The Answer Is Transaction Costs

Send us a text
Smith closes Book IV by dismantling mercantilism through the lens of colonial policy, monopoly, and rent seeking, then weighs physiocracy against the system of natural liberty. We trace why colonies grew despite Europe, not because of it, and how “wealth as money” broke policy and fueled war.

• mercantilism’s definition of wealth and the balance of trade myth
• monopoly and bounties as tools for concentrated gains
• chapter 7 on colonies as a case study in institutional design
• free ports versus exclusive companies and growth outcomes
• enumeration, navigation acts, and distorted incentives
• defense costs and the arithmetic of empire
• the “nation of shopkeepers” argument and public choice
• draconian wool laws, smuggling, and consumer losses
• physiocracy’s insights and errors, sector favoritism
• the system of natural liberty as Smith’s alternative

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz

Send us a text
We trace how Alex Schuessler, the once and once-again President of SmartEquip--also a scholar of expressive choice!--built a platform that makes machines more profitable by erasing the friction between parts, service, and uptime. The rental economy, Japan’s utilization model, and IoT diagnostics reveal why transaction costs, not price tags, decide who should own and who should rent.

• rental vs sharing and why property rights matter
• how serial-number specific data kills errors and downtime
• why parts discounts matter less than service speed
• Japan’s high saturation rental market and long lifecycles
• sensors, IoT, and AI for damage attribution and prevention
• decommoditizing parts through integrated workflows
• Coasean boundaries of the firm and renting incentives
• why RB Global acquired SmartEquip to span the lifecycle
• the back-office puzzle of bespoke systems vs SaaS

“Next week: Book 4, chapters 7–9 from The Wealth of Nations”
(Parts is Parts, from Wendy's) https://youtu.be/OTzLVIc-O5E?si=Mjz8JX-Sl_sdG6bC
SmartEquip web site:  https://www.smartequip.com/schedule-demo/
Announcement of Schuessler being (re)hired as President:  https://news.ararental.org/schuessler-appointed-president-of-smartequip
Why Japanese "used" equipment commands a premium:  https://everycar-review.com/2025/08/27/voices-from-global-dealers-why-japanese-used-machinery-is-their-first-choice/

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz

Send us a text
We explore why money became the default middleman and how a modern platform can make barter practical by slashing the costs of search, matching, and trust. Founder Jassim Baqer shares the story behind Tbadel, what people actually trade, and how reputation, bundling, and scale (might) make swaps work.

• Adam Smith’s "double coincidence of wants" problem and transaction costs
• Platforms as connection engines that lower search and matching costs
• Tabottle’s origin, goals and name meaning exchange in Arabic
• How offers, counteroffers and bundles enable fair value without prices
• Building trust with profiles, ratings, in‑app messaging and reporting
• Local meetups versus future delivery options to cut transfer costs
• Why density and subcommunities unlock multi‑party and chain trades
• What trades dominate now: books, electronics, kids’ gear and services
• AI matching, alerts and global exchange as the growth roadmap
• Two‑sided market dynamics and the path to scale

Tbadel Web Site
Jassim Baqer on LinkedIn

From JJ's letter: Photos of "Parklet" in San Francisco.

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz

Send us a text
Tracing out Adam Smith’s Book IV, chapters 1–6, to show how mercantilism mistakes money for wealth, how protection creates monopolies at home, and why free exchange raises real prosperity. Smith defends two narrow exceptions—defense and tax parity—while rejecting bounties and politicized treaties that entangle trade with war.

• mercantile vs physiocratic systems and their influence
• wealth as goods and industry, not specie
• balance of trade as a “pestilent error”
• make-or-buy logic and misallocation from tariffs
• invisible hand clarified and limited
• natural vs acquired advantages in specialization
• two exceptions: national defense and tax parity on imports
• drawbacks as refunds vs bounties as subsidies
• corn bounties, higher home prices, cheaper foreign prices
• specie hoards as dams that inevitably overflow
• treaties of commerce, Methuen example, political risk
• case for unilateral free trade over reciprocity

Mentioned in the podcast:
Laura Williams on Pineapples
Pineapples in Sweden
Oren Cass on Adam Smith
Dan Klein's Law and Liberty piece on Oren Cass on Adam Smith
If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz

Send us a text
We trace how Adam Smith solves a historical puzzle: why Europe’s path to prosperity inverted the “natural order,” and how commerce quietly dissolved feudal power to make room for liberty. The story follows incentives, from primogeniture and entail to charters, free towns, and the market’s “silent and insensible” revolution.

institutions as congealed preferences and elite incentives
why Smith’s natural order inverts in Europe
the physiocrats’ growth model and Smith’s critique
Solow’s technology vs North’s institutions vs McCloskey’s ideas
Joel Mokyr's synthesis and improvement (written BEFORE he Nobel'ed!)
feudal constraints primogeniture and entail suppressing agriculture
towns as islands of order through charters and fixed rents
the king–burgher alliance against barons
merchants as improvers of land and capital risk-takers
commerce introducing liberty and good government
Smith’s “most important” passage and its modern relevance

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz