, a self-described "popularizer of public choice," breaks down complex economic principles into digestible insights about political behavior.The discussion begins with the foundations of public choice theory—the application of economic reasoning to political decisions. Far from portraying politicians as uniquely self-interested, public choice simply acknowledges that all humans respond to incentives, whether in markets or politics. As Lynch explains, "It's a mistake to characterize public choice as people being just materially self-interested." Even Mother Teresa was pursuing her goals single-mindedly—the definition of self-interest properly understood.When the conversation turns to tariffs, Lynch delivers a masterclass in why bad policies persist. Manufacturing interests receive concentrated benefits and organize effectively, while consumers bear diffuse costs. "That $70,000 job costs consumers $210,000 to $250,000 in increased prices," Munger notes. But since an individual consumer might pay just pennies more per purchase, they won't mobilize political opposition.Perhaps most fascinating is the exploration of Elinor Ostrom's Nobel Prize-winning work on common-pool resources. Conventional wisdom suggested that without government intervention, shared resources face inevitable destruction through overuse. Yet Ostrom discovered countless examples worldwide where communities developed sophisticated management systems to sustain resources over generations.If you've ever wondered why policies that economists universally condemn keep returning, or why small groups seem to dominate our politics despite majority rule, this conversation offers profound and sometimes unsettling answers. Subscribe now for more insights that will transform how you understand politics, economics, and collective decision-making.LINKS:G. Patrick Lynch:https://www.econlib.org/author/plynch/ https://www.civitasinstitute.org/research/the-young-americas-need-each-other https://lawliberty.org/author/patrick-lynch/https://lawliberty.org/book-review/public-choice-with-chinese-characteristics/ Shaggy Dog story: https://www.phrases.org.uk/meanings/shaggy-dog-story.html The ORIGINAL Shaggy Dog story:  https://stephengreensted.wordpress.com/2011/01/20/the-original-shaggy-dog-joke/Book'o'da Month:    Two Books, both by William Bernstein. The Birth of Plenty: How the Prosperity of the Modern World was Created. McGraw-Hill, New York, 2004, If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textWhat 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 function, arguing they're not so much coherent philosophical systems as they are socially shared belief networks. In these networks, most people specialize in just one or two issues they deeply care about, while adopting their coalition's positions on everything else. This creates an environment where signaling group loyalty becomes crucial—explaining why people sometimes make outrageous claims not despite their falsity, but precisely because the willingness to say something costly signals authentic commitment.The conversation takes an illuminating turn when Green unpacks his groundbreaking research on "curation bubbles." Unlike echo chambers or filter bubbles, these environments emerge when people strategically share content based on its utility for their side, regardless of source. A conservative might enthusiastically share a New York Times article criticizing Democrats, while generally dismissing the publication as biased. This selective curation creates information environments that are neither completely closed nor genuinely diverse.Perhaps most troubling is Green's insight about misinformation in the digital age. The real danger isn't simply false claims from unreliable sources, but rather the strategic repurposing of true information to create misleading narratives. When accurate statistics or facts are stripped of context and woven into deceptive frameworks, traditional fact-checking approaches fall short.As we navigate this unbundled media landscape, the question remains: can we rebuild institutions that verify and curate information effectively? The answer may determine the future of our shared reality and democratic discourse.Jon Green at Duke"Curation Bubbles" in APSRConverse on Belief SystemsMunger on "Direction of Causation"Letter Response:Sweden is NOT socialist!  (If you don't believe me, believe Andreas Bergh...)Book'o'da Month:  Alexander Kirshner, Legitimate Opposition, 2022, Yale University Press.  ISBN:  9780300243468. https://yalebooks.yale.edu/book/9780300243468/legitimate-opposition/Excellent podcast with Kirshner on the book. If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a text Join economist Peter Bettke 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, Bettke reveals why understanding transaction costs is essential for navigating the complexities of modern economies. We also explore the evolving discourse surrounding socialism, questioning whether new technologies, such as AI, could revolutionize planning efforts. This episode is not just for economists; it's a critical discussion for anyone seeking to understand the interplay between institutions, information, and human behavior in shaping societal outcomes.Our conversation unravels the myths surrounding economic models and their real-world applications, encouraging listeners to think critically about the institutions that govern our economy. Don't miss out on this thought-provoking discussion that could reshape your perception of economics.Peter Boettke:  Web page:  https://economics.gmu.edu/people/pboettkeRecent book: Socialist Calculation Debate (Cambridge U Press) https://www.cambridge.org/core/elements/abs/socialist-calculation-debate/5E63749F9D34D065193DCF77FC9FD8A9Recent Econtalk: https://www.youtube.com/watch?v=5NVocBZ8S7U Munger papers on “Status Quo” and James Buchanan:   (with G. Vanberg) https://scholars.duke.edu/publication/1475073 https://link.springer.com/chapter/10.1007/978-3-030-03080-3_3 The "Socialist Generation Debate," at AIERMainline Economics Resources: Living Economics Six Nobel Lectures Applied Mainline Economics Book'o'da'month:  Bill Mauldin, BRASS RING: A SORT OF MEMOIR. 1973, WW Norton.  If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textWhat 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 and public choice theory, and now she is looking at the Indian Constitution as a subject of study. She shares how India's socialist elements and frequent amendments navigate the balance between democracy and central planning.Explore the contrasting worlds of constitutional amendments in the United States and India, where transaction costs play a pivotal role. We unravel the philosophical differences in how these two nations interpret their constitutions, impacting citizens' rights and governance in uniquely distinct ways. Through metaphors like the Ship of Theseus, we evaluate the stability and adaptability of these constitutions, shedding light on how they sustain their respective democratic frameworks amid evolving societal needs.Adding a dose of humor, we recount a satirical tale of international contractors bidding for a White House fence and explore the complexities of voting systems influenced by transaction costs. The episode takes a reflective turn as we discuss Ulysses S. Grant's memoirs, highlighting themes of personal sacrifice and political intricacies. This conversation promises to enrich your understanding of how economics, law, and political systems intricately intertwine, offering both serious insights and light-hearted moments to ponder.Links:Dr. Shruti Rajagopalan's web site at Mercatus and her personal web siteDr. Rajagopalan's podcast, "Ideas of India" and publicationsBook o'da'month: U.S. Grant, Personal Memoirs, Modern Library, 1999. A note on the TWEJ: Some listeners may find the joke racist. But in fact each of the three stereotypes captures a kind of "excellence," though the three kinds of excellence might not all be equally socially admirable. Gordon Tullock, who was discussed in this episode, made some observations about corruption that are worth keeping in mind: Western nations abhor, or pretend to abhor, corruption, though in fact there is plenty of it in the West. Tullock's point was that, in a nation with dysfunctional institutions, corruption can be efficiency enhancing. Institutions matter. The point is not that Germans are inherently organized and methodical, nor that Mexicans are inherently hard-working and efficient, and certainly not that Indians are all corrupt. But the political and economic systems of those nations create a setting where such actions are "rational," and even expected.  