The Riddle is Transaction Costs: That's What the Money is For!

The Answer Is Transaction Costs

Can a single $100 bill solve an entire town's debt crisis? This riddle is a window into transaction costs. I rely on Jeffrey Rogers Hummel's insights, adding a few thoughts of my own.
And a cool letter: Ever wondered why you haggle for a car but not for your morning Starbucks's coffee?
Plus, a book recommendation: Nobel Prize-winning economist Edmund Phelps' "My Journeys in Economic Theory," a compelling read that blends economic insights with political theory.
Links:

• David Henderson gives a statement of "the riddle"
• J.R. Hummel's web site
• Similar story, from LvMI

Haggling:
Sebastian Schweighofer-Kodritsch, "The Bargaining Trap," Games and Economic Behavior, November 2022, v. 136, pp. 249-54.

Book recommendation:

• Edmund Phelps, My Journeys in Economic Theory. Columbia University Press. https://cup.columbia.edu/book/my-journeys-in-economic-theory/9780231207300

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

You can follow Mike Munger on Twitter at @mungowitz

Chapters

1. Riddle of Debt and Transaction Costs (00:00:00)

2. Haggling and Transaction Cost (00:10:49)