Regime Uncertainty: Political Risk is Transaction Cost!

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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