I wrote a piece for Public Choice on Tullock's insight, and the problem of India, and that's why I enjoyed this joke!If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textThis 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 costs hinder citizen engagement in political processes • Political capitalism defined as capitalism influenced by political motives • Dynamic of cronyism within democratic systems • Buchanan's notion of "politics as exchange" explored • Political elites dominant in shaping policy and public preferences • Charismatic leadership affects political beliefs and decisions • Importance of competing elites for maintaining a balanced political landscape • Reasons for optimism surrounding innovation in capitalism despite political challenges • Upcoming book discusses further aspects of political exchangeLinks!Randy Holcombe's web site at FSU Political Capitalism bookFollowing Their Leaders bookMichael Giberson blog post at Knowledge Problem, on Price Gouging. Book'o'da Month:  Peter Boettke, Rosolino A. Candela and Tegan Lindstrom Truitt, The Socialist Calculation Debate: Theory, History, and Contemporary Relevance   https://www.cambridge.org/core/elements/socialist-calculation-debate/5E63749F9D34D065193DCF77FC9FD8A9If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textCurious 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 insights reveal the sophisticated systems of governance designed by prison gangs to maintain order and manage illicit economies. Whether you're fascinated by how these groups mimic pirate crews or intrigued by their ability to regulate harm in a high-stakes environment, this episode promises to reshape your understanding of extra-legal cooperation.David Skarbek, Michael Targoff Professor of Political Economy at Brown University. David Skarbek's Amazon Author PageBook'o'da'Month:  Shattered: Inside Hillary Clinton's Doomed Campaign  – Crown Publishers, April 18, 2017. by Jonathan Allen  Amie Parnes.Club Random: Bill Maher talks to William ShatnerIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textTodd Zwicky, 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 contemporary legal thought. Todd offers perspectives on the role of intuition and reasonableness in the courtroom, inspired by the legacies of Leone and Hayek. Uncover the hidden parallels between market dynamics and legal systems, emphasizing the fluidity of Roman law as a process of discovery. Links:Todd Zywicki's Faculty PageZywicki's published work on Leoni, and the Common LawThe Rise and Fall of Efficiency in the Common Law: A Supply-Side Analysis, 97 NORTHWESTERN L. REV. 1551 (2003). Common Law and Economic Efficiency (with Edward Stringham), in 7 ENCYCLOPEDIA OF LAW AND ECONOMICS: THE PRODUCTION OF LEGAL RULES (2d ed., Francesco Parisi, ed., 2012). Bruno Leoni's Legacy and Continued Relevance, 30(1) J. OF PRIVATE ENTERPRISE 131-41 (2015).Austrian Law and Economics and Efficiency in the Common Law (with Edward Stringham), in RESEARCH HANDBOOK ON AUSTRIAN LAW AND ECONOMICS 192 (Todd J. Zywicki and Peter J. Boettke, eds. 2017). The Loper Bright SCOTUS Decision (And the Gorsuch concurrence!)If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Send us a textHave 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 spending their own money versus others' and how these incentives impact societal outcomes, highlighting the deep wisdom embedded in traditionally evolved rules.We also venture into the nuanced distinction between law and legislation, drawing on insights from Buchanan and Hayek. We elaborate on Buchanan's concept of "relatively absolute absolutes," and on Hayek's emergence process, emphasizing the continuous generation of information through human action and preferences. Discover the natural process behind the emergence of common law, its role in establishing predictable rules, and the challenges presented by the unpredictable nature of parliamentary law. Guest: Donald Boudreaux at George Mason UniversitySome Links: Econtalk, Sept 30, 2024: “The Underrated Bruno Leoni”Econtalk, Dec 11, 2006:  "Law and Legislation"Michael Munger and Georg Vanberg, 2023, Contractarianism, Constitutionalism, and the Status Quo. Public Choice. Michael Munger, 2023, “The Socialist Generation Debate,” AIER. Book o'da'month: Bruno Leoni, FREEDOM AND THE LAWIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Ever 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 understanding of how transaction costs influence economic behaviors and organizational structures, with fascinating examples from Richard Langlois' analysis of the American Midwest's agricultural sector before the railroad era.Ronald Harry Coase, The Nature of the Firm (1937)Michael Munger, Why Bosses Don't Wear Bunny SlippersIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Can 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 transportation of vital supplies during crises. Allowing higher prices is, perhaps surprisingly, the only way to get low prices soon. Links on Price Gouging:Videos:https://www.youtube.com/watch?v=HFXYO1W_JXwhttps://www.facebook.com/watch/?v=1227582290607127Articles:https://www.econlib.org/library/Columns/y2007/Mungergouging.htmlhttps://www.aier.org/article/three-undeniable-problems-with-anti-gouging-laws/https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1099567#:~:text=Matt%20Zwolinski,-University%20of%20San&text=Price%20gouging%20occurs%20when%2C%20in,needed%20to%20cover%20increased%20costs.Book o'da Week:  https://www.simonandschuster.com/books/What-Went-Wrong-with-Capitalism/Ruchir-Sharma/9781668008263If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Are 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 luxury projects instead.Vicki Been; Ingrid Gould Ellen; Katherine O'Regan, 2018. "Supply Skepticism," https://furmancenter.org/research/publication/supply-skepticismnbsp-housing-supply-and-affordabilityMichael Munger, "All Housing is Affordable Housing: Seen and Unseen Edition." AIER. Credit to Biden/Harris: Trying to Make It Legal to Build Housing: https://www.whitehouse.gov/briefing-room/statements-releases/2024/08/13/fact-sheet-biden-harris-administration-takes-new-actions-to-lower-housing-costs-by-cutting-red-tape-to-build-more-housing/Building "luxury" housing reduces rents on lower-cost units! https://x.com/jayparsons/status/1823352715852103697Javier Milei Got Rid of Rent Control: Housing Supply Skyrocketed!Q  https://www.newsweek.com/javier-milei-rent-control-argentina-us-election-kamala-harris-housing-affordability-1938127Cans v. Bottles: https://twinmonkeys.net/an-advantage-to-canning-vs-bottling-lower-shipping-costs/#:~:text=Aluminum%20cans%20are%20cheaper%20to,space%20and%20reducing%20packaging%20wasteThe Theban Plays: https://www.amazon.com/Sophocles-Oedipus-Colonus-Antigone-Editions/dp/B00HTJUCLW/ref=monarch_sidesheet_titleIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

What 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." AIER, by Michael Munger. https://www.aier.org/article/to-consumers-all-costs-are-transaction-costs/Yogi Berra "quotes" (mostly attributed, rather than actual). https://businesscoachingofpa.com/top-100-classic-yogi-berra-quotes/Book o'da'week: Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age Kindle Edition Michael A. Hiltzik, 2009, Harper-Collins.  https://www.amazon.com/Dealers-Lightning-Xerox-PARC-Computer/dp/0887309895If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

You 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 Shibumi defended its designs against Beach Shade LLC, demonstrating the high stakes of protecting intellectual property in today's competitive markets.But the beach isn't the only place optimization matters. Ever wondered the optimal way to board a plane or fund your education? We dive into the secrets behind efficient airline boarding procedures and the real-world challenges that complicate them. Then, we shift to a heated debate on Income Share Agreements (ISAs) versus traditional student loans, exploring their unique benefits and drawbacks. Get ready to question everything you thought you knew about intellectual property as we discuss Boldrin and Levine's controversial views on innovation and competition. Links and Resources:Shibumi:Description of Shibumi v. Beach Shade:  https://www.finnegan.com/en/insights/articles/southeast-litigation-update-december-2023.htmlPrimary Shibumi Patent, Granted January 2019:  https://portal.unifiedpatents.com/patents/patent/US-10190330-B2List of Patents, From Shibumi Web Site:  https://shibumishade.com/pages/patentsThe Assembly--"Shibumi Has Taken Over NC Beaches" https://www.theassemblync.com/business/shibumi-shade-takes-over-north-carolina-beaches/ISA's:  https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2022-03-02/income-share-agreements-and-private-education-loan-requirementsMichele Boldrin on IP, on Econtalk: https://www.econtalk.org/boldrin-on-intellectual-property/ If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Not 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 explore the evolution of borrowing against future earnings and how modern financial institutions have streamlined processes that once resembled slavery, fostering the growth of capitalism.We'll then shift gears to examine Glenn Lowry's groundbreaking views on educational investment, discussed in his book "Late Admissions" and echoed in his 1981 Econometrica paper. Lowry's exploration of intergenerational transfers and parental investments in education reveals significant inefficiencies in the current system, drawing parallels with Michael Hudson's analysis of financial markets. The conversation sheds light on the untapped potential of underprivileged children and the need for better financial instruments to optimize educational funding.Geoffrey Hodgson. The Wealth of a Nation: Institutional Foundations of English Capitalism. Princeton University Press.  https://press.princeton.edu/books/hardcover/9780691247014/the-wealth-of-a-nation Glenn Loury, (1981). Intergenerational Transfers and the Distribution of Earnings. Econometrica, 49(4), 843–867. https://doi.org/10.2307/1912506What Causes Capitalism? STEPHEN DAVIES. REASON.   https://reason.com/?p=8285302Nick Gillespie Interviews Glenn Loury, REASON, https://reason.com/podcast/2024/06/12/glenn-loury-tales-of-sex-drugs-and-capitalism/If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Bees 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 pollination services while beekeepers pay for the privilege of orange blossom honey, reveal how market dynamics naturally balance costs and benefits. M.C. Munger. "The Lighthouse Myth." https://www.aier.org/article/the-lighthouse-myth/M.C. Munger. "Orange Blossom Special." https://www.econlib.org/library/Columns/y2008/Mungerbees.htmlJ.E. Meade, 1952, "External Economies and Diseconomies in a Competitive Situation." https://www.jstor.org/stable/2227173Shawn Regan, "How Capitalism Saved the Bees", PERC. https://www.perc.org/2017/07/20/how-capitalism-saved-the-bees/SNS Cheung, "Fable of the Bees." https://www.pauldeng.com/pdf/stevencheung/fableofbees.pdfBruce Frohnen and Ted McAllister, Character in the American Experience: An Unruly People.  https://rowman.com/ISBN/9781666914528/Character-in-the-American-Experience-An-Unruly-PeopleIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Two 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 quirky turn with the arrival of a man in a pork pie fedora who disrupts these parking norms, buying spaces directly from beachgoers. This unconventional behavior prompts a deeper discussion on the breakdown of social rules and the challenges of maintaining order when outsiders intervene. Wrightsville Beach Parking InformationLocke and Property Porkpie Fedoras, if you NEED one now!Elinor Ostrom and Property NormsTo Consumers, ALL Costs are Transaction Costs (AIER)Economic Benefits of Beach Access Points(Parking) Life Is A BeachIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

