The Answer Is Transaction Costs

Michael Munger

"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.....

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Episodes

Corner Crossing Conundrum: Trespassing, Airspace, and Property Rights
Jun 11 2024
Corner Crossing Conundrum: Trespassing, Airspace, and Property Rights
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
From Commons to Coase and Beyond, With Steven Medema
May 28 2024
From Commons to Coase and Beyond, With Steven Medema
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.Meaning of "Kaleidic":  From Roger Garrison https://webhome.auburn.edu/~garriro/r8lachmann.htmLetters: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
Desert Town Dilemmas and the Problem of Property Rights
Apr 30 2024
Desert Town Dilemmas and the Problem of Property Rights
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 presumption in favor of liberty in those deep waters.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-airlinehttps://abcnews.go.com/Politics/airlines-give-automatic-refunds-canceled-flights-delayed-3/story?id=109573733Lynne 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
Caldwell: Hayek's Intellectual Journey
Mar 26 2024
Caldwell: Hayek's Intellectual Journey
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
Making Deals With Shadows: The Economics of Ransomware and Cybersecurity
Feb 27 2024
Making Deals With Shadows: The Economics of Ransomware and Cybersecurity
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
Current Event: Smart Grids, DERs, and the Economics of Energy
Jan 30 2024
Current Event: Smart Grids, DERs, and the Economics of Energy
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
The 5G Revolution, Huawei Controversy, and Global Trade Dynamics
Dec 19 2023
The 5G Revolution, Huawei Controversy, and Global Trade Dynamics
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
Permissionless Innovation: Unshackling Potential or Unleashing Chaos?
Nov 21 2023
Permissionless Innovation: Unshackling Potential or Unleashing Chaos?
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