All Episodes

June 13, 2025 13 mins
Mike Munger is a professor of political science at Duke University. Much of his teaching and his great podcast, The Answer is Transaction Costs, involves political economy (the intersection of politics and economics) rather than just politics. We'll discuss the nature of bureaucracy.
Mark as Played
Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I'm so pleased to go to not only one of
my favorite guests and people, but if you're an econ
nerd and listen to probably the best economics podcast of
all time, which is Russ Roberts econ Talk. And if
you're not a subscriber, it's free, by the way to
the econ Talk podcast.

Speaker 2 (00:20):
You should be.

Speaker 1 (00:22):
Mike Munger, who is the knower of important things, is
closing in on his fiftieth appearance on econ Talk, and
nobody else is even close. Mike Munger teaches political science,
but I think of it more as political economy because
there's a heck of a lot of economics and the
stuff that he talks about at Duke University and has

(00:42):
his own tremendous podcast that I never ever miss an
episode of called The Answer Is Transaction Costs, And we're
going to talk about some of that now. So Mike,
welcome back. It's good to see you.

Speaker 3 (00:56):
It's a pleasure to see you.

Speaker 1 (00:59):
You're in a different or else you have a different
camera angle because I don't see a unicorn behind you.

Speaker 3 (01:07):
Right, I'm metaphorically in a different place, but we're at
the beach.

Speaker 1 (01:12):
You all right, let me just nerd out with you
for a second. You sent me an email the other
day saying that you live at the beach or in
some town, but you put the word live in quotes.
Can you please explain to me why you put the
word live in quotes.

Speaker 2 (01:29):
It is a metaphor.

Speaker 3 (01:31):
My heart is at the beach no matter where I am,
but right now my butt is there also, and so
we stay at the beach as much as we can.
The beach in North Carolina is tremendous. I realized the
beach in Colorado was also nice, but the beach in.

Speaker 2 (01:47):
North Carolina is just terrific.

Speaker 3 (01:49):
I am doing extensive research on craft beer and crustaceans simultaneously.

Speaker 2 (01:56):
Do they go well together? I'm stuffing beer and bit
into my mouth. Yes, excellent.

Speaker 1 (02:03):
I really enjoyed, Well, I enjoy all your episodes, but
I really enjoyed the last episode of the Answer Is
Transaction Costs, which was a little bit less in the
weeds economically than some recent episodes have been entitled barking cats,
and so who are barking cats? Why are barking cats?

(02:24):
And what are we talking about here?

Speaker 3 (02:27):
We're talking about bureaucracy. And you probably didn't see that coming.
But it's actually a phrase that came from Milton Friedman,
the famous pro market economist, and his claim was actually
backs up also famous economist Ludwig von Misis, who pointed
out that a lot of times we think that all

(02:48):
we need to reform government is better people. And what
a lot of economists have pointed out is there's different
forms of organizing things, and markets sometimes have problems. There
can be real difficulties with markets, but bureaucracies always have

(03:09):
problems because bureaucracies are separated from the profit motive. And
so if I'm a bureaucrat, you come to me with it.
So I suppose I'm a venture capitalist. Let's go to
Silicon Valley. I'm a venture capitalist. You come to me
and you say I have this idea, and I say, damn,
that's a really good idea. I can make money, and
so I give you some of my money, and as

(03:31):
a result, we make this new product. It goes crazy
and all of us make money and I get some
of the reward. Now suppose I go to bureaucrat and
I say I would like to propose this new drug.
The bureaucrat says, hmm, if this works, I get nothing.
But if it goes badly, I get fired. I'm going
to do some more tests. And so bureaucracy, by its nature,

(03:56):
because it's separated from responsibility, if it works, themocrat doesn't benefit.

Speaker 2 (04:01):
And if it goes badly, either they get fired or
nothing happens.

Speaker 3 (04:04):
We build a bridge to nowhere, we build a new
housing project that people don't want to live in. We're
separated from the profit motive. The result is that your burocracy,
by its nature, is going to be more conservative, more slow.
And if anyone, if you think about it, you go
to the Department of Motor Vehicles, that's not what you
think of as being the paragon of efficiency. So what

(04:28):
Friedman said was that if you want to make bureaucracy efficient,
it's like saying, you know, I really want a cat,
except I want one that bark.