The 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 their social networks and reduced aggression to endure the island's new, harsh environment.Plus, a politically incorrect TWEJ, and an interesting letter. NYT Cayo Santiago storyA short piece on "anti-market atavisms" and Hayek's insights.Why you can't get a reservation at a restaurant...News story about "Monkey App"Book'o'da week: Peter Boettke, Erwin Dekker, and Chad Van Schoelandt, editors, Toward a Hayekian Theory of Social Change. https://rowman.com/ISBN/9781666937138/Toward-a-Hayekian-Theory-of-Social-ChangeIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Why 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 fans. Using a real-life example from a recent Mets game, we explore how such promotions can change the crowd dynamics, boost attendance, and ensure a positive atmosphere for everyone, even when things get a bit rowdy.And the TWEJ:  A dad joke, because of course it isThree apple pie prices (for one pie!)Andy Anand $70  Publix $7.75  Joe's Stone Crab $130Samuel Bagg's book The Dispersion of Power (Oxford)If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

I 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 is actually a thing. And it can be complicated: Kleinman and Teles, "Market and Non-Market Failures." But so is government failure.  There is no reason to expect government action to be Pareto Optimal.  The problem is that every flaw in consumers is worse in voters!It could even be argued (I did!) that a "good" industrial policy is impossible in a democracy.Book o'da week:  The Next American Economy: Nation, State, and Markets in an Uncertain World . 2022, Encounter Books.  by Samuel Gregg. If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

What 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 rights from the heavens to the earth's core. Through landmark cases like Hinman v. Pacific Air Transport and Jacques v. Steenberg Homes, you'll gain a deeper understanding of how airspace and land use rights have evolved.Links:Corner-crossing  https://www.casebriefs.com/blog/law/property/property-law-keyed-to-singer/trespass-and-public-rights-of-access-to-property/jacque-v-steenberg-homes-inc/  Corner-crossing update https://wyofile.com/ranch-owner-corner-crossing-would-erase-billions-in-private-property-value/ More on corner-crossing https://oilcity.news/crime/court/2024/05/14/who-are-the-judges-hearing-tuesdays-corner-crossing-appeal/#:~:text=The%20panel%20for%20the%2010th,property%20in%202020%20and%202021. Hinman v. Pacific Air Transport https://casetext.com/case/hinman-v-pacific-air-transport Jacques v. Steenberg Homes: https://www.wicourts.gov/sc/opinion/DisplayDocument.html?content=html&seqNo=17010 Book:  Jeffrey Rosen, The Pursuit of Happiness: How Classical Writers on Virtue Inspired the Lives of the Founders and Defined America. Simon Schuster. https://www.simonandschuster.com/books/The-Pursuit-of-Happiness/Jeffrey-Rosen/9781668002476If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Can 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' "My Journeys in Economic Theory," a compelling read that blends economic insights with political theory.Links:David Henderson gives a statement of "the riddle"J.R. Hummel's web siteSimilar story, from LvMIHaggling:Sebastian Schweighofer-Kodritsch, "The Bargaining Trap," Games and Economic Behavior, November 2022, v. 136, pp. 249-54.Book recommendation:Edmund Phelps, My Journeys in Economic Theory.  Columbia University Press.  https://cup.columbia.edu/book/my-journeys-in-economic-theory/9780231207300 If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

What 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. Commons' critical insights, and moving through Ronald Coase's focus on transaction costs as the critical difference among institutions, we explore  how these issues shape our understanding of efficiency and the "If markets are so great, why are there firms?"  Don't miss four new economics jokes (one is lawyer joke, in honor of common law!), my book recommendations, and get psyched for a summertime return to shorter, more frequent episodes.Letters:Corner Crossing:  https://www.nytimes.com/2022/11/26/business/hunting-wyoming-elk-mountain-access.html?searchResultPosition=1 https://www.wyomingpublicmedia.org/natural-resources-energy/2024-05-13/corner-crossing-case-back-in-court Books:•Glenn Loury, Late Admissions: Confessions of a Black Conservative.  https://wwnorton.com/books/9780393881349 (Econtalk Podcast on the Loury book:  https://www.econtalk.org/glenn-loury-tells-all/  )•Kevin Munger, The Youtube Apparatus, from Cambridge Essentials.  https://www.cambridge.org/core/elements/youtube-apparatus/36600D69788530F805C650B70976A585If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

