Contracting with Yourself: Akrasia and Transaction Costs

We start with a simple mystery: how the same person can make a proud plan at night and break it in the morning, even while still believing the plan is good. We connect akrasia, free will, and moral responsibility to transaction costs, treating self-control as a contracting problem between competing versions of ourselves. 
• Jordan I and Jordan II as a model of divided preferences over time 
• Hard determinism, libertarian free will, and compatibilism as the main philosophical map 
• Responsibility and punishment as social conventions that reduce coordination costs 
• Aristotle on voluntary intoxication and why blame can attach upstream 
• Akrasia defined as wanting to want the right thing 
• Plato’s knowledge-based denial of akrasia versus Aristotle’s acceptance of weakness of will 
• Paul and Augustine on the internal conflict of the will 
• Time-inconsistent preferences and hyperbolic discounting as a behavioral explanation 
• Commitment devices as credible commitments and transaction cost engineering 
• Odysseus and the sirens as the classic precommitment story 
• Listener letter on military punctuality as costly signaling and institutional discipline 
• Listener letter on recycling labels as regulation creating new transaction costs 

Links and Sources

1. Ainslie, G. (1992). Picoeconomics: The strategic interaction of successive motivational states within the person. Cambridge University Press.  Link: Cambridge University Press — Picoeconomics

2. Aristotle. (1999). Nicomachean ethics (W. D. Ross, Trans.). Batoche Books. (Original work published ca. 350 B.C.E.)  Passage: Book VII (on incontinence/akrasia). Link: Nicomachean Ethics, trans. W. D. Ross (free PDF)

3. Augustine. (1838). The confessions of Saint Augustine (E. B. Pusey, Trans.). John Henry Parker. (Original work written ca. 397–400 C.E.)  Passage: Book VIII, Chapters 8–9 (§§20–21). Link: Confessions, Book VIII, Pusey translation (free full text)

4. Davidson, D. (1970). How is weakness of the will possible? In J. Feinberg (Ed.), Moral concepts (pp. 93–113). Oxford University Press. Link: Oxford Academic — "How Is Weakness of the Will Possible?" (in Essays on Actions and Events) (gated — subscription/institutional access)

5. Dennett, D. C. (1984). Elbow room: The varieties of free will worth wanting. MIT Press. Link: MIT Press — Elbow Room (gated — purchase; excerpts free)

6. Dennett, D. C. (2003). Freedom evolves. Viking.  Link: Internet Archive — Freedom Evolves (gated — free with Internet Archive lending account)

7. Hume, D. (1999). An enquiry concerning human understanding (T. L. Beauchamp, Ed.). Oxford University Press. (Original work published 1748) Passage: Section VIII, "Of Liberty and Necessity." Link: Hume Texts Online — Section 8 (free full text)

8. King James Bible. (2017). King James Bible Online. https://www.kingjamesbibleonline.org/ (Original work published 1769) Passage: Romans 7. Link: Romans, Chapter 7 (KJV) (free full text)

9. Plato. (1967). Protagoras (W. R. M. Lamb, Trans.). Harvard University Press. (Original work published ca. 380 B.C.E.)  Link: Perseus Digital Library — Protagoras (Lamb trans.) (free full text)

10. Schelling, T. C. (1984). The intimate contest for self-command. In Choice and consequence: Perspectives of an errant economist. Harvard University Press.  Link: National Affairs — "The Intimate Contest for Self-Command" (original 1980 essay, free full text) · Harvard University Press — Choice and Consequence (book page, gated)

11. Strawson, P. F. (1962). Freedom and resentment. Proceedings of the British Academy, 48, 1–25. Link: The British Academy — Freedom and Resentment (official publisher page, may be gated)

12. Vaihinger, H. (1925). The philosophy of 'as if': A system of the theoretical, practical and religious fictions of mankind (C. K. Ogden, Trans.). Harcourt, Brace. (Original work published 1911)

Link: Internet Archive — The Philosophy of 'As If' (free full text)

Book-o-da-Week:  Emily Wilson’s translation of Homer’s THE ODYSSEY, 2018, WW Norton. 

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 

Transcript

Jordan I vs Jordan II

Michael Munger 0:01

This is Mike Munger, the knower of important things from Duke University. Last night, Jordan set the alarm for 545 AM so they could run. Had the shoes laid out by the door. Jordan went asleep being proud of the sort of person who gets up and runs at 545 AM. We'll call that person Jordan one. This morning, the alarm went off and a different person woke up. That person did not want to run. That person wanted eleven more minutes, and eleven more minutes after that. That person kept hitting the snooze. We'll call that person Jordan II. The puzzle is both of those people are actually Jordan. Nobody swapped Jordan's body in the night. They didn't lose a bet, get hypnotized. Jordan II just wanted something different from what Jordan I wanted. And Jordan II won because Jordan II got to decide. The difficulty is that even Jordan II wanted to want to run. Jordan II believes running is healthy and useful. But in spite of Jordan I wanting to run, and Jordan II wanting to want to run, Jordan II hit the snooze button until they not only didn't run, but they were almost late for work. Greeks had a word for this. They called it acrossia. Knowing the right thing but lacking the moral will to do that thing. You act against your own better judgment, and it's not a minor psychological quirk. It sits on top of one of the oldest unresolved problems in philosophy. Whether you're really free at all, and if you are, what exactly is it that's supposed to be free when even you don't do what you want? Today free will, the ancient argument about why anyone would knowingly do the wrong thing, and because this is that kind of show, why the whole mess turns out to be a transaction cost problem, specifically a problem with contracting with someone else, who inconveniently is also you. Straight out of Creedmoor, this is Tidy C.

SPEAKER_02 2:14

I thought they talk about a system where there were no transaction costs. It's an imaginary system. There always are transaction costs.

SPEAKER_01 2:23

When it is costly to transact, institutions matter. And it is costly to transact.

Three Maps Of Free Will

Michael Munger 2:35

The philosophical problem of free will isn't really about whether you can move your arm if you want to. It's about whether you're wanting anything that was ever really up to you. Every choice you make seems to have a prior cause, your genes, your upbringing, the argument you had at breakfast, the state of your blood sugar. If every choice is the output of some prior state of the universe plus laws of physics, in what sense did you, as opposed to that chain of causes running through you, do anything? Three broad positions have organized this debate for centuries, and it's worth having the map drawn so you can envision the terrain. Oh, and by the way, maps, one of the greatest solution to transaction cost in all of human history. Well, the three ways of thinking about free will. First is hard determinism. Hard determinism says the causal chain is unbroken and free will in any robust sense is an illusion. You feel like you're choosing, you're actually just watching neurons execute a program written by prior causes you didn't select. You're a meat puppet, inhabited by a brain that's also meat. There's no mind body dualism, no ghost in the machine, it's just electrical impulses running through liquids. Second is libertarian free will. And here philosophers are using libertarian in the metaphysical sense, nothing to do with politics. That says no, somewhere in the chain there's genuine uncaused origination. You are, in some meaningful sense, an uncaused cause. This is philosophically expensive. It has to explain how a choice can be yours and not simply random. Uncaused sounds like a lot like arbitrary. And though we won't talk about random, random's a difficult thing, generally. It's very difficult to produce a random number, for example, and for exactly the same reason that randomness in your action or free will in your action is complex. To be truly uncaused, not the result of any prior condition, is a really hard condition to sustain. Well, the third position is compatibilism, the position that many working philosophers actually hold, and that says the whole framing is a trick or at least a waste of time. Freedom was never about escaping causation, it's about the kind of causation that's running the show. If your action flows from your own desires, reasoning, and value, rather than from a gun to your head, a tumor in your brain, or something that happened seven hundred years ago when a butterfly flapped its wings, that's really all that free has ever meant, determinism or no determinism. David Hume made a version of this argument in the seventeen forties. Liberty for Hume just meant acting according to the determinations of your own will. The alternative to that kind of liberty isn't some grander metaphysical freedom, it's constraint. Now I have to admit I've never been all that interested in this debate. The cause for free, true libertarian will is just implausible. But in terms of how we live our lives, we have to act as if, all in capital letters, as if. And to reward and punish those actions as if those people had made free and independent choices. Of course, the social decision to reward and punish becomes precisely part of the matrix of forces that determine how people act. I'd like to drive really fast, but I can't, because I'll be arrested or face a huge fine. So do I decide freely not to drive really fast? Notice that that's both a political and a metaphysical question. Now, if I'm drunk and then drive, I may start driving really fast, but I'm not even aware that I'm driving super fast because I'm drunk, so I didn't choose it. But I did choose to get drunk, or did I? Even if I'm an alcoholic, did I really choose? Or was that just the addiction operating the meat puppet? A compulsion? Well, society has to adopt the convention that I chose to get drunk and therefore can be punished for speeding while drunk.