Speaker 2 (04:40):
Bureaucracy is not efficient. It can't be.

Speaker 1 (04:43):
Bureaucracy can't be efficient for the same reason that cats
can't bark, because it's it's their nature. So your argument
not just yours. Your argument is it's their nature. Right,
So your argument is not just that that bureaucracies aren't efficient,
it's that they can't be efficient, and I would I

(05:07):
would like you to just talk a little bit about
what I heard you say in the podcast regarding why
you are so unsurprised at the lack of success of
DOZE to get anywhere near their claimed goals.

Speaker 3 (05:27):
What DOGE did was try to make barking cats, and
that that makes sense if you're a business person, you
think I can reform this, and.

Speaker 2 (05:37):
All we have to do is have better people.

Speaker 3 (05:39):
And so from the beginning, and it's not surprising, Elon
Musk is used to we'll fix this and this, we'll
change this, and we'll go on to something else. That's
not the way bureaucracy works. And so when you appoint
an outsider, and that's what Musk was, and you can
call it the Department of Government Efficiency if you want those,

(06:00):
all of those reforms have to go through Congress, and
the spending bills, the amount of budget that an agency has,
all of that has to go through Congress. So there
was no chance from the outset that they were going
to be able to accomplish their goals at dose. But
the point is, even if they had been able to,
if what you thought you were going to do was

(06:21):
just reform the bureaucracy. It wasn't going to work. What
you need to do is have two books in front
of you. One is the Constitution. The Constitution says that
the states have most of the powers to execute public policy.
So education that's a state matter, police power that's a

(06:42):
state matter.

Speaker 2 (06:43):
And yet the.

Speaker 3 (06:44):
Federal government is involved in that. So we're asking the
federal government to do a lot of things the federal
government literally cannot do. The other thing is you need
Milton Friedman's free to choose, is this something that the
government would have to do where good markets provide it.
Those didn't do either of those two things. And because
they didn't do either of those two things, no constitution,

(07:05):
no conception of what marcuts can do, those was doomed
to fail.

Speaker 2 (07:09):
From the outset.

Speaker 1 (07:10):
We're talking with Mike Munger, the Knower of Important Things
from Duke University, and we're talking about the most recent
episode of his fantastic podcast, which during summer when he's
not teaching, is weekly, which is even better because when
he's teaching it's only monthly, so weekly is even better.
It's called the answer is transaction costs. So all right,

(07:31):
let me just get slightly nerdier with you, and I
think listeners will be able to stick with me here.

Speaker 3 (07:36):
So is.

Speaker 2 (07:38):
Saying what you said.

Speaker 1 (07:39):
About bureaucracy and the barking CAATs metaphor and all. Is
that exactly the same thing as Buchanan and public choice
theory or is it just similar or is it more
different than I think.

Speaker 3 (07:56):
It is an aspect of public choice theory. Well, you
can in intellec set was that there are going to
be problems in democracy also, So the two things we
associate with government are bureaucracy and democracy. The third way
of doing things is markets. So markets have certain properties,
there's problems with it. If you vote, and this is

(08:17):
Buchanan Intelleck if you vote, then it means that again
I am not responsible for bad consequences and my vote
doesn't matter, so I may not understand the alternatives very well.

Speaker 2 (08:28):
I'll vote in a way that makes me feel good.

Speaker 3 (08:30):
So that's one problem if we decide things bureaucracy is
we're going to create a bunch of experts who are
insulated from all incentives, and we're going to put them
in charge of carrying out this policy.

Speaker 2 (08:43):
And it's a shame.

Speaker 3 (08:44):
That it has become such almost a metaphor, but certainly
a picture. The Department of Motor Vehicles is there's a
bunch of long lines. The big problem you have with
bureaucracy is so in a market you could raise the price.
In bureaucracy, you want to keep the price really low,
but you have to wait in really long lines as
a consequence. So we cut the budget. We have fewer

(09:06):
people in the bureaucracy, and those did this. Elon Musk
did this just terribly. There are things you have to
get licenses, you have to get driver's licenses, you have
to go through passport customs at the airport. So they
cut a bunch of the people who are responsible, and
now the lines are two or three hours long. So
perversely we imposed an additional tax. And this is thoroughly

(09:31):
public choice. You're right, this is Buganan Intelic and it
is Friedman. It's because the incentives are different in non
market settings. They don't they can't capture any of the
benefits of having shorter lines, and so you have really
long lines at all socialist institutions, whether it's in Russia
or the DMV.