 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 resource distribution.The discussion with David delves into the essence of property ownership, dissecting what it means to hold rights over something as abstract as an idea or as concrete as land. We grapple with the notion that property is not just a "bundle of sticks" but a set of societal constructs, born from necessity and shaped by our collective desire for harmony. Through examples of conflict resolution and the negotiation of public and private interests, such as eminent domain and navigation easements, we confront the delicate dance between individual autonomy and the greater good. The philosophical undercurrents of property law are laid bare, revealing the liberal heart beating at its core.The "Desert Town" source:  https://www.cambridge.org/core/books/abs/elements-of-justice/desert/268B6C7A9B17949572933A4DAA0CAB09Wall Street Journal article on Costco gold purchases: https://www.wsj.com/finance/investing/selling-costco-gold-bars-f14e966f Biden DOT rule on airline refunds:  https://www.transportation.gov/briefing-room/biden-harris-administration-announces-final-rule-requiring-automatic-refunds-airlineLynne Kiesling on The Essential Ronald Coase, Fraser Institute. Books:C. Johnson, R. Lusch, Schmidtz, Commercial Society: A Primer on Ethics & Economics (Rowman & Littlefield).  Bryan Caplan and Ady Branzei. Build, Baby, Build. Graphic novel just published by the Cato Institute  If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Come 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, transaction costs, and the profound impact of Friedrich Hayek's theories on modern economics. Get ready to unlock the secret meaning behind the unique TIPS acronym within Austrian economics.We follow Hayek's intellectual transition from his focus on business cycles to the intricate challenges of economic calculation and knowledge distribution. The conversation illuminates the value of information in economic decision-making and highlights the importance of markets in reconciling diverse plans and purposes. Discover how Hayek's 1945 paper reshaped economic thinking, extending its influence beyond the Austrian school and into the realms of neoclassical economics.Our exploration culminates with an examination of the very fabric holding our economic systems together – institutions. Delve into the evolution of economic institutions with insights from Doug North's intellectual quest and the relevance of Austrian capital theories in understanding economic flexibility. Links:Bruce Caldwell, Beyond Positivism  https://www.amazon.com/Beyond-Positivism-Bruce-Caldwell/dp/1138834238Bruce Caldwell and Hansjoerg Klausinger, Hayek: A Life, 1899-1950  https://www.amazon.com/Hayek-Life-1899-1950-Bruce-Caldwell/dp/0226816826/ F.A. Hayek, 1945: The Use of Knowledge in Society, American Economic Review. https://www.econlib.org/library/Essays/hykKnw.htmlMichael Munger,  "The Socialist Generation Debate" https://www.aier.org/article/the-socialist-generation-debate/Surge Pricing, NPR.  https://www.vox.com/money/24105250/fast-food-restaurants-dynamic-pricing-algorithm-wendysHope Center at Duke. https://today.duke.edu/2018/08/duke-center-expands-commitment-history-economicsIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

The 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 hackers, learn how organizations across the board—from the halls of government to the frontlines of business—are fortifying their defenses against a barrage of cyber threats, each with their own unique strategies and vulnerabilities.Wrapping up with a human touch, our conversation turns to the pivotal role individuals play in the security of networks and the negotiation tactics employed once defenses have been breached. And because all work and no play makes for a dull podcast, we round off the session with a sprinkling of economic humor, answering listener queries with a blend of wit and wisdom. Don't forget, for those hungry for more knowledge, I've got some book recommendations to deepen your understanding of the legendary thinker Adam Smith. Links:Anja Shortland Website:  https://www.kcl.ac.uk/people/anja-shortland-1Duke CHOPE Hayek Lecture with Dr. Shortland:  https://www.youtube.com/watch?v=Czs2EYDo2sIBooks:Arthur Herman: How the Scots Invented the Modern World https://www.amazon.com/How-Scots-Invented-Modern-World/dp/0609809997James Otteson: Adam Smith's Marketplace of Life https://www.amazon.com/Adam-Smiths-Marketplace-James-Otteson/dp/0521016568/ref=monarch_sidesheetAdam Smith: The Theory of Moral Sentiments  https://www.libertyfund.org/books/the-theory-of-moral-sentiments/EconTalk Book Club (six episodes):  https://www.econtalk.org/klein-on-the-theory-of-moral-sentiments-episode-1-an-overview/If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Unlock 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 technologies like rooftop solar panels and home energy storage. Professor Kiesling, drawing from her academic journey and reverence for Ronald Coase's work, delves into the institutional structure of production within firms and imparts her wisdom on navigating the complex regulatory frameworks that shape our smart grid technologies.Also, 4 new TWEJ's, and a letter. It's the January TAITC!This month's guest:  Lynne Kiesling:  https://lynnekiesling.com/Our paper:  Theisen, Kiesling, and Munger, "Airbnb to solar: electricity market platforms as local sharing economies."   Public Choice: 2022  Lynne's Substack: "Are We Talking Ourselves Out of Progress?"Lynne's Substack:  "Pareto-relevant Externalities (You don't have to internalize everything, folks!)Links:Buchanan and Stubblebine, "Externality." Economica.  Russ Roberts and the parable of the wind and the sun:   https://www.econtalk.org/david-mcraney-on-how-minds-change/Amory Lovins (cold beer, hot shower, "Nega-Watts"): https://en.wikipedia.org/wiki/Amory_LovinsOhtani's contract, from REASON:  https://reason.com/2023/12/15/baseball-star-shohei-ohtanis-new-contract-is-a-massive-tax-avoidance-scheme-nice/If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

