The Answer Is Transaction Costs

Send us a textWhat 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 GillotTwo carriages at an intersection, arguing about who gets to go firstA drawing of same, with a judge to determine the merits of the claims2. 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 DescriptionIf 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

Send us a textTransaction 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 TextWord of Wisdom Text from D&CCaffeinated drinks at "The Y."Why is SPAM so badly written? Calligraphy in the Chinese Civil ServiceGeorge 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 chIf 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

Send us a textHow 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

Send us a text(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 informationB. Hooker on Rule ConsequentialismMunger on Pave the Muddy PathsMunger on Rule UtilitarianismRuss Roberts on Wild ProblemsRoberts and Munger on Norms and SportsRoberts and Munger on Cultural NormsDavid Schmidtz on "Desert Town"Adam Smith on being committed to your principlesAlfred North Whitehead on habitLagniappe: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

Send us a textLast 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 RavineThe "Monkey App" kerfuffle in the Bay Area$1 hotdog night at Philadelphia got out of hand, because of course it didRobert Murphy and the Argument FOR CouponsEcontalk discussion of "found wallets" There is no such thing as a free coupon!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

Send us a textLast 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 Munger on John Locke, Prices, and Hurricane SandyJohn Locke, "Venditio"Guzman and Munger, "Moral Dilemmas from Locke's Venditio," Public Choice. A "Loudwire" article that fails to understand even basic economics of scarcity.Mark Perry drops the truth about "Ticket Scalping" and why it happens...Adam Smith:  "The real price of everything is the toil and trouble of acquiring it."  (WoN, Bk I, Chapter 5) Michael Munger, "To the Consumer, All Costs are Transaction Costs." AIER. 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

Send us a textEpisode 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 Russ Roberts, on "Making Your Own Economy"Intellectual Property and the Problem of the Anti-CommonsBackground on search cost and optimal stopping:Secretary Problem ISecretary Problem IIIf 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

Send us a textEpisode 5: Notes and Sources  Vaughn Baltzly, "Publicized Goods, or the Promiscuity of the Public Goods Argument."   https://www.cambridge.org/core/journals/economics-and-philosophy/article/abs/concerning-publicized-goods-or-the-promiscuity-of-the-public-goods-argument/DE16529B673600C47C22B59C87D198A9 Bruce Benson, "Are Roads Public Goods?"https://www.springerprofessional.de/en/are-roads-public-goods-club-goods-private-goods-or-common-pools/11240720 Daniel Klein, KNOWLEDGE AND COORDINATION.   https://www.amazon.com/Knowledge-Coordination-Interpretation-Daniel-Klein/dp/019979412X/ref=sr_1_1?ie=UTF8&qid=1324300010&sr=8-1 Thomas Schelling, THE STRATEGY OF CONFLICT.  http://elcenia.com/iamapirate/schelling.pdf "Are Roads Really Public Goods?"  https://fee.org/articles/are-roads-really-public-goods/ "Economists on Federal Funding for NPR." National Public Radio, PLANET MONEY.  https://www.npr.org/transcripts/134863998 "The Fundamental Law of Road Congestion."  https://cityobservatory.org/the-fundamental-global-law-of-road-congestion/ "Tolls on the Connecticut Turnpike."   https://www.latimes.com/archives/la-xpm-1985-10-10-mn-15553-story.html 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

Send us a textDoes Starbucks have surge pricing?What is a Mancgere?Should the Stomach go to the Wheat, or should the Wheat come to the Stomach?Plus, the TWEJ!Some things discussed this week:Michael Munger, "Market Makers or Parasites" https://www.econlib.org/library/Columns/y2009/Mungermiddlemen.htmlFrederic Bastiat, WHAT IS SEEN AND UNSEEN. https://www.econlib.org/book-chapters/chapter-chapter-1-what-is-seen-and-what-is-not-seen/Frederic Bastiat, "The Negative Railroad." https://www.libertarianism.org/publications/essays/negative-railroadDavid Friedman, HIDDEN ORDER.   http://ndl.ethernet.edu.et/bitstream/123456789/2041/1/47.pdf.pdf 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

Send us a textThe third episode for TAITC: First, we take up the question of traffic congestion. Then, does the transaction cost approach have a relationship with moral and ethical theory?Resources:Econtalk: Traffic  https://www.econtalk.org/michael-munger-on-traffic/Roger Congleton Book  Solving Social DilemmasCoase and Epstein: Intellectual Portrait Series, Liberty FundJohn R. Commons, 1931, American Economic ReviewRonald Coase, 1937, EconomicaOliver Williamson, Transaction Cost EconomicsDouglass North, InstitutionsAnd of course the TWEJThe letter, for this week, from Anonymous: Does Starbucks have surge pricing? Once you realize that TAITC, then of course they do. 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