Science
**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…..

Latest Episodes:

Parasites And Property Rights Jun 23, 2026

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BIBLIOGRAPHICAL NOTE: The information in this episode comes from Red Flags Press. Their main web site is very useful for research purposes, and I recommend it!

We follow the idea of the “social parasite” through socialist writing and show how it shifts from moral accusation to an enforceable legal category once society claims ownership over individual labor. We argue that the transaction costs of monitoring effort and assigning “socially useful” work push real-world socialism toward surveillance, coercion, and punishment.
• socialist critique of wage labor as work or starve
• transaction costs as defining, monitoring, and enforcing property rights
• the property rights switch from self-ownership to society owning labor
• “from each according to their ability” as an obligation backed by force
• socialist writers labeling middlemen and many professions as parasites
• the party as the decision-maker when prices are suppressed
• Joseph Brodsky’s trial as a real anti-parasite enforcement example
• why the parasite problem expands and becomes politically arbitrary
• how similar labor-claim logic shows up in authoritarian socialism and fascism
• why Scandinavian social democracy is capitalism, not classical socialism
The book of the week is Lenin’s What Is to Be Done? Burning Questions of Our Moment, and I strongly recommend it.

Links:

Red Flags, "Why Socialism Says Slacking is Theft."

Moments in Soviet History: The Trial of Joseph Brodsky

Leo Huberman, The ABCs of Socialism.

"Soviet Era 'Parasites'" https://www.themoscowtimes.com/2016/05/20/soviet-era-parasites-return-to-todays-russian-a52934

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

Books Don't Bet, They Match Jun 16, 2026

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We break down how sportsbooks function as brokers that match contracts, set prices through the point spread, and earn their living through the vig. Kevin Braig joins us to explain how law, technology, and property rights shape whether sports betting markets stay clean or slide toward corruption and bad incentives.
• five reasons people gamble, from dopamine to positive skewness
• what a sports bet is as a contract and why a book exists as a broker
• how the 11-to-10 price and the vig work in practice
• why point spreads are a pricing technology and a marketing tool
• how street-level enforcement and local political capture governed bookmaking
• why Nevada legalized betting and how phones and smartphones changed everything
• the Coasean case for clearly assigned property rights between leagues and books
• how prop bets and inside information can erode trust in games
• why extreme taxes and licensing fees raise transaction costs and distort markets
Judge Kevin Braig's book, "Bookmakers vs. Ballowners"

RH Coase, "The Problem of Social Cost"

Gustavo Dudamel's opera, "Wealth of Nations"

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

Hereditary Monarchy: At Least You Know Which Idiot Is Next Jun 09, 2026

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Hereditary monarchy seems like a ridiculous way to pick a leader, yet it dominates most of human political history. We argue the reason is transaction costs: succession systems survive when they settle “who rules next” cheaply enough to prevent recurring civil war.
• Why hereditary monarchy is historically prevalent compared with democracy and universal suffrage
• Why “divine right” stories often rationalize a choice people already find tolerable
• Thomas Paine’s critique of hereditary succession and what it misses
• Hobbes on the state of nature as what happens when sovereignty is contested
• Succession as the master coordination problem of political order
• Transaction costs applied to elections, enforcement, legitimacy, and rent seeking
• Why elective monarchy can become an armed auction for total power
• Bright line rules versus discretionary selection and why speed can beat “better”
• How constitutional design lowers the cost of leadership transition when it works
• The legitimacy problem and why dynasties converge on endogamy
• The genetic consequences of endogamy and the Habsburg cautionary tale
• Twedges, book recommendation, and a listener letter on board game “math trades”

LINKS:

Thomas Paine, Common Sense, February 1776

Michael Munger, The Ugly Pig, 20224

A.P. Martinich, Thomas Hobbes: A Biography, 1999.

Thomas Hobbes, Leviathan, 1651.

