The Answer Is Transaction Costs

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A NOTE OF APOLOGY:  I uploaded the raw audio, rather than the podcast.  So the first of you who listened heard the raw version, where there was some random stuff at the beginning. Sorry to waste your time!  Fixed now. 
We talk with economist Karl Whelan about how sportsbooks actually set odds, why the “balanced book” story falls apart, and how modern betting products are engineered to raise margins. We also trace how regulation, transaction costs, and prediction markets like Kalshi are reshaping sports gambling in the US and abroad. 
• Karl’s path from macroeconomics and central banking to sports betting research and writing 
• COVID soccer without crowds as a natural experiment on home advantage and bookmaker pricing 
• gambling morality through freedom, addiction risk, and second-order preferences 
• why bans fail and why targeted friction and consumer protection can work better 
• gambling versus investing and where derivatives and event contracts fit 
• UK legalization, US prohibition history, PASPA, and the post-2018 state-by-state scramble 
• why US markets often lack price competition and how lobbying and licensing shape outcomes 
• what a sportsbook is and why firms price for profit not for perfectly balanced action 
• how minus 110 differs from moneylines, prop bets, parlays, and in-play betting margins 
• sharp bettors, profiling, limits, and the transaction costs of trying to beat legal books 
• prediction markets, betting exchanges, liquidity, interface design, and why most demand is still sports 
• Kalshi, the CFTC, politics and sports contracts, and the state rights conflict heading toward court 

Guest:  Prof. Karl Whelan's home page at UC Dublin
Resources:
TAITC with Kevin Braig
Kevin Braig's book, Bookmakers vs. Ballowners
What is Kalshi? A Beginner's Guide
Are you a "sharp"? If you have to ask, likely no.  Some background
Professional and Amateur Sports Protection Act (PASPA, 1992) 
The Worst Bad Beat:
NFL explains ruling at end of Chargers-Steelers game (NFL.com)
Referee says officials errantly voided Steelers TD (AP via Patriots.com)
Scoring mistake in Steelers-Chargers game costs some bettors big (AP via Honolulu Advertiser)
Steelers beat Chargers in NFL's first 11-10 game (HeraldNet)
Sorry Gamblers: Official Blew Final Call (NBC San Diego / FanHouse)
Book o'da Month:  Fine Margins, by Karl Whelan

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 walk through how Chile converts retirement savings into lifelong income and why inflation protection and competition make the design work. Then politics collides with contract law as COVID-era withdrawals test credible commitment and raise transaction costs across the financial system. 

• how AFP accounts build national savings and deep capital markets 
• why a pension is more than a savings account, especially under longevity risk 
• how the renta vitalicia life annuity works and why it is irrevocable 
• what the UF inflation-indexed unit of account does for long-term contracts 
• programmed withdrawal versus annuities, including inheritance and market exposure 
• how the 2004 electronic quotation system reduces shopping costs and corruption 
• how 2019 unrest and COVID pressures drive the 10% retiro laws 
• why the third retiro for annuitants functions like breaking a sold contract 
• what “credible commitment” means for pensions, insurers, and bond markets 
• how the 2025 reform and a court ruling help restore trust 
• economics jokes, a listener letter on data center side payments, and the book pick

Links:
Assessing Chile's Pension System
Chile makes major changes to pension system

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 how Hebrew goes from a “museum language” to a living vernacular by treating language as a coordination good with huge network effects and real transaction costs. We follow Eliezer Ben-Yehuda’s strategy for lowering those costs, then watch the Technion language fight prove Hebrew can carry science, not just prayer. 
• Hebrew’s revival as a rare case of full language reboot at scale 
• Jewish linguistic diversity and why German, French, Russian, Polish, and Yiddish create coordination barriers 
• Spoken language as a network effect and why “no one wants to go first” 
• Inframarginality and Ben-Yehuda providing a public good as a private mission 
• Hebrew as a neutral focal point that no faction fully “owns” 
• Building missing vocabulary through roots, grammar, and standardization bodies 
• Bootstrapping with a native-speaking child as proof of concept 
• Newspapers as distribution channels that reduce divergence in word choice 
• Backlash from religious authorities and the real enforcement costs of change 
• The 1913 Technikum decision and the Technion language war over German vs Hebrew 
• A listener extension connecting Rawls, insurance, and the veil of ignorance 
• Book recommendation on American founding ideals and proclaiming liberty

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 tell the story of the Chicago dinner where Ronald Coase walks into a hostile room, and by the end everyone votes with him, led by Milton Friedman changing his mind in real time. Along the way, we unpack why transaction costs, not moral blame, often explain when law and institutions shape outcomes. 

• the Aaron Director dinner and the vote that flips 
• why Milton Friedman becomes a political symbol and lightning rod 
• critiques from the right and left on markets, shareholder value, trade, and Chile 
• Pigouvian externalities versus Coase’s reciprocal harm framing 
• the Coase theorem as a benchmark and why real transaction costs make institutions decisive 
• the “twedge” on comparative advantage and the “no free lunch” remix 
• listener question on tax horizons, regime uncertainty, and the permanent income hypothesis 
 
LINKS:
Who's afraid of Milton Friedman (a video)
Milton Friedman Lives (a blog post)
Steve Medema, "What Happened on Blackstone Ave?"
Mary Roach, BONK
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 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