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What if transaction costs could shape entire political and economic systems? Join us for an insightful discussion with Shruti Rajagopalan, a senior research fellow at the Mercatus Center, as she takes us through her fascinating journey from the University of Delhi to George Mason University. Her research on India's economic liberalization shaped her understanding of economics and public choice theory, and now she is looking at the Indian Constitution as a subject of study. She shares how India's socialist elements and frequent amendments navigate the balance between democracy and central planning.

Explore the contrasting worlds of constitutional amendments in the United States and India, where transaction costs play a pivotal role. We unravel the philosophical differences in how these two nations interpret their constitutions, impacting citizens' rights and governance in uniquely distinct ways. Through metaphors like the Ship of Theseus, we evaluate the stability and adaptability of these constitutions, shedding light on how they sustain their respective democratic frameworks amid evolving societal needs.

Adding a dose of humor, we recount a satirical tale of international contractors bidding for a White House fence and explore the complexities of voting systems influenced by transaction costs. The episode takes a reflective turn as we discuss Ulysses S. Grant's memoirs, highlighting themes of personal sacrifice and political intricacies. This conversation promises to enrich your understanding of how economics, law, and political systems intricately intertwine, offering both serious insights and light-hearted moments to ponder.

Links:

Dr. Shruti Rajagopalan's web site at Mercatus and her personal web site
Dr. Rajagopalan's podcast, "Ideas of India" and publications

Book o'da'month: U.S. Grant, Personal Memoirs, Modern Library, 1999.

A note on the TWEJ: Some listeners may find the joke racist. But in fact each of the three stereotypes captures a kind of "excellence," though the three kinds of excellence might not all be equally socially admirable. Gordon Tullock, who was discussed in this episode, made some observations about corruption that are worth keeping in mind: Western nations abhor, or pretend to abhor, corruption, though in fact there is plenty of it in the West. Tullock's point was that, in a nation with dysfunctional institutions, corruption can be efficiency enhancing. Institutions matter. The point is not that Germans are inherently organized and methodical, nor that Mexicans are inherently hard-working and efficient, and certainly not that Indians are all corrupt. But the political and economic systems of those nations create a setting where such actions are "rational," and even expected.  I wrote a piece for Public Choice on Tullock's insight, and the problem of India, and that's why I enjoyed this joke!

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This episode explores the intersection of democracy and capitalism, focusing on the concept of political capitalism and its relation to cronyism. Randall Holcomb discusses transaction costs, charismatic leadership, and critiques the idea that democracy and separation of powers inherently checks coercion, stressing the need for competing elites to foster accountability.

• Transaction costs hinder citizen engagement in political processes
• Political capitalism defined as capitalism influenced by political motives
• Dynamic of cronyism within democratic systems
• Buchanan's notion of "politics as exchange" explored
• Political elites dominant in shaping policy and public preferences
• Charismatic leadership affects political beliefs and decisions
• Importance of competing elites for maintaining a balanced political landscape
• Reasons for optimism surrounding innovation in capitalism despite political challenges
• Upcoming book discusses further aspects of political exchange

Links!

Randy Holcombe's web site at FSU 

• Political Capitalism book
• Following Their Leaders book

Michael Giberson blog post at Knowledge Problem, on Price Gouging.

Book'o'da Month:  Peter Boettke, Rosolino A. Candela and Tegan Lindstrom Truitt, The Socialist Calculation Debate: Theory, History, and Contemporary Relevance   https://www.cambridge.org/core/elements/socialist-calculation-debate/5E63749F9D34D065193DCF77FC9FD8A9

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Curious about how the world of prison economics operates? Get ready to uncover a hidden universe with our guest, David Skarbek, a leading voice in political economy. David takes us on a captivating journey from his early days in construction to his groundbreaking research at George Mason University, where he was inspired to explore the economics of unconventional spaces. His insights reveal the sophisticated systems of governance designed by prison gangs to maintain order and manage illicit economies. Whether you're fascinated by how these groups mimic pirate crews or intrigued by their ability to regulate harm in a high-stakes environment, this episode promises to reshape your understanding of extra-legal cooperation.

David Skarbek, Michael Targoff Professor of Political Economy at Brown University.

David Skarbek's Amazon Author Page

Book'o'da'Month:  Shattered: Inside Hillary Clinton's Doomed Campaign  – Crown Publishers, April 18, 2017. by Jonathan Allen  Amie Parnes.

Club Random: Bill Maher talks to William Shatner

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Todd Zywicky, professor at George Mason's Scalia Law School, challenges some conventional legal doctrine, taking up the views of Bruno Leone and Friedrich Hayek. What if the legal world has underestimated the power of spontaneous order? Todd's intellectual journey sheds light on how these groundbreaking ideas contrast sharply with the dominant constructivist views shaping contemporary legal thought.

Todd offers perspectives on the role of intuition and reasonableness in the courtroom, inspired by the legacies of Leone and Hayek. Uncover the hidden parallels between market dynamics and legal systems, emphasizing the fluidity of Roman law as a process of discovery.