Neal Schultz, Suicide Kings: Hereditary Monarchy, 2025

Tbadel Barter App

Cosmos Institute, Coasian Bargaining at Scale, 2025

UPDATE: An interesting, and more clearly articulated, application of the reasoning here.... https://aminga.substack.com/p/how-transaction-cost-economics-explains

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

Swollen Permits? Call Chile! May 31, 2026

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Permits feel like “just paperwork”, until they quietly become the biggest barrier to building, investing, and even basic economic growth. We use Chile’s fight with “permisologia” to show how bureaucracy creates delay, uncertainty, and political risk even when the stated goal is safety or environmental protection.
• permits as transaction costs that quietly tax projects and entrepreneurship
• why bureaucracy is not the same thing as government and why it crowds out market coordination
• “permisologia” in Chile and how a one-stop shop becomes many counters
• parallels to India’s license raj and the logic of rent seeking choke points
• Dominga as a case study in shifting rules, scandal, and investment held hostage
• documented GDP and jobs costs from permitting delay and collapsed processing capacity
• Chile’s LMAS reform plan including deadlines, digitization, and sworn declarations with sanctions
• Parkinson’s Law, bike shedding, and why committees obsess over trivial items
• listener letter on commune life and how transaction costs show up inside “one big firm”
Links:

What is "Permisología"? https://comentarista.emol.com/2294117/27242033/Emol-Social-Facts.html

Framework Law (LMAS): https://www.bluefieldresearch.com/research/chile-takes-another-step-towards-mining-reform/

Parkinson's Law and the "Law of Triviality": https://fs.blog/parkinsons-law/

Twin Oaks Community: https://www.twinoaks.org/

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

Honor Among Thieves: Anja Shortland and Ransomware Apr 28, 2026

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A talk with Dr Anya Shortland about the economics of ransomware and the gray-zone institutions that let extortion markets function when nobody can truly enforce trust. We dig into how cyber insurance quietly becomes a form of governance, why data leaks change the game, and what national security risks emerge as everything gets connected.
• criminal markets that sit between legal firms and underworld gangs
• insurance as governance through protocols, repeat play, and incident response packages
• why victims amplify risk when they throw money at crises
• the origin story of early ransomware and the transaction costs that made it fail
• step-by-step ransomware mechanics from phishing to exfiltration to encryption
• how gangs price ransoms by reading cash flow and insurance certificates
• leak sites, privacy regulation, and third-party liability as bargaining leverage
• why cyber insurance is fragmented and slow to enforce security standards
• deductibles, coverage caps, and market hardening that push better cybersecurity
• AI-enabled phishing and the asymmetric arms race between attackers and defenders
• state-linked ransomware, impunity jurisdictions, and critical infrastructure threats
• efficiency versus resilience in smart cities and the Internet of Things

Anja Shortland at Kings College London

Shortland's book, Dark Screens: https://www.amazon.com/Dark-Screens-Hackers-Shadowy-Ransomware/dp/1541705750
Shortland's first TAITC episode: "Deals with shadows"

Links mentioned in podcast:

Alex Danco's pirate puzzle

Pete Leeson's book, The Invisible Hook

David Deutsch's book, The Beginning of Infinity

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 Transaction Costs Really Just Human Distance Mar 24, 2026

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We connect Adam Smith’s moral psychology to the modern idea of transaction costs and argue that the biggest frictions in markets start with the cost of understanding other people. We show how sympathy, propriety, self command, and reputation turn separate perspectives into workable cooperation and why justice is the real precondition for a stable commercial order.
• why transaction costs always exist and why institutions matter when exchange is costly
• a brief history of the term from Coase to an early use in Scitovsky
• transaction costs as asymmetric information and the cost of social coordination
• Smith’s epistemic distance and why sympathy requires imaginative effort
• propriety as social calibration through the impartial spectator
• self command as the price of being socially intelligible
• commerce as a practical school for restraint, trust, and predictability
• the prudent man as a model of conduct that reduces suspicion and monitoring
• Buchanan’s moral community, moral order, and moral anarchy as lenses on social stability
• why society can survive without beneficence but not without justice
• a listener’s college admissions case where interviews act as a separating equilibrium and improve aid allocation
Links:

Liberty Fund eBook--Theory of Moral Sentiments (PAGES DO NOT MATCH UP WITH PRINT EDITION!)
TAITC with Steve Medema, on Coase and Transaction Costs
Dan Klein and Russ Roberts on Theory of Moral Sentiments
Tibor Scitovsky, 1940, Economica paper
Gustavo Dudamel’s ‘the wealth of nations’ Melds Opera and Economics - Bloomberg