Responsibility As A Useful Fiction

Michael Munger 7:06

Free will and moral responsibility are social conventions we adopt as a way of managing social transaction cost, regardless of what's metaphysically true about determinism. A clearer version of this is P. F. Strawson's Freedom and Resentment book in 1962. He argues we hold people responsible because we have reactive attitudes, resentment, gratitude, indignation, that are hardwired into human social life, and these attitudes actually don't wait on the outcome of the free will debate. In other words, the need to treat people as if they had free will is built into human brain architecture because it aids group selection and evolution. Is that pretty cool? It's biologically determined that we have to act as if we and others have free will, so we can blame people. Daniel Bennett, in Elbow Room and Freedom Evolves, pushes a similar compatibilist line. The free will worth wanting is a functional social kind of freedom. Holding people accountable is justified by what it does. It deters, it expresses values, stabilizes cooperation, not by proving libertarian free will exists for the metaphysicians. Hans Weinger's philosophy of as if is the most explicit ancestor of the claim that I made. His whole thesis is that many of our most important concepts, free will very much included, are just useful fictions we act on for practical purposes, whether or not they're literally true. Honestly, people who want to argue the libertarian metaphysics or the determinist metaphysics are just boring. You people are never going to get dates or reproduce. So frankly, you're just biological bit dead ends. The as if position solves everything. And we can go on to talk about something interesting, like transaction costs. That's how you get dates, people.

Drunk Choices And Upstream Blame

Michael Munger 9:08

The drunkenness example explicitly is ancient. Aristotle got there first in the Nicobegean Ethics. In Book three, he asks if a man is drunk and does something wrong while too impaired to reason properly, is he responsible? Aristotle's answer is yes, because that man was responsible for getting drunk. The act was voluntary in its origin, even if the specific harmful act in the moment wasn't something he could have chosen against. Aristotle even cites the lawgiver Piticus, who imposed double penalties for crimes committed while drunk precisely because the drunkenness itself was self-inflicted and therefore doesn't excuse the action. This got formalized in later legal philosophy as the doctrine of Actio libera in causa, a free act in its cause, used heavily in German and other continental criminal law theory and invoked sometimes in Anglo American law. Voluntary intoxication generally isn't a defense to reckless endangerment type crimes exactly on this reasoning. The idea is responsibility attaches at the upstream choice point, the moment you were free, the last moment you were free. If at that point you make a choice, and the consequence of that choice was plausibly, reasonably, the action that you later took, although didn't intend, you are guilty, even though by the time of the harmful act itself you were not in a deliberative state where you were free to choose. This connects to a broader point that some philosophers and legal theorists make. For example, H. L. A. Hart in his book Punishment and Responsibility in 1968. Later it was reflected also in people like Manuel Vargas' revisionist compatibilism. They claim even a hard determinist has to concede that a functioning legal and social system requires treating people, all in caps, as if their choices are theirs. Deterrence, dessert-based punishment, contracts, promises, blame, praise, all those things presuppose it. Vargas explicitly argues that responsibility talk should be justified by its consequences. He calls that a quasi-fictionalist or pragmatic defense, rather than by first winning the metaphysical argument. What that all means is that is that the transaction cost of having a society that denies free will and moral responsibility are just too high, even if that position is in some sense metaphysically correct.

Akrasia From Plato To Aristotle

Michael Munger 11:51

Now, a Cracia is a very interesting, complicating factor, and really the key aspect of transaction cost when it comes to the example of Jordan I and Jordan II from the opening. At any given moment you don't have one will. You have several, and they disagree. The one that wins isn't always the one that you want to win. The term comes from ancient Greek. Ah, A is without or negation, plus kratos, power or mastery. Literally a lack of self-mastery. The person who put the problem on the table characteristically was Socrates, well, actually Plato. And uh Plato had Socrates deny that the problem existed at all. So if we put the A in front of a Greek word, it's a common Greek construction. For example, if we have aporea, that's a not negation, and poros, passage, forward, way through, or resource. So for Socrates, if we reach an impasse in a Socratic conversation, we have no poros, no way out, or at an impasse. That was the state of aporea, perplexity. We're not sure what to do next. Well, akrasia, or in Greek, akrasia, is having no mastery, an insufficient moral will to do the thing that we know is right, or the thing that we want to want to do. Notice it's not what we want to do, that's the problem. It's what we want to want to do. Jordan wanted to want to go for a pre-dawn run. Jordan I could try to lock in that choice by setting the alarm. Jordan II didn't have the moral will to get up and get dressed, even though Jordan II, suppose, wanted to have that will. In Plato's Protagoras, Socrates argues that no one does wrong knowingly. If you truly fully understood that eating those tallow fried palm frites was worse for you than the alternative, really understood it and weighed it accurately, you simply could not choose the French fries. What looks like knowing the right thing and doing the wrong thing is, on this view, always a failure of knowledge in disguise. Virtue for Socrates, then, really is just knowledge. Get the knowledge right, and the will will always take care of itself. Well, that's a nice theory, and almost everyone's lived experience tells you that it's just wrong. I think it's an example of the true Scotsman fallacy, where the arguer is trying to define true knowledge in terms of an outcome that the arguer desires. So it's a way of winning the argument just by giving right by insisting on a definition, which is question begging. Aristotle disagreed. Aristotle thought that knowledge means that right action theory could still fail. In book seven of the Nicomachean Ethics, Aristotle takes acracia seriously as its own category, distinct from simple vice. The vicious person has bad values all the way down. He does wrong, feels just fine because his standards endorse what he's doing. The acrotic person is different. He retains the correct judgment right up until the moment of action, and then acts against it anyway, typically feels bad afterward. Aristotle compares him to someone reciting lines from a play or to a drunk person mouthing philosophical doctrines. They have the knowledge, but in some sense it isn't operative as a motivation. Well, this matters enormously for how we think about willpower today. Aristotle was locating the failure not in ignorance, but in something like timing, knowledge present in general but absent from the specific moment of choice, when appetite is loud and close, and the reasoned judgment is quiet and abstract, just giving you the side eye, shaking its head and looking disappointed. In the New Testament, Paul's letter to the Romans, we see one of the most quoted description of Acrasia in Western tradition, the complaint that he does not do the good he wants to do, but instead the very thing he does not want to do. So it's in chapter seven. And it's pretty similar to the French fry problem, a divided self, an endorsed preference that loses to an unendorsed one, but in real time. So what Paul says in Romans seven, uh fifteen first, for that which I do I allow not, for what I would, that do I not, but what I hate that I do. And then in verse nineteen, for the good that I would, I do not, but the evil which I would not, that I do. That's verse nineteen. Augustine of Hippo, perhaps most famously in his confessions, in Book eight, chapter nine. Whence is this monstrousness, and to what end? The mind commands the body, and it obeys instantly. The mind commands itself and is resisted. Earlier in the same chapter, Augustine said in section twenty, some more direct restatement of the occasia problem. For in these things the ability was one with the will, and the will was to do, and yet it was not done. More easily did my body obey the weakest willing of my soul, than the soul obeyed itself to accomplish in the will alone this its momentous will. So again, that's from Book eight, chapters eight and nine of the eighteen thirty eight Puse translation. Well, this is one of the core claims of Augustinian theology and his answer to Pelagianism. Even if we do know what righteous action is and we know God's will, we lack the moral will to act as we know that we should. God's grace, for Augustine, is required to give us this moral will. Augustine thought that occursia was the essence of the fallen condition of man. No righteous action was possible, where Pelagius believed in free will, and Augustine spent quite a bit of the second half of his life in northern Africa arguing with and fighting with Pelagians. By

