The Answer Is Transaction Costs

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We walk through the weirdly powerful math that makes a stable $10,000 profit stream worth $50,000 in one world and $1,000,000 in another. Then we apply the same present value logic to politics and show how unpredictable rules raise transaction costs, inflate the effective discount rate, and freeze long-term investment.
• the discount rate as the hidden driver of valuation
• why the consol bond makes present value intuitive
• P = X / R as a shortcut for long-lived assets
• how low interest rates mechanically boost asset prices
• discount rates as opportunity cost plus inflation plus risk
• regime uncertainty as political risk priced into investment
• how New Deal “experimentation” can prolong a downturn
• modern examples through tariffs tax policy and regulation
• a listener puzzle on why Coke concentrate costs more
Tell me what the answer is.
If anybody knows of a recording of the George M. Cohan play, Broadway musical, I would certainly like to be able to find it.

Michael Munger, "How Interest Rates Set Asset Prices: One Weird Trick," The Daily Economy, May 28, 2025 
Robert Higgs, "Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War," The Independent Review, Spring 1997 
Amity Shlaes, The Forgotten Man: A New History of the Great Depression (HarperCollins, 2007)
Franklin D. Roosevelt, Oglethorpe University commencement address, May 22, 1932 
Book o-da-week:  Robert Higgs, Depresssion, War, and Cold War, (reprint) Independent Institute. 
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

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We argue that “friction” is not always a flaw and can be a deliberate shield against bad collective decisions. We use Buchanan and Tullock’s public choice framework to show why supermajorities, veto points, and other transaction costs can protect rights while still leaving room for day to day governing. 
• contrasting cheap outrage with intentional institutional friction 
• explaining why constitutional amendment rules use supermajorities 
• breaking down external costs versus decision-making costs 
• applying the framework to routine policy versus foundational rules 
• linking cancel culture to collapsed coordination costs and lost buffers 
• spotting designed friction in bicameralism, vetoes, jury unanimity, central bank independence, corporate charters, and treaties 
• testing objections about minority rule, the filibuster, and who classifies “big” decisions 
• discussing ballot initiatives, referenda, and easy-to-amend constitutions 
• sharing listener letters, egg market notes, and a book recommendation 

Links:
Shruti Rajagopalan on TAITC
The Senate is the Enemy... (claims it comes from "The West Wing," but this is a story that I heard in the 1980s. West Wing just used it. Strange that people think a TV show is a SOURCE. It was just the MEDIUM, people!)
Book-o-da-week:  Benjamin Labatut, THE MANIAC
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 Fan Mail
We test a simple bakery price-fixing pact and watch it unravel, then use that failure to explain how transaction costs shape institutions, from unenforceable contracts to the rise of the corporate trust. We connect the common law doctrine of restraint of trade to the Sherman Act, modern merger fights, and a real-world egg pricing controversy where evidence is hard to untangle from supply shocks.
• a two-baker cartel that collapses as soon as cheating pays
• why courts historically refuse to enforce restraint of trade agreements
• how the trust device unifies control and removes the need to “trust” rivals
• how the Sherman Antitrust Act targets trusts and criminalizes collusion
• why merger discretion creates power and invites rent seeking
• why high prices and parallel pricing are not proof of conspiracy
• how price indexes can reduce transaction costs and also enable coordination
• two antitrust “twedges” that poke at efficiency arguments
• a listener letter on lateness norms and why uncertainty matters
If any listeners have some ideas about it, please do write in.

Links:
Egg producers settle
Bartholomae, T.C. (1923). “The Common Law on Restraint of Trade.” University Journal of Business, 1(4), 451–466.
 Munger, M.C. (2021). “Giants among us: do we need a new antitrust paradigm?” Constitutional Political Economy. https://doi.org/10.1007/s10602-021-09350-w
Sherman Antitrust Act (1890)
William Baxter Joke 
Robert Bork, Antitrust Paradox
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 Fan Mail
We start with a simple mystery: how the same person can make a proud plan at night and break it in the morning, even while still believing the plan is good. We connect akrasia, free will, and moral responsibility to transaction costs, treating self-control as a contracting problem between competing versions of ourselves. 
• Jordan I and Jordan II as a model of divided preferences over time 
• Hard determinism, libertarian free will, and compatibilism as the main philosophical map 
• Responsibility and punishment as social conventions that reduce coordination costs 
• Aristotle on voluntary intoxication and why blame can attach upstream 
• Akrasia defined as wanting to want the right thing 
• Plato’s knowledge-based denial of akrasia versus Aristotle’s acceptance of weakness of will 
• Paul and Augustine on the internal conflict of the will 
• Time-inconsistent preferences and hyperbolic discounting as a behavioral explanation 
• Commitment devices as credible commitments and transaction cost engineering 
• Odysseus and the sirens as the classic precommitment story 
• Listener letter on military punctuality as costly signaling and institutional discipline 
• Listener letter on recycling labels as regulation creating new transaction costs 