TAITC 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 take up some of the intricacies of switching technology, capacity increases, and how institutions and transaction costs influence the wireless business competition. Our journey won't stop at revealing the inner workings of the telecom industry. We'll also shed light on the transformative impact of 5G technology on society. Beyond simply being a faster version of 4G, we'll discuss how 5G acts as a conduit connecting things to things, with the potential to bring radical changes to multiple industries. Discover why it's not too late to jump on the 5G bandwagon and how its full potential is yet to be realized.Some background info and links:Underappreciated Economists: Karl Mittermaeir (by M.C. Munger)SQL queries: JoinsBooks'o'da'Month!•Wireless Wars, Jon Pelson•The Capitalist Manifesto, Johan Norberg (I said Jonah, but of course it's Johan!!!)•The Hand Behind the Invisible Hand, Karl MittermaierIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

What 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 my son Kevin Munger saying "Not so fast, there Scooter!", we venture into the contentious territory of innovation intellectual property rights in an era of digital sharing. FOUR TWEJs (trying to keep THAT weekly, at least), and some great letters.LINKS:PAPERS and BOOKS by ADAM THIERER:https://rtp.fedsoc.org/paper/the-coming-onslaught-of-algorithmic-fairness-regulations/https://fedsoc.org/commentary/fedsoc-blog/the-problem-with-ai-licensing-an-fda-for-algorithms https://news.bloomberglaw.com/us-law-week/overregulating-ai-will-disrupt-markets-and-discourage-competitionhttps://www.rstreet.org/people/adam-thierer/https://www.amazon.com/Books-Adam-Thierer/s?rh=n%3A283155%2Cp_27%3AAdam+ThiererMoney Pump: https://www.oxfordreference.com/display/10.1093/oi/authority.20110803100205601#:~:text=The%20concept%20was%20introduced%20by,willing%20to%20pay%20for%20it. https://johanegustafsson.net/books/money-pump-arguments.pdf   Aaron Wildavsky, SEARCHING FOR SAFETY, https://www.routledge.com/Searching-for-Safety/Wildavsky/p/book/9780912051185Calestous Juma, INNOVATION AND ITS ENEMIES  https://academic.oup.com/book/25649William Baumol, ENTREPRENEURSHIP (article)  https://www.sciencedirect.com/science/article/abs/pii/088390269400014XEpstein and Munger on Capitalism and Stagnation https://www.youtube.com/watch?v=4o-s541UKgI  Munger on “Permissionless Innovation” on Econtalk https://www.econtalk.org/michael-munger-on-permissionless-innovation/ If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Are 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-knowledge proofs of identity or performance, we walk a knife-edge separating  privacy and security. Wrapping up, we discuss the economic benefits of pseudonymity and the potential regulatory response(s). Plus, just to keep TWEJ meaningful (otherwise, it would be "TMEJ", which is too hard to say), FOUR new economics jokes, one for each week of the month! And several letters, to give a taste of what I'll talk about in November. Some Links:Ryan Berckmans  on LinkedIn Ryan Berckmans on TwitterEthereum Learn about EthereumDune: A Dashboard of Dashboards of Tokenized Assets If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

A 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 dynamics in maintaining this equilibrium. We'll question the limits of utility maximization as a framework and ponder over the potential dangers it could pose if unchecked. Our discussion investigates how EA, rational thinking, and global development has influenced the field of AI alignment. And my favorite new TWEJ, from @dtarias. In the first monthly edition of TAITC.Some resources:The Reddit source for the TWEJSunday Brunch, for $195, at the BreakersEconTalk: Peter SingerEconTalk: Will McCaskill and LongtermismEconTalk: Eric Hoel and the Repugnant ConclusionKevin Munger--Everything Was Rational and Nothing VibedConsequentialism: IEPEffective Altruism ForumSB-F on SB-F (New York Times)If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

There 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.NOTE: This is the last of the regular episodes of Season 1. With the start of the new academic year, TAITC will move to once per month, with longer episodes coming out the last Tuesday of each month. APOLOGY: I said "Meltzer and Richards" with an "S", twice. That's wrong. It's just "Richard," no "S."Links to Resources:Quote Investigator on the ditty about "Tax that man"Meltzer, A. H., & Richard, S. F. (1981). A Rational Theory of the Size of Government. Journal of Political Economy, 89(5), 914–927. Costs of tax compliance in the U.S.Chilean tax system Laffer CurveCharlie Gibson/Barack Obama exchangeWho Pays Federal Income Tax? Harvard Business Review article on $X.99 pricingOn the Problem of "Fictitious Reference Pricing"Bob Barker ObitIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

There 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 Organization of Markets. The Journal of Law & Economics, Vol. 25, No. 1 (Apr., 1982), pp. 27-48   https://www.jstor.org/stable/725223Comeback of "all you can eat" https://www.today.com/food/restaurants/all-you-can-eat-buffets-comeback-rcna99462Buffets, pricing, and management, seller's perspectivehttps://www.cheftalk.com/threads/pricing-salad-bars-by-weight.70748/https://pdfcoffee.com/buffet-cost-control-pdf-free.html David V. Pavesic (1994) By-The-Ounce Pricing for Salad Bars, Journal of College & University Foodservice, 1:4, 3-11David V. Pavesic and Paul F. Magnant (2005; 2nd Ed).  Fundamental Principles of Restaurant Cost Control, pp. 238-246. Prentice Hall. Consumer's perspectivehttps://www.budgetbytes.com/hit-salad-bar-like-boss/  https://www.refinery29.com/en-us/whole-food-cheap-salad-bar-hacks If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Are 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 elections are undemocraticPublic Goods and "Club" GoodsIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