Hyperbolic Discounting And Two Selves

Michael Munger 18:37

the late 20th century, economists had picked up a version of this problem and they gave it a name, Time Inconsistent Preferences. George Ainsley's work on hyperbolic discounting showed that if the value you place on a reward shrinks hyperbolically as it's delayed, you get exactly the acratic pattern as a mathematical inevitability. From a distance, the healthy choice always wins in your preference ranking. But closer in time, as the tempting option becomes immediate, the curves cross, and the tempting but bad option wins instead. This is a stable, predictable feature of how humans and pigeons and rats in the same experiments discount the future. Jordan I liked the idea of running in the future. Jordan II decided not to run, at least not right now. The difference between the two was the proximity of the running. So if you have two selves, we'll call them planning self, Jordan I, who sets the alarm at night, and executing self, Jordan II, who hits news in the morning, then how do I stop being acratic is structurally identical to a question we ask constantly in economics. How do two parties with different interests who can't perfectly monitor or enforce agreements against each other get to a deal that sticks and makes both better off? Jordan I and Jordan II have to negotiate a contract and enforce it. That's obviously a transaction cost problem. Thinking about it that way turns a moral failing, gosh, I have no willpower, into an engineering problem with known categories of solution. How can I make a credible commitment? It's a standard contracting problem. Consider what Thomas Schelling did with this. Schelling took game theory, a toolkit built for analyzing conflict between separate people, and pointed it at the conflict between a person and the future version of that person, describing it as an intimate contest for self-command. Now, the contest is entirely internal, but it has the structure of a negotiation, complete with threats, commitments, and strategic moves. Person who wants to quit smoking makes a bet with a friend that costs real money if they smoke again. Dieter buys food in small packages, so the friction of going of getting the food makes more overeating slightly harder. Obviously, you're raising the transaction cost because raising the price of doing something makes it less likely that you'll do it, and it reminds you that you're trying to quit. Now, why is any of this necessary? Because the two selves can't write and enforce an ordinary contract. Planning self's preferences aren't directly observable or enforceable by executing self. There's no court you can sue yourself in. So exactly as Ronald Coase would predict, when the cost of a straightforward transaction is high, the parties look for alternative institutional arrangements that route around the missing enforcement mechanism. When