Links:

Todd Zywicki's Faculty Page

Zywicki's published work on Leoni, and the Common Law

• The Rise and Fall of Efficiency in the Common Law: A Supply-Side Analysis, 97 NORTHWESTERN L. REV. 1551 (2003). 
• Common Law and Economic Efficiency (with Edward Stringham), in 7 ENCYCLOPEDIA OF LAW AND ECONOMICS: THE PRODUCTION OF LEGAL RULES (2d ed., Francesco Parisi, ed., 2012). 
• Bruno Leoni's Legacy and Continued Relevance, 30(1) J. OF PRIVATE ENTERPRISE 131-41 (2015).
• Austrian Law and Economics and Efficiency in the Common Law (with Edward Stringham), in RESEARCH HANDBOOK ON AUSTRIAN LAW AND ECONOMICS 192 (Todd J. Zywicki and Peter J. Boettke, eds. 2017). 

The Loper Bright SCOTUS Decision (And the Gorsuch concurrence!)

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Have you ever wondered how common law rules and market prices both "emerge"? Inspired by the works of James Buchanan, F.A. Hayek, and Bruno Leoni, Donald Boudreaux explains how decentralized processes can lead to the emergence of effective norms, such as queuing and speeding rules, without the need for top-down legislation. We discuss the significance of individuals spending their own money versus others' and how these incentives impact societal outcomes, highlighting the deep wisdom embedded in traditionally evolved rules.

We also venture into the nuanced distinction between law and legislation, drawing on insights from Buchanan and Hayek. We elaborate on Buchanan's concept of "relatively absolute absolutes," and on Hayek’s emergence process, emphasizing the continuous generation of information through human action and preferences. Discover the natural process behind the emergence of common law, its role in establishing predictable rules, and the challenges presented by the unpredictable nature of parliamentary law.

Guest: Donald Boudreaux at George Mason University

Some Links: 

• Econtalk, Sept 30, 2024: “The Underrated Bruno Leoni”
• Econtalk, Dec 11, 2006:  "Law and Legislation"
• Michael Munger and Georg Vanberg, 2023, Contractarianism, Constitutionalism, and the Status Quo. Public Choice. 
• Michael Munger, 2023, “The Socialist Generation Debate,” AIER. 
• Quotes from Bruno Leoni on Cafe Hayek (a search, as suggested by Don Boudreaux) 

Book o’da’month: Bruno Leoni, FREEDOM AND THE LAW

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Ever wondered why firms exist in a market-driven economy? This month's episode promises to unravel this question by diving deep into Ronald Coase's seminal 1937 paper, "The Nature of the Firm." Join me, Mike Munger, as I reflect on our first 16 months of podcasting and share the insights and wisdom that have shaped our journey. You'll gain a thorough understanding of how transaction costs influence economic behaviors and organizational structures, with fascinating examples from Richard Langlois' analysis of the American Midwest's agricultural sector before the railroad era.

• Ronald Harry Coase, The Nature of the Firm (1937)
• Michael Munger, Why Bosses Don't Wear Bunny Slippers

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Can high prices during emergencies actually save lives?  Using North Carolina as an example, we dissect the economic and legal implications of these laws, exploring the ambiguities in terms like "unreasonably excessive" and the chilling effect on commerce. Discover how artificially low prices can lead to resource misallocation, discourage stockpiling, and hinder the transportation of vital supplies during crises. Allowing higher prices is, perhaps surprisingly, the only way to get low prices soon. 

Links on Price Gouging:
Videos:

• https://www.youtube.com/watch?v=HFXYO1W_JXw
• https://www.facebook.com/watch/?v=1227582290607127

Articles:

• https://www.econlib.org/library/Columns/y2007/Mungergouging.html
• https://www.aier.org/article/three-undeniable-problems-with-anti-gouging-laws/
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1099567#:~:text=Matt%20Zwolinski,-University%20of%20San&text=Price%20gouging%20occurs%20when%2C%20in,needed%20to%20cover%20increased%20costs.

Book o'da Week:  https://www.simonandschuster.com/books/What-Went-Wrong-with-Capitalism/Ruchir-Sharma/9781668008263

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Are housing regulations making affordable homes a pipe dream? We promise you'll gain a deeper understanding of how transaction costs and regulatory hurdles impede new housing development, frustrating both market responses and the dreams of potential homeowners. We'll explore how the very laws intended to protect affordable housing often backfire, pushing developers toward luxury projects instead.