The 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 H. “Solving the Red Dot Mystery.” Sandlapper,  spring 2000: 32–34.)ShibbolethGileadites and EphraimitesBackground on the conflictNaked mole rats use shibboleths (thanks to Robert Lawson, who knows him some mole rats)The Stone Signposts of PompeiiWorld Series as Shibboleth  (Robert T. Gravlin, 23rd Armored Engineer Battalion)Appropriate Measures of InflationERRATUM: MJ writes to point out that if the economist could really count, he would have miscounted the number of sheep, adding one, because he counted the dog. That's fine. But then why did the shepherd agree that the number of sheep was correct? It should have been one over. It's okay that TWEJ's are not funny, that comes with the territory. But in this case there is a logical problem. My mistake, and thanks, MJ!If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

How 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 fishery to a bowl of M&M's. And TWEJ. Always, TWEJ.Some Resources:Gary Lynne, on Dual Interest Theory:   https://journals.sagepub.com/doi/abs/10.1177/02601079231172366?journalCode=jieaNeo(Classical) and Rama-Kandra, on caring about others:  https://www.imdb.com/title/tt0242653/characters/nm0924502On Coase, Olson, and the Problem of Encompassing Institutions:Justice Department Merger Guidelines:  https://www.justice.gov/archives/atr/merger-guidelines-and-integration-efficiencies-antitrust-review-horizontal-mergers: https://www.justice.gov/archives/atr/merger-guidelines-and-integration-efficiencies-antitrust-review-horizontal-mergersRonald Coase, 1937, "The Theory of the Firm." https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.1937.tb00002.xRichard Jankowski on Encompassing Organizations:  (1989). Preference Aggregation in Firms and Corporatist Organizations: The Enterprise Group as a Cellular Encompassing Organization. American Journal of Political Science, 33(4), 973–996. https://www.jstor.org/stable/2111117Robert Keohane, "International Institutions": https://www.jstor.org/stable/2600589Mancur Olson, the Rise and Decline of Nations. https://www.jstor.org/stable/j.ctt1nprddThe "Coase Theorem" and the "$100 Bill on the Sidewalk" Joke: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405632On Brown M&Ms:The DLR interview (excerpts): https://www.youtube.com/watch?v=_IxqdAgNJckNPR on Brown M&Ms:  https://www.npr.org/sections/therecord/2012/02/14/146880432/the-truth-about-van-halen-and-those-brown-m-msBackground, including a copy of the relevant part of the contract:  https://www.insider.com/van-halen-brown-m-ms-contract-2016-9If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

What 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 is for you.  Plus the TWEJ, a triple-header!Some links:1.  Some images sent by EA, about "Desert Town", by Claude GillotTwo carriages at an intersection, arguing about who gets to go firstA drawing of same, with a judge to determine the merits of the claims2. The Insectivore's Dilemma: An actual instant of the "eat a bug!" coupon.3. George Akerlof and the "Loyalty Filters" article in the American Economic Review, 73(1), 54–63.  4. Kevin Munger and the Journal of Quantitative DescriptionIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Transaction 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. But....there are cola vending machines at Brigham Young University, a seeming detour from the teachings of the Word of Wisdom. Links:Genesis 22 TextWord of Wisdom Text from D&CCaffeinated drinks at "The Y."Why is SPAM so badly written? Calligraphy in the Chinese Civil ServiceGeorge Akerlof. (1983). Loyalty Filters. The American Economic Review, 73(1), 54–63. David Kreps (1990). Corporate Culture and Economic Theory ("culture" as a signalling device)Lagniappe: A note from listener J:  I was particularly interested in today's topic as I am a member of the "Mormon" faith. I remember growing up when caffeinated sodas were seen as a huge deal, you would never bring one to a church BBQ and I remember being kicked out of a friend's house for drinking a diet mountain dew. I thought you may find it funny that after almost 100 years of confusion around caffeinated sodas, the church finally clarified in 2012 that in fact, caffeinated sodas are okay and not against the word of wisdom. Many speculate that this was due to MItt Romney being thrust into the spotlight as a presidential candidate, and he often drinks diet coke, and the church didn't want to turn off potential converts who might think, "I would never join a church that would ask me to gIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

How 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 Pricing in Retail Produce"  Clement Atlee:  https://blog.oup.com/2017/06/clement-attlee-timeline/ Atlee and Churchill:  https://www.amazon.com/Attlee-Churchill-Allies-Adversaries-Peace/dp/1848876602 Atlee speech  https://www.youtube.com/watch?v=XLuIlkT4gV4 SOURCE for the joke:  https://quoteinvestigator.com/2015/08/13/working-well/ If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