Commitment Devices And Odysseus

Michael Munger 21:50

transactions cost are high, institutions matter, and transaction costs are high. So that's what a commitment device is a transaction cost reducing. Institution for a negotiation between two temporal versions of the same person. One of the oldest examples of this in Western literature is Odysseus and his uh ship sailing past the sirens. Now, Odysseus knows that the siren song will be irresistible once he's close enough. His future self is going to have preferences wildly different from his present self's. The future self was going to act on those. So Odysseus I anticipates that and doesn't try to reason with Odysseus II. Odysseus II is not going to be reasonable. Odysseus I imposes a contract, raising the transaction cost of defection. The goddess Kirky told Odysseus that he would come to the island of the sirens. Let me read an extended passage from the Odyssey. This is the goddess Kirky speaking. First to the sirens ye shall come, that taint of minds of all men whom they can acquaint with their attractions. Whomsoever shall for want of knowledge move, but hear the call of any siren, he will so despise both wife and children, for their sorceries that never home turns his affection stream, nor they take joy in him, nor he in them. The sirens will so soften with their song, shrill and insensual appetite so strong, his loose affections that he gives them head, and then observe, they sit amidst a mead, and round about it runs a hedge or wall of dead men's bones, their withered skins and all hung all about it, and these men were such as they had fawned into their fen, and then their skin hung on their hedge of bones. Sail by them, therefore, thy companions, beforehand causing to stop every ear with sweet, soft wax, so close that none may hear a note of all their charmings. Yet may you, if you affect it, open ear aloud to try their motion, but presume not so to trust your judgment. When your senses go so loose about you, but give straight command to all your men to bind you foot and hand sure to the mast, that you may safe approve how strong in instigation to their love their rapting tunes are. If so much they move that spite of all your reason your will stands to be enfranchised both of feet and hands, charge all your men before to slight your charge, and rest so far from fearing to enlarge, that much more sure they bind you. So Kirky is saying that the answer is transaction costs. She told Odysseus to do three things. First, have your men stop up all their ears with wax so they can't hear. Second, don't stop up your own ears with axe, but tell the men to bind you tightly to the mast. Third, tell your men that when you beg and scream and order them to untie you, not only should they ignore your orders, but they should tie you even more tightly and then recheck the knots. So that means that Odysseus has to order his men to disobey his orders because he knows that in the future he's going to say, Oh, come on, guys, untie me. Those sirens are so hot. Come on. So Odysseus I is not trusting Odysseus II's judgment, because Odysseus knows he's Acratic. But occrasia is no excuse. You can plan for that. Odysseus disables his own flawed judgment, uses the crew as a third-party enforcement mechanism because self-enforcement in that state has a reliability of zero. Modern commitment devices run the same logic with better technology. Lock your phone away, have apps that make you forfeit money to a cause you hate if you miss a goal. Automatic escalation retirement savings that pre-commit future raises before you ever even see the money so that you can waste it. Telling other people your goal because social embarrassment is a cheap and effective enforcement mechanism against your future self-renegging. This is where free will comes back in because it tells us something about what a self even is institutionally. A firm, in COSA's framing, exists because it's cheaper to organize certain transactions inside a hierarchy than to negotiate them fresh in the market every time. Maybe a stable, willpower exercising self is doing something similar. An institution for economizing on the transaction cost of constant renegotiation between our own competing time-indexed preferences. When acresia wins, that's not proof that you have no self or no will. It's evidence that the internal governance structure broke down and the negotiation reverted to spot market chaos, decided by whichever preference happened to be loudest when the market cleared. Compatibilist Free Will said freedom was acting on your own desires and reasoning rather than external compulsion. The transaction cost lens adds a wrinkle that's worth thinking about. The self whose desires you're supposedly acting on isn't one making one demand. It's a long-running partnership between temporally distinct parties with divergent interests. And willpower is really just a good contract designed between them, while occursia is government failure, not a metaphysical one. Whoa,

Jokes Then Listener Letters

Michael Munger 27:55

that sound means it's time for the twedge. Two hard determinists walked into a bar because of course they did. What's the difference between a metaphysician and a large pizza? Well, a large pizza can feed a family of four. Three canine libertarian metaphysicians are having a meeting. The first dog says, So we all agree we have free will. Another dog says, unless there are treats, bacon treats. And the third dog says, Well, yes, obviously, unless there are bacon treats. I got a couple of letters. First letter I thoroughly enjoy Tidy C and your guest appearances on Econ Talk. Keep it up. You always find a way to illustrate that the answer truly is transaction cost. Institutions construct cultural norms and coordination measures to counter the tendency for people to be late. These norms and measures are costly to all involved. In the Army, we have a saying, if you're five minutes early, you're ten minutes late. Thus everyone is early, which actually reduces productivity. Everyone could be working for those 15 minutes. Senior Army officials have a staff of free, three, and sometimes maybe six or seven people, whose sole job it is to manage their officials' calendar and ensure that he or she is on time to meetings and appointments. Commanders often direct an organizational morale and fitness run. That is, they direct that all soldiers be in formation at 0630 to run together for four or five miles. The commander sergeant major directs that all major subunits be present, present and standing in formation by 0600. You can't be late for the commander, it's disrespectful. The next subordinate leader directs his or her soldiers to be present at 0530. Can't be late for the command, sergeant major. That actually continues down the line to the most junior sergeant, who directs the three soldiers under his charge to be present for accountability at 0430. The end result is that soldiers stand around for two hours waiting to run four or five miles. But nobody's late for the 0630 morale run. You may think that this illustration is hyperbole, but I can assure you it is not. MD Well, thanks, MD. And it is I think there's two things going on here. One is that your the institution is trying to get people to recognize that their individuality is secondary to the purposes of the collective. And for a military unit, even I think that's just fine because we have to be able to act as a unit. If you have a company that is uh dug in and is facing an assault from a uh regiment scale enemy, it makes sense for individuals to just take off and run. There's reserves behind us, I can save my life, but that means that the other people in my unit are going to die. We don't want people taking off and running. And so it is a costly signal. Someone who objects, someone who's always late, is the sort of person that might take off running if they get attacked by a superior force. And all they have to do is hold on for a few minutes and the reserves will be up. So the I I think there's there's an important signaling aspect to this. Not so much that you want people to waste time as you want to find out the people that are so upset by the idea of this costly signal that they bail out because they may also bail out in situations where it matters more. But the result is, sure, that you end up wasting a lot of time. The other thing is that just inculcating the idea that being on time or early is a help is a pretty big advantage in later life. Um, I find that I often arrive exactly on time for an appointment, and other people, because they know that I will be on time because I'm obsessed with being on time, they will show up at the at the same time. And often I have gotten out of an Uber at the same time that someone else walked up to a restaurant. And so neither of us wasted any time. So developing this as a habit when people are young, and notice that this hierarchy goes down pretty quickly. The senior officer is older and more experienced. Everybody below that's probably under 30. And so developing that as a young person is one of the reason why military service probably makes people more valuable in the workplace. But thank you, MD, for that letter. Letter