• Vicki Been; Ingrid Gould Ellen; Katherine O’Regan, 2018. "Supply Skepticism," https://furmancenter.org/research/publication/supply-skepticismnbsp-housing-supply-and-affordability
• Michael Munger, "All Housing is Affordable Housing: Seen and Unseen Edition." AIER. 
• Credit to Biden/Harris: Trying to Make It Legal to Build Housing: https://www.whitehouse.gov/briefing-room/statements-releases/2024/08/13/fact-sheet-biden-harris-administration-takes-new-actions-to-lower-housing-costs-by-cutting-red-tape-to-build-more-housing/
• Building "luxury" housing reduces rents on lower-cost units! https://x.com/jayparsons/status/1823352715852103697
• Javier Milei Got Rid of Rent Control: Housing Supply Skyrocketed!Q  https://www.newsweek.com/javier-milei-rent-control-argentina-us-election-kamala-harris-housing-affordability-1938127

Cans v. Bottles: https://twinmonkeys.net/an-advantage-to-canning-vs-bottling-lower-shipping-costs/#:~:text=Aluminum%20cans%20are%20cheaper%20to,space%20and%20reducing%20packaging%20waste

The Theban Plays: https://www.amazon.com/Sophocles-Oedipus-Colonus-Antigone-Editions/dp/B00HTJUCLW/ref=monarch_sidesheet_title

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What is it that beach parking lots are actually selling? Why do beer bottles cost more than cans? And just what are costs of the thing, as opposed to the costs of selling or buying the thing? Can you really separate them out?

• Mass MOCA: "Wilco's Solid Sound" Music Festival https://massmoca.org/event/solid-sound-2024/
• "To Consumers, ALL Costs are Transaction Costs." AIER, by Michael Munger. https://www.aier.org/article/to-consumers-all-costs-are-transaction-costs/
• Yogi Berra "quotes" (mostly attributed, rather than actual). https://businesscoachingofpa.com/top-100-classic-yogi-berra-quotes/

Book o'da'week: Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age Kindle Edition Michael A. Hiltzik, 2009, Harper-Collins.  https://www.amazon.com/Dealers-Lightning-Xerox-PARC-Computer/dp/0887309895

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You can throw shade, but can you own the idea of shade? Shibumi's sunshade has become an essential part of the coastal landscape, but that has sparked some fierce legal battles. We'll talk patents, beginning with the evolution of shade solutions from caveman ingenuity to Shibumi's wind-powered marvel. Plus, you'll get the inside scoop on the recent lawsuit where Shibumi defended its designs against Beach Shade LLC, demonstrating the high stakes of protecting intellectual property in today's competitive markets.

But the beach isn't the only place optimization matters. Ever wondered the optimal way to board a plane or fund your education? We dive into the secrets behind efficient airline boarding procedures and the real-world challenges that complicate them. Then, we shift to a heated debate on Income Share Agreements (ISAs) versus traditional student loans, exploring their unique benefits and drawbacks. Get ready to question everything you thought you knew about intellectual property as we discuss Boldrin and Levine's controversial views on innovation and competition. 

Links and Resources:

Shibumi:

• Description of Shibumi v. Beach Shade:  https://www.finnegan.com/en/insights/articles/southeast-litigation-update-december-2023.html
• Primary Shibumi Patent, Granted January 2019:  https://portal.unifiedpatents.com/patents/patent/US-10190330-B2
• List of Patents, From Shibumi Web Site:  https://shibumishade.com/pages/patents
• The Assembly--"Shibumi Has Taken Over NC Beaches" https://www.theassemblync.com/business/shibumi-shade-takes-over-north-carolina-beaches/

• ISA's:  https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2022-03-02/income-share-agreements-and-private-education-loan-requirements

• Michele Boldrin on IP, on Econtalk: https://www.econtalk.org/boldrin-on-intellectual-property/ 

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

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Not everyone realizes that the modern financial system has enabled us to end historical practices such as indentured servitude and apprenticeship.  This episode uncovers how financial systems tackled market failures and transaction costs, drawing on insights from Jeffrey Hodgson's "The Wealth of a Nation: Institutional Foundations of English Capitalism." We'll explore the evolution of borrowing against future earnings and how modern financial institutions have streamlined processes that once resembled slavery, fostering the growth of capitalism.

We'll then shift gears to examine Glenn Lowry's groundbreaking views on educational investment, discussed in his book "Late Admissions" and echoed in his 1981 Econometrica paper. Lowry's exploration of intergenerational transfers and parental investments in education reveals significant inefficiencies in the current system, drawing parallels with Michael Hudson's analysis of financial markets. The conversation sheds light on the untapped potential of underprivileged children and the need for better financial instruments to optimize educational funding.

• Geoffrey Hodgson. The Wealth of a Nation: Institutional Foundations of English Capitalism. Princeton University Press.  https://press.princeton.edu/books/hardcover/9780691247014/the-wealth-of-a-nation 
• Glenn Loury, (1981). Intergenerational Transfers and the Distribution of Earnings. Econometrica, 49(4), 843–867. https://doi.org/10.2307/1912506
• What Causes Capitalism? STEPHEN DAVIES. REASON.   https://reason.com/?p=8285302
• Nick Gillespie Interviews Glenn Loury, REASON, https://reason.com/podcast/2024/06/12/glenn-loury-tales-of-sex-drugs-and-capitalism/

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