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.....
Episodes
Mentioned books
Aug 26, 2025 • 26min
When Bribes Become the System: Understanding Lock-In
Corruption is deeply ingrained in state incentives, creating feedback loops that resist change. The concept of prebends highlights how public offices can become sources of personal income. Lock-in effects make reform nearly impossible, especially in systems where bribery is normalized. The podcast examines how bad institutions and mental models entrench corruption, using examples from Nigeria and post-Soviet Russia. It also discusses the challenge of reform, suggesting that significant shocks or brave leadership are often required to break the cycle of corruption.
Aug 19, 2025 • 1h 22min
Adam Smith's Wealth of Nations: Introduction and Book I
Delve into Adam Smith's groundbreaking ideas on market exchange and its role in prosperity. Discover how division of labor boosts productivity, exemplified by the fascinating pin factory case. Explore Smith's view on human nature, where our social instincts drive trade and ideas. Uncover his critique of powerful interests manipulating government and the foundation of justice in commerce. This intriguing discussion connects moral philosophy with economic policy, revealing how societies can thrive through fair interactions.
14 snips
Aug 12, 2025 • 42min
Second Place Is The First Loser: Strategy Over Speed
Discover the thrilling world of Il Palio in Siena, where ancient rivalries and strategic corruption reign. Learn how lottery-based horse assignments level the playing field against wealthy neighborhoods. Explore the staggering sums jockeys can earn through bribes and the extraordinary influence of the starter horse. Delve into the social stigma of finishing second, a fate worse than last place, echoing through generations. Finally, uncover the economic dynamics of seller clustering that enhance buyer interaction in various markets.
8 snips
Aug 5, 2025 • 35min
When Bats Attack: Understanding Insurance
Explore the quirky world of insurance and its economics, focusing on the comical 'bat-in-mouth disease' case study. Discover the intricacies of risk management, including adverse selection and moral hazard, with a humorous twist. The history of insurance dating back 5,000 years reveals its evolution and importance. Learn how transaction costs shape everyday decisions—from managing personal finances to the curious case of dogs avoiding stairs. Dive into whimsical anecdotes that bridge past and present, making complex topics accessible and entertaining.
Jul 29, 2025 • 57min
Adam Smith's Wealth of Nations: Episode #2--The "Model"
Dive into Adam Smith's profound insights on human nature! Discover how he connects transaction costs to morality and social harmony. Explore the importance of self-command in transforming virtuous thoughts into actions. Unearth the complexities behind moral judgments through motives and societal expectations. Smith's views challenge hierarchical systems and highlight the welfare of commerce. His allegories, like the 'Chinese earthquake', provoke a fresh take on ethics and decision-making in societal contexts.
24 snips
Jul 22, 2025 • 57min
Adam Smith's Wealth of Nations: Episode 1 (Background)
The discussion shines a light on the Scottish Enlightenment, showcasing its unexpected intellectual vigor. Key figures like Adam Smith and David Hume are highlighted for their foundational contributions to economics and philosophy. The influence of Scottish Presbyterian education on literacy and critical inquiry is explored, contrasting it with Oxford’s stagnation. The dual theories of human nature and the moral foundations necessary for a thriving commercial society are unpacked, emphasizing Smith's anti-slavery stance and belief in justice and beneficence.
11 snips
Jul 15, 2025 • 17min
Nnnnooooo one expects transaction costs!! The economics of Monty Python
Dive into the hilarious world of Monty Python as their iconic sketches illustrate complex economic principles! Discover how the 'Dead Parrot' sketch cleverly highlights the absurdities of contract enforcement. Laugh along with the 'Ministry of Silly Walks,' showcasing inefficiencies in bureaucratic institutions. The 'Argument Clinic' brings contract scope problems to life, and 'Monty Python and the Holy Grail' depicts the hurdles in communication costs. Finally, the infamous 'Spanish Inquisition' exposes the hilarity of coordination failures!
Jul 8, 2025 • 16min
The Engineers of Exchange: Middlemen, Part Deux
Middlemen are crucial 'engineers of exchange,' connecting buyers and sellers who might otherwise never meet. Historically seen as parasites, they actually enhance market efficiency and promote beneficial trades. Interesting insights include the origins of the word 'monger' and R.A. Radford's POW camp study, showcasing how middlemen increased overall welfare. The discussion challenges common misconceptions, emphasizing that middlemen create value when they facilitate transactions, not just when they exploit price differences.
8 snips
Jul 1, 2025 • 19min
FA Hayek: Price Whisperer
Explore the fascinating insights of Friedrich Hayek on how price signals convey dispersed knowledge that central planners can never grasp. Discover the tale of two farmers, revealing how profit-driven actions can benefit society more than altruistic ones. Learn about Goodhart's Law, illustrating the pitfalls of setting rigid goals, and witness the absurdities of Soviet planning failures. Delve into the future of pennies as a currency and the practical challenges they face today. A thought-provoking discussion on market dynamics versus centralization awaits!
Jun 24, 2025 • 19min
The Price of Pennies: Make or Buy?
Dive into the quirky world of pennies and the surprising inefficiencies of their production. It costs more to make a penny than it’s worth, leading to a massive annual loss for taxpayers. With nearly 130 billion pennies sitting idle, the discussion leans toward innovative solutions like a buy-back system. Also, explore the amusing economic comparison between grass seed and bread prices, revealing unexpected factors that influence costs. Get ready for some laughs as complex economics meets everyday currency debates!
