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...

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 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...

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...

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...

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...

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...

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...

There are three reasons to impose taxes, it seems: 1. To discourage behavior "we" don't like 2. To raise revenue for things "we" want  3.  To achieve a pattern of social justice in the distribution of resources What 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...

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 ...

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 TWEJ Some 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" Goods If you have questions or comments, or want to suggest a future topic,...

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.)Shibboleth Gileadites and EphraimitesBackground on the...

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: ...

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...

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...

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: ...

(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...

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...

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 Sandy John Locke, "Venditio" Guzman and Munger, "Moral Dilemmas from Locke's Venditio,"...

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-Commons Background on search cost and optimal...

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...

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.html Frederic 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."...

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 Dilemmas Coase and Epstein: Intellectual Portrait Series, Liberty Fund John R. Commons, 1931, American Economic Review Ronald Coase, 1937, Economica Oliver Williamson, Transaction Cost...

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...