The Answer Is Transaction Costs

Send us Fan Mail Why 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...

Send us Fan Mail 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 ignorance 2. Incentive problems and institutional design Market f...

Send us Fan Mail 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 r...

Send us Fan Mail 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'...

Send us Fan Mail 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. Co...

Send us Fan Mail  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 an...

Send us Fan Mail 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 institution...

Send us Fan Mail 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...

Send us Fan Mail 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 t...

Send us Fan Mail 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'...

Send us Fan Mail 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!" an...

Send us Fan Mail 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 ze...

Send us Fan Mail 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...

Send us Fan Mail 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...

Send us Fan Mail 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...

Send us Fan Mail 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 Tiebout Munger on Wealth Taxes, and "Tuh" the Dog   Makovi on "Cookie Cutter Covenants" NH property owners...

Send us Fan Mail 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,...

Send us Fan Mail 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 fis...

Send us Fan Mail 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...

Send us Fan Mail 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 principl...

Send us Fan Mail 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 a...

Send us Fan Mail (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 information B. Hooker on Rule Consequentialism Munger on Pave the Muddy Paths Munger on Rule Utilitarianism R...

Send us Fan Mail 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 Ravine The &quo...

Send us Fan Mail 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...

Send us Fan Mail 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...