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The make-or-buy decision is a fundamental aspect of economics that applies to businesses, households, and nations, with the U.S. penny providing a fascinating case study in economic inefficiency.

• It costs 2.72 cents to manufacture one penny, representing a loss of 1.7 cents per coin to taxpayers
• The U.S. Treasury loses between $85-120 million annually due to penny production costs
• There are approximately 130 billion pennies in existence, but only 5-10% actively circulate
• Most pennies end up sitting idle in jars, drawers, and coin collections after minimal use
• Arguments against pennies include production costs, inflation reducing value, transaction inefficiency, and environmental impact
• Canada successfully eliminated the penny in 2012, rounding cash transactions to the nearest five cents
• A potential alternative: buying back existing pennies at a price below manufacturing cost
• The Federal Reserve could implement a system paying $1.50 for 100 pennies, still saving over the $2.72 production cost
• This system would utilize the billions of idle pennies while maintaining the existing distribution infrastructure

Grass seed: Expensive!

Book'o'da'week: Abortion, Baseball, and Weed

Join us next week on Tuesday, July 1st for a new episode with a fresh topic, letters from listeners, and of course, a hilarious new TWEJ.

You can follow Mike Munger on Twitter at @mungowitz

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How should we decide which political-economic systems are best for organizing society? Let's peer through the lens of the "Pretty Pig Problem," which highlights the flaws in comparing the actual implementation of systems we dislike with idealized versions of systems we prefer. The PPP shows that we must compare real-world options rather than theoretical ideals.

Some details:
• Only three social systems are viable at scale: authoritarianism, capitalism, and democratic socialism
• Every system has both an ideal form and a corrupted form that must be considered
• The "Pretty Pig Problem" highlights our tendency to unfairly compare real systems to idealized alternatives
• People on the left note market problems and conclude state intervention is necessary without examining real state actions
• People on the right highlight state problems and assume markets are better without considering actual market performance

And....TWEJ! And Book'o'da'week!

Listen next Tuesday, June 24th, for a new episode of Tidy C with a new topic, letters, and another hilarious TWEJ.

LINKS:

• Peter Boettke on EconTalk and a "Living Economics"
• Brooks' Law of Software Engineering

You can follow Mike Munger on Twitter at @mungowitz

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Transaction costs are the friction in the gears of society, but the worst transaction costs are the ones that reflect government failure. You can see it in ever cliche about government, from the dreaded DMV lines to the passport control bottleneck. Drawing on Milton Friedman's "Barking Cats" essay from 1973, I explore why bureaucracy remains fundamentally immune to reform efforts, regardless of which political party holds power.

The frustrating reality is that bureaucracies operate with completely different incentives than private businesses. While companies balance money costs against convenience to attract customers, government agencies focus solely on their budgets while taxing citizens with enormous "trouble costs." North Carolina's DMV perfectly illustrates this dysfunction—appointments require six-month waits while the state proudly touts its budget savings. Most maddening is that these aren't even genuine services, but rather artificial permission requirements the government imposes before allowing us to live our lives.

This represents a textbook government failure—what economists call a Pareto inferior outcome. Most citizens would gladly pay slightly more in fees or taxes to avoid wasting hours (or months) of their lives in bureaucratic purgatory. That additional revenue could easily fund more staff and faster service. Yet the system has no mechanism to capture these preferences or respond to them.

The problem isn't partisan, and it can't be fixed by shuffling leadership or staff. As Chris Rock might say about bureaucracy—"that tiger ain't go crazy, that tiger went tiger." Bureaucracy simply acts according to its nature. Reformers who believe they can fundamentally change how these institutions function are like people who want cats that bark—they fundamentally misunderstand the beast they're dealing with.

Listen in for insights on why bureaucratic inefficiency persists despite our best efforts, complete with revealing (but not really funny) quotes from political thinkers ranging from Schumpeter to Trotsky. Have your own bureaucratic horror story to share? Let me know in the comments or on social media.

Links:

Friedman article 1973

Keech and Munger article 2015

Chris Rock, "Tiger!"

Parkinson's Law

Michael Munger: The "Trouble Tax"

You can follow Mike Munger on Twitter at @mungowitz