Links and Sources
1. Ainslie, G. (1992). Picoeconomics: The strategic interaction of successive motivational states within the person. Cambridge University Press.  Link: Cambridge University Press — Picoeconomics
2. Aristotle. (1999). Nicomachean ethics (W. D. Ross, Trans.). Batoche Books. (Original work published ca. 350 B.C.E.)  Passage: Book VII (on incontinence/akrasia). Link: Nicomachean Ethics, trans. W. D. Ross (free PDF)
3. Augustine. (1838). The confessions of Saint Augustine (E. B. Pusey, Trans.). John Henry Parker. (Original work written ca. 397–400 C.E.)  Passage: Book VIII, Chapters 8–9 (§§20–21). Link: Confessions, Book VIII, Pusey translation (free full text)
4. Davidson, D. (1970). How is weakness of the will possible? In J. Feinberg (Ed.), Moral concepts (pp. 93–113). Oxford University Press. Link: Oxford Academic — "How Is Weakness of the Will Possible?" (in Essays on Actions and Events) (gated — subscription/institutional access)
5. Dennett, D. C. (1984). Elbow room: The varieties of free will worth wanting. MIT Press. Link: MIT Press — Elbow Room (gated — purchase; excerpts free)
6. Dennett, D. C. (2003). Freedom evolves. Viking.  Link: Internet Archive — Freedom Evolves (gated — free with Internet Archive lending account)
7. Hume, D. (1999). An enquiry concerning human understanding (T. L. Beauchamp, Ed.). Oxford University Press. (Original work published 1748) Passage: Section VIII, "Of Liberty and Necessity." Link: Hume Texts Online — Section 8 (free full text)
8. King James Bible. (2017). King James Bible Online. https://www.kingjamesbibleonline.org/ (Original work published 1769) Passage: Romans 7. Link: Romans, Chapter 7 (KJV) (free full text)
9. Plato. (1967). Protagoras (W. R. M. Lamb, Trans.). Harvard University Press. (Original work published ca. 380 B.C.E.)  Link: Perseus Digital Library — Protagoras (Lamb trans.) (free full text)
10. Schelling, T. C. (1984). The intimate contest for self-command. In Choice and consequence: Perspectives of an errant economist. Harvard University Press.  Link: National Affairs — "The Intimate Contest for Self-Command" (original 1980 essay, free full text) · Harvard University Press — Choice and Consequence (book page, gated)
11. Strawson, P. F. (1962). Freedom and resentment. Proceedings of the British Academy, 48, 1–25. Link: The British Academy — Freedom and Resentment (official publisher page, may be gated)
12. Vaihinger, H. (1925). The philosophy of 'as if': A system of the theoretical, practical and religious fictions of mankind (C. K. Ogden, Trans.). Harcourt, Brace. (Original work published 1911)
Link: Internet Archive — The Philosophy of 'As If' (free full text)
Book-o-da-Week:  Emily Wilson’s translation of Homer’s THE ODYSSEY, 2018, WW Norton. 
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

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We trace a straight line from a 1697 blasphemy execution to modern cancel culture by focusing on one variable: the cost of turning speech into coordinated punishment. We break down how social media creates common knowledge at near-zero cost, making outrage faster, bigger, and harder to control. 
• Thomas Aikenhead’s case as a story about information and enforcement costs 
• Transaction costs as the hidden limiter on persecution and social punishment 
• The First Amendment limiting state coercion while leaving private sanctions intact 
• Social media as a collapse in the cost of broadcasting accusations 
• Common knowledge as the trigger for coordinated action by strangers 
• Justine Sacco as the early template for modern cancellation dynamics 
• Brendan Eich, Emmanuel Cafferty, James Damore, and PyCon “donglegate” as repeating patterns 
• John Cleese on offense and the urge to control others’ behavior 
• Listener letters on healthcare markets, consolidation, and transaction costs 
• Certificate of need laws and price systems that shape competition

Amy Poehler's super bowl ad (Dongle!):
John Cleese on cancel culture
Letters:
Dr. Anthony Digiorgio, UCSF, Graphic Novel Claim Denied, Off Label Ideas
Surgery Center of Oklahoma
Book-o-da-week:
Steven Pinker’s When Everyone Knows That Everyone Knows . . .: Common Knowledge and the Mysteries of Money, Power, and Everyday Life  Scribner, 2025. 
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