Recycling Labels And Regulatory Incentives

Michael Munger 32:40

two. I thought you would be interested in this empirical example of rent seeking creating transaction cost in the guise of attempting to reduce other worst costs, manifesting as a tragedy of the commons. California passed Senate Bill three hundred forty-three in twenty twenty four to take effect this October, that is, twenty twenty-six, under the premise that increasing recycling in California first requires accurate labels on recyclables. More specifically, California's Senate Bill 343 will prohibit, as of October 4th, the use of that chasing arrows symbol, that circle of chasing arrows. Any other symbol in indicating recyclability, or any statement indicating recyclability or directing consumers to recycle on products and packaging, unless the product or packaging meets specific recyclability criteria indicating that the labeled product or packaging is actually being recycled by 60% of the population. Now, let me pause the letter for a second. This is not 60% of my product. If I have if this is plastic type 3, that means 60% of all the plastic type 3 has to be recycled, or I can't claim that my product, which is made of plastic type 3, is recyclable. So back to the letter. In short, in order to enforce or ensure robust recycling efforts to stave off the doom of global warming and otherwise do good, California's determined that all business shipping products into the state must certify that the recyclability category claims on their packaging have been verified according to their criteria. In other words, it's actually being recycled. It's not recyclable, like that's the company's fault. Moreover, it's not enough simply to verify that the goods can be recycled. The company is required to somehow confirm that they are being recycled by the general public. So, according to the state, it's not enough for businesses to adhere to truth in advertising. They must now somehow ensure their customers are acting in good faith to affirm that their claims are true. Surely, even the politicians writing and ultimately passing this bill had to foresee that the path of least resistance would be for the majority of businesses exposed to this regulation to simply forego all recycling label henceforth, full stop. And yet they moved ahead. So what is their true incentive? There are so many cross-currents of bad public policy, layered with added transaction cost, that a civilian like me can't begin to cogently outline the myriad issues at play. I thought I'd toss it your way as a proposal for a future tidy C episode, or at least an example to cite. Although it seems that basic coast theorem would address a lot of the original transaction costs relating to the trust in labeling. No? Best regards, HD. End of letter. Well, thanks, HD, and you're right, I'm going to do a whole future episode. I actually did some poking on this, and it's fascinating. There's a lot more to this issue, and we will talk about it. Finally,

Book Pick And Sign Off

Michael Munger 35:57

Book of the Week. Since we talked about the Odyssey, I wanted to recommend Emily Wilson's translation of Homer's The Odyssey. It was published in 2018 by W.W. Norton. That's Emily Watson's translation of Homer's The Odyssey 2018, published by W. W. Norton. Thanks, and until next week.