Trailer for sale or rent... Rooms to let, fifty cents...
By Alice Temnick
What do ancient bazaars, the now defunct Sears catalogue, and amazon.com have in common? Which future platforms will enable us to share, charge for, or rent using our smartphones? In this episode, frequent EconTalker Michael Munger and Russ Roberts cover many examples of the benefits we gain as transactions costs are reduced.
No matter what the question (couch surfing? power tools?), Munger believes the answer is … transactions costs. We hope you enjoyed this discussion and that it ignites your imagine about future innovations. As always, we hope you will continuing the conversation with others offline.
1- What are some (other) things we tend to own that are highly underutilized for which it would make sense to borrow and lend if those transaction costs were reduced? Can you provide an idea not mentioned in the conversation?
2- Related to the question above, how does your idea specifically address what Munger calls the trifecta: transfer, triangulation and trust? (Triangulation is how buyers and sellers find each other, transfer is the delivery and payment, and trust reduces fear of fraud). Why did Ronald Coase avoid a specific definition for transactions costs?
3- Why is host Russ Roberts uncomfortable about a future where we will be identified by a single universal reputation on a blockchain application? Do you agree with Mike Munger that the “privacy ship has sailed?” What other concerns should we have about our algorithmic identity?
4- Adam Smith points out that division of labor is limited by the extent of the market. Will there be a greater and greater gap between urban and rural people as software handles the sharing problem? Why or why not?
5- Munger cites the work of Nobel laureate Eugene Fama who suggests that since non-profits are not equity financed, people are more likely to contribute. To what extent is it a leap to imagine a successful “Be Lovely” app in which we willingly participate to fund local public goods like park lawn mowing? What other type of platform(s) might have the same effect?