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

Adam Smith's Wealth of Nations Episode 10: Always Contemporary Feb 24, 2026

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We assess Adam Smith’s enduring ideas—moral authorization of commerce, division of labor, emergent order—and confront where his optimism breaks: how democratic politics and business fuse to create monopoly privilege. The result is a maintenance‑intensive commercial order that needs competition defended, not assumed.
• presumption for markets under secure property, justice, and competition
• division of labor as the main engine of productivity and growth
• invisible hand reframed as emergent order, not automatic virtue
• critique of mercantilism, monopoly privilege, and rent seeking
• limited but real state functions: defense, justice, public works, education
• motivational symmetry and public choice constraints on government
• trade clarity: buy where cheaper, specialize, gains from exchange
• competition as a public good that must be defended
Happy 250th birthday, Wealth of Nations

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

Adam Smith's Wealth of Nations Episode 9: Spending, Taxing, and Debt Jan 27, 2026

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We walk through Book Five of The Wealth of Nations to map a state that defends, adjudicates, and builds wisely, then pays for it without killing growth. From militias to standing armies, fee-based courts to salaried judges, turnpikes to basic schooling, and taxes to debt, we test what holds up now.
• defense as a professional, civilian-controlled standing army
• justice as predictable law and salaried judges
• public works funded by user fees where feasible
• education to offset division of labor’s civic costs
• incentives in universities and churches
• four tax maxims and ability to pay
• why land taxes beat mobile capital taxes
• state property and monopolies as bad revenue
• debt, consols, and fiscal illusion
• Smith with Hume and public choice echoes
We do have one more episode, which is a summing up and taking stock of why the Wealth of Nations still matters today. It will post Tuesday, February 24th, 2026.

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

Adam Smith Episode 8: A Nation of Shopkeepers Dec 30, 2025

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Smith closes Book IV by dismantling mercantilism through the lens of colonial policy, monopoly, and rent seeking, then weighs physiocracy against the system of natural liberty. We trace why colonies grew despite Europe, not because of it, and how “wealth as money” broke policy and fueled war.
• mercantilism’s definition of wealth and the balance of trade myth
• monopoly and bounties as tools for concentrated gains
• chapter 7 on colonies as a case study in institutional design
• free ports versus exclusive companies and growth outcomes
• enumeration, navigation acts, and distorted incentives
• defense costs and the arithmetic of empire
• the “nation of shopkeepers” argument and public choice
• draconian wool laws, smuggling, and consumer losses
• physiocracy’s insights and errors, sector favoritism
• the system of natural liberty as Smith’s alternative

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

Parts is (Not) Parts: The Life Cycle Problem for Heavy Equipment Dec 23, 2025

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We trace how Alex Schuessler, the once and once-again President of SmartEquip--also a scholar of expressive choice!--built a platform that makes machines more profitable by erasing the friction between parts, service, and uptime. The rental economy, Japan’s utilization model, and IoT diagnostics reveal why transaction costs, not price tags, decide who should own and who should rent.
• rental vs sharing and why property rights matter
• how serial-number specific data kills errors and downtime
• why parts discounts matter less than service speed
• Japan’s high saturation rental market and long lifecycles
• sensors, IoT, and AI for damage attribution and prevention
• decommoditizing parts through integrated workflows
• Coasean boundaries of the firm and renting incentives
• why RB Global acquired SmartEquip to span the lifecycle
• the back-office puzzle of bespoke systems vs SaaS
“Next week: Book 4, chapters 7–9 from The Wealth of Nations”

(Parts is Parts, from Wendy's) https://youtu.be/OTzLVIc-O5E?si=Mjz8JX-Sl_sdG6bC
SmartEquip web site: https://www.smartequip.com/schedule-demo/
Announcement of Schuessler being (re)hired as President: https://news.ararental.org/schuessler-appointed-president-of-smartequip
Why Japanese "used" equipment commands a premium: https://everycar-review.com/2025/08/27/voices-from-global-dealers-why-japanese-used-machinery-is-their-first-choice/

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

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The Answer Is Transaction Costs – Michael Munger

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !

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