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Michael Munger on Sharing, Transaction Costs, and Tomorrow 3.0

EconTalk

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The Price System and the Economic System

The size of firms will be determined over time by transaction cost. If it's cheaper to buy things in the market, then firms will shrink. The margin between owning and sharing will be determined by transactions cost. People who live in cities are going to be able to participate in the sharing economy. It is hard to imagine any way of being able to commodify an electric toothbrush if its costs are too high.

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