Claim OwnershipThe Answer Is Transaction Costs
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© 2024 The Answer Is Transaction Costs
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"The real price of everything is the toil and trouble of acquiring it." -Adam Smith (WoN, Bk I, Chapter 5)
In which the Knower of Important Things shows how transaction costs explain literally everything. Plus TWEJ, and answers to letters.
If YOU have questions, submit them to our email at taitc.email@gmail.com
There are two kinds of episodes here:
1. For the most part, episodes June-August are weekly, short (<20 mins), and address a few topics.
2. Episodes September-May are longer (1 hour), and monthly, with an interview with a guest.
Finally, a quick note: This podcast is NOT for Stacy Hockett. He wanted you to know that.....
30 Episodes
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1Why 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 dynam...
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 failur...
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. Steen...
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...
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 differe...
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 w...
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 unlo...
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 intellect...
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. Wrappin...
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 t...
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...
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...
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...
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 conflic...
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", ...
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 ...
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 Churchi...
(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...
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 Coupon...
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