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:

Effective Altruism and the Transaction Costs of Maximizing Expected Value Sep 26, 2023

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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:

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

Motives and Morals of Taxes, and an Homage to Bob Barker Aug 29, 2023

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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 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 Curve
Charlie Gibson/Barack Obama exchange
Who Pays Federal Income Tax?
Harvard Business Review article on $X.99 pricing
On the Problem of "Fictitious Reference Pricing"
Bob Barker Obit

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

All You Can Eat, or By the Ounce? Aug 22, 2023

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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/725223
Comeback of "all you can eat" https://www.today.com/food/restaurants/all-you-can-eat-buffets-comeback-rcna99462

Buffets, pricing, and management, seller's perspective

https://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, 3-11
David V. Pavesic and Paul F. Magnant (2005; 2nd Ed). Fundamental Principles of Restaurant Cost Control, pp. 238-246. Prentice Hall.

Consumer's perspective

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 Devil Went Down to Grievance: Tuh, Taxes, and HOAs Aug 15, 2023

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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:

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 Red Dots Three, Parsley, and Counting Sheep Aug 08, 2023

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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) version
South Carolina Encyclopedia (from Moore, John H. “Solving the Red Dot Mystery.” Sandlapper, spring 2000: 32–34.)

Shibboleth

Gileadites and Ephraimites
Background on the conflict
Naked mole rats use shibboleths (thanks to Robert Lawson, who knows him some mole rats)

The Stone Signposts of Pompeii
World Series as Shibboleth (Robert T. Gravlin, 23rd Armored Engineer Battalion)

Appropriate Measures of Inflation
ERRATUM: 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

Packing Out Your Trash, Brown M&Ms, and $100 Bills on the Sidewalk Aug 01, 2023

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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=jiea
Neo(Classical) and Rama-Kandra, on caring about others:
https://www.imdb.com/title/tt0242653/characters/nm0924502
On 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-mergers
Ronald Coase, 1937, "The Theory of the Firm." https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.1937.tb00002.x
Richard 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/2111117
Robert Keohane, "International Institutions": https://www.jstor.org/stable/2600589
Mancur Olson, the Rise and Decline of Nations. https://www.jstor.org/stable/j.ctt1nprdd
The "Coase Theorem" and the "$100 Bill on the Sidewalk" Joke: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405632

On Brown M&Ms:

The DLR interview (excerpts): https://www.youtube.com/watch?v=_IxqdAgNJck
NPR on Brown M&Ms: https://www.npr.org/sections/therecord/2012/02/14/146880432/the-truth-about-van-halen-and-those-brown-m-ms
Background, including a copy of the relevant part of the contract: https://www.insider.com/van-halen-brown-m-ms-contract-2016-9

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

Academic Publishing, Talking Frogs, and Nailing Your Head to the Floor Jul 25, 2023

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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 Gillot
Two carriages at an intersection, arguing about who gets to go first
A drawing of same, with a judge to determine the merits of the claims
2. 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 Description

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

Faith and Loyalty through the TC Lens Jul 18, 2023

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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 Text
Word of Wisdom Text from D&C
Caffeinated drinks at "The Y."
Why is SPAM so badly written?
Calligraphy in the Chinese Civil Service
George 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 give up soda," (though that does defy the transaction costs argument).

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

Lettuce Again, and Lumber Jul 11, 2023

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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

Conventional Wisdom, Chesterton Fences, and "Excuse me" Jul 04, 2023

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(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:

Lagniappe:
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

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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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