Speaker 1 (09:52):
So again, in your recent podcast episode about barking Cats,
you a point that I really hadn't thought about even
though I should have, and I felt a little dumb
for not having thought about it, and you just touched
on it. But I want to ask you to elaborate
on the concept of DMV or anybody else quote unquote

(10:14):
now providing a service.

Speaker 3 (10:22):
A lot of times economists when they talk about public goods,
they're talking about something like defense, and defense is something
that's hard for markets to provide because I can't charge
you for it. And if we provide national defense, everybody
enjoys it, even if they don't pay.

Speaker 2 (10:37):
And so we use taxes instead.

Speaker 3 (10:40):
The problem with a lot of the services, and I'm
making air quotes, a problem with a lot of the
services government provides is that it's licenses, it's permissions, it's filling.

Speaker 2 (10:53):
Out of forms.

Speaker 3 (10:54):
And those are all services in the sense that there's
a law that says I have to do that or
I can't live my life.

Speaker 2 (11:00):
But that's a pretty artificial service.

Speaker 3 (11:02):
That's not different from the mafia coming to me and saying,
you know, this is a nice house you have here.
It'd be a shame if something was to happen to it. Well,
they're providing me a service. Of not burning it down.
But that's not really a service. So the solution to
having too much bureaucracy is having fewer required permissions. Don't

(11:23):
have so many permits. There's a whole bunch of building permits.
There are all kinds of permissions and things you have
to get filled out if you want to start any
kind of small business.

Speaker 2 (11:36):
Those are not real services, those are artificial.

Speaker 1 (11:39):
I think part of the problem you and I are
up against is that so many people have so little
faith in their fellow man that they are willing to
put up with massive expansions of government in almost every
way to protect themselves against a perceived threat. And of
course the politicians and the bureaucrats always emphasizing the perceived

(12:03):
thread or the perceived risk that somebody is going to
hurt you, or somebody's going to steal from you, or
somebody's going to do something bad, and therefore you have
to wait in this long line or get this document.

Speaker 3 (12:14):
Sure, but let me defend the government for a minute.
So consider the Internal Revenue Service. People saying we should
get rid of the Internal Revenue Service. I don't believe
that we have really complicated tax law. If I have
a question about the tax law. I have to call
the irs. Well, I may have to wait for several
days to get somebody on the phone because we fired

(12:36):
all the people that are supposed to provide this service.
So the government, the bureaucracy that is, is enforcing laws
that are made by the Congress. And so the reason
why this is complicated is we tend to blame the
bureaucracy because the lines are long, But the bureaucracy didn't
make the rules that they're trying to enforce. They're just

(12:57):
law enforcement. They're just doing their job. The real problem
is Congress. And until the voters start to tell Congress
that we need fewer laws, you can't blame the bureau
drafts that are just trying to do their job enforcing
the law.

Speaker 2 (13:10):
They don't get to make the law.

Speaker 1 (13:13):
Gosh, I wish Mike Munger had been a professor of
mine when I was in college, but I'm way too
old for that. Mike Munger teaches at Duke University. If
you've got a kid thinking of going to college and
studying politics or political economy, get him over to Duke
before Mike retires. Mike's a fantastic podcast is called The
answer is transaction costs. Mike Munger, thanks for making time

(13:35):
for us. You can go get your butt back on
the beach and eat some shrimp now.

Speaker 2 (13:40):
Thanks very much. I appreciate it, great to talk.

Speaker 1 (13:42):
Yeah you too, Mike, Thank you all right. Gosh, that
guy is the best. Just love that guy.

The Ross Kaminsky Show News

Advertise With Us

Popular Podcasts

On Purpose with Jay Shetty

On Purpose with Jay Shetty

I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!

Crime Junkie

Crime Junkie

Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.

Ridiculous History

Ridiculous History

History is beautiful, brutal and, often, ridiculous. Join Ben Bowlin and Noel Brown as they dive into some of the weirdest stories from across the span of human civilization in Ridiculous History, a podcast by iHeartRadio.

Music, radio and podcasts, all free. Listen online or download the iHeart App.

Connect

© 2025 iHeartMedia, Inc.