(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 Roberts on Wild ProblemsRoberts and Munger on Norms and SportsRoberts and Munger on Cultural NormsDavid Schmidtz on "Desert Town"Adam Smith on being committed to your principlesAlfred North Whitehead on habitLagniappe:I think we all see different headlines. This one (to me) says, "Sheetz raises gas prices using long lines and frayed tempers on one of the hottest days of the year!"If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Last 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 "Monkey App" kerfuffle in the Bay Area$1 hotdog night at Philadelphia got out of hand, because of course it didRobert Murphy and the Argument FOR CouponsEcontalk discussion of "found wallets" There is no such thing as a free coupon!If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Last 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 Munger on John Locke, Prices, and Hurricane SandyJohn Locke, "Venditio"Guzman and Munger, "Moral Dilemmas from Locke's Venditio," Public Choice. A "Loudwire" article that fails to understand even basic economics of scarcity.Mark Perry drops the truth about "Ticket Scalping" and why it happens...Adam Smith:  "The real price of everything is the toil and trouble of acquiring it."  (WoN, Bk I, Chapter 5) Michael Munger, "To the Consumer, All Costs are Transaction Costs." AIER. If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Episode 6 takes up the question of "matching," and the transaction costs of dating and marriage.  Some resources:  Ashley Madison:  "Is It Real?"Garrison Keillor, "We are Still Married"Michael Munger, on "Calculation" and socialist economics, at AIER Michael Munger and Russ Roberts, on "Econtalk: WIld Problems"  Tyler Cowen and Russ Roberts, on "Making Your Own Economy"Intellectual Property and the Problem of the Anti-CommonsBackground on search cost and optimal stopping:Secretary Problem ISecretary Problem IIIf you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Episode 5: Notes and Sources  Vaughn Baltzly, "Publicized Goods, or the Promiscuity of the Public Goods Argument."   https://www.cambridge.org/core/journals/economics-and-philosophy/article/abs/concerning-publicized-goods-or-the-promiscuity-of-the-public-goods-argument/DE16529B673600C47C22B59C87D198A9 Bruce Benson, "Are Roads Public Goods?"https://www.springerprofessional.de/en/are-roads-public-goods-club-goods-private-goods-or-common-pools/11240720 Daniel Klein, KNOWLEDGE AND COORDINATION.   https://www.amazon.com/Knowledge-Coordination-Interpretation-Daniel-Klein/dp/019979412X/ref=sr_1_1?ie=UTF8&qid=1324300010&sr=8-1 Thomas Schelling, THE STRATEGY OF CONFLICT.  http://elcenia.com/iamapirate/schelling.pdf "Are Roads Really Public Goods?"  https://fee.org/articles/are-roads-really-public-goods/ "Economists on Federal Funding for NPR." National Public Radio, PLANET MONEY.  https://www.npr.org/transcripts/134863998 "The Fundamental Law of Road Congestion."  https://cityobservatory.org/the-fundamental-global-law-of-road-congestion/ "Tolls on the Connecticut Turnpike."   https://www.latimes.com/archives/la-xpm-1985-10-10-mn-15553-story.html If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Does Starbucks have surge pricing?What is a Mancgere?Should the Stomach go to the Wheat, or should the Wheat come to the Stomach?Plus, the TWEJ!Some things discussed this week:Michael Munger, "Market Makers or Parasites" https://www.econlib.org/library/Columns/y2009/Mungermiddlemen.htmlFrederic Bastiat, WHAT IS SEEN AND UNSEEN. https://www.econlib.org/book-chapters/chapter-chapter-1-what-is-seen-and-what-is-not-seen/Frederic Bastiat, "The Negative Railroad." https://www.libertarianism.org/publications/essays/negative-railroadDavid Friedman, HIDDEN ORDER.   http://ndl.ethernet.edu.et/bitstream/123456789/2041/1/47.pdf.pdf If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

The third episode for TAITC: First, we take up the question of traffic congestion. Then, does the transaction cost approach have a relationship with moral and ethical theory?Resources:Econtalk: Traffic  https://www.econtalk.org/michael-munger-on-traffic/Roger Congleton Book  Solving Social DilemmasCoase and Epstein: Intellectual Portrait Series, Liberty FundJohn R. Commons, 1931, American Economic ReviewRonald Coase, 1937, EconomicaOliver Williamson, Transaction Cost EconomicsDouglass North, InstitutionsAnd of course the TWEJThe letter, for this week, from Anonymous: Does Starbucks have surge pricing? Once you realize that TAITC, then of course they do. If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz

Why would sellers go to a "place" where many others are also selling the same product? Wouldn't it better to go someplace off by yourself, so you can get the monopoly price? Well, the answer is that transactions"take place," meaning they require a context. Amazingly, it's better to go where all the other sellers are going, because of the problems of triangulation, transfer, and trust.  The Sears catalog was a "virtual" (paper) place, and Amazon is another "virtual" (online) place. But the answer to why we do that is "transaction costs." But then I go back in time to my own introduction to the notion of transaction costs, in a class taught by the remarkable economist Yoran Barzel. The puzzle is so simple that it seems dumb: why do we measure lettuce by the head, meat by the pound, and diamonds by the caret?Yoram Barzel, Measurement Cost and the Organization of Markets.The Journal of Law & Economics, Vol. 25, No. 1 (Apr., 1982), pp. 27-48https://www.jstor.org/stable/725223Brian Albrecht, Brian Albrecht at Int Cent for Law and Econhttps://pricetheory.substack.com/p/are-transaction-costs-just-costs Plus, the TWEJ! And our first letter, as a homework assignment. Are congestion taxes an effective way to overcome transactions costs pertaining to efficient use of roads?  Probably not the best.  There is no externality with congestion, because everyone stuck in traffic has moved to the harm. Those who could be held liable for causing congestion are not those who pay for a variable toll, but those who come later. We'll talk about this in Week 3!If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com ! You can follow Mike Munger on Twitter at @mungowitz