The price mechanism is the means by which a free market communicates the relative value of goods and services. On The Bob Zadek Show the concept is treated as the central informational function of capitalism: Bob Zadek describes it as the key element of a free market system, the most important bit of information an economy produces, answering what the relative value of a good or service is versus something else, and asks whether a free market system is essential simply to provide information about what items are worth relative to another item Mike Munger is Taking Public Choice Seriously (2019). Guests across several episodes develop the idea in different directions — as information transmission, as a definitional solvent for the word “shortage,” and as the thing subsidies and price controls destroy.
Prices as information
Art Carden, in an episode on price theory, calls prices information signals that transmit valuable and important information about what is going on on the ground, so that someone who has no idea what is happening can nonetheless respond appropriately. His illustration is a drought in California: under a free market in water, higher water prices would lead potential suppliers to notice they could earn more selling water in California than in Alabama, while a consumer who has no idea what is going on in California simply sees his water bill going up and takes shorter showers. Carden says he uses the word “beautiful” intentionally about the price mechanism, because it lets someone ignorant of conditions in California help others there without necessarily knowing it Art Carden on Price Theory & Its Discontents (2022).
Bob Zadek makes the same informational point in a transit episode, telling listeners that with a price mechanism and a free market everybody gets to learn how much people are willing to pay for various goods and services, and that where pricing is distorted we have no idea what people want. He adds that government, when providing services, should at least provide the services people want, and that people do not get to vote with their dollars when there are subsidies Never let a good crisis go to waste (2020).
Shortage, price and quantity
The show returns repeatedly to the claim that “shortage” is a statement about price rather than quantity. Bob Zadek tells Mike Munger that the word almost has no meaning, that we have never had a shortage of anything, and that shortage really means price, not quantity: diamonds are very expensive, but anybody who wants a diamond can have it if they pay the price, and anybody who wants a house anywhere, including San Francisco, can live there if he can pay the price. In Zadek’s formulation there is always exactly enough because the supply-demand mechanisms make sure of that Is Environmentalism a Religious Movement? (2023).
Munger’s reply in the same exchange concedes the term has content but relocates it to interference with prices. He says there is such a thing as a shortage, and that there is a shortage of housing in San Francisco because of rent control: if the price mechanism is not free to adjust, you can have a shortage because there is not nearly enough housing at the rent-controlled price. New York, he says, has a terrible shortage of housing because of rent control, and trying to build something there at the City Council is next to impossible, while people live in rent-controlled apartments that poor people cannot find. Munger states that it is literally impossible to run out of anything as long as the price mechanism is free to adjust, and that when the price mechanism is prevented from adjusting it only seems like there are shortages Is Environmentalism a Religious Movement? (2023).
The same passage appears in the preceding day’s episode, where Munger gives the identical formulation — the San Francisco and New York rent-control shortages, the impossibility of running out of anything while prices adjust, and the observation that preventing adjustment makes shortages appear The ‘Broken Window Fallacy’ is Back (2023).
Subsidies and distortion
Randal O’Toole, a Cato Institute senior fellow, supplies the show’s most concrete numbers on subsidy. He says it costs about $5 million to build a mile of a freeway lane and $200 million to build a mile of light rail, with subway or elevated rail costing even more, while hardly anybody rides the trains being built. On operating subsidies he says highways average about a penny for every passenger mile carried on roads and streets in America, while mass transit averages a dollar and a penny — a hundred times as much. He proposes ending all the subsidies and seeing what happens, predicting that private transit would spring up in various places but look a lot different, and noting that a penny-a-mile increase in driving costs would not change habits much whereas a fifty-cent or dollar increase in the cost of riding mass transit would affect how much people ride it. He calls this the market distortion Never let a good crisis go to waste (2020).
Bob Zadek frames the same episode around the loss of the price mechanism, and notes that mass transit is almost 100% government-owned and operated, which creates the pricing distortion — though he says it was not always that way, and that mass transit systems were once privately owned, reasonably priced and profitable Never let a good crisis go to waste (2020).
Price controls and national decline
In the 2019 episode with Munger, Zadek argues that capitalism is somewhat inevitable because in any centrally planned economy a black market springs up, and a black market is nothing other than a capitalist system within a planned economy. Because it always springs up underground, he says, you cannot legislate away a market: you can make it illegal, but it does not go away, it goes underground, like prohibition. He calls this the source of his optimism Mike Munger is Taking Public Choice Seriously (2019).
Munger agrees about markets but distinguishes capitalism as a subset of the system, defined by open private ownership and, essentially, liquid capital — the stock ownership form that lets shares of equity in future prosperity be sold, giving people reasons to look forward. He says capitalism requires an actual legal system defining ownership and exchange of equity shares in corporations, and that this is not inevitable. Venezuela, he says, was a developed, wealthy nation that used the price mechanism and was as capitalist as can be, until it elected Hugo Chavez, who said capitalism was not sufficiently considerate of the needs of the people; the majority voted for that, and the result was that they first distorted the price mechanism, then began nationalizing industry, and became a third-world country — one of the only examples in history of a developed nation reverting to being a developing nation. Argentina, he adds, did something close to the same by substituting central planning and price controls for the functioning of a market; in 1900 Argentina was a very wealthy country. Munger also notes that the Supreme Court imposed changes to the Constitution in the period of the ’30s and the ’40s, and that markets are essential but not inevitable Mike Munger is Taking Public Choice Seriously (2019).
Public choice and the limits of markets
The earliest episode in the set introduces the price mechanism as one of the things markets do that politics may have to substitute for. Munger, laying out the premises of Public Choice, says markets cannot use the price mechanism and private property to solve problems of the environment, pollution, externalities, and information that not everyone has, so there may be a role for the state — but a role based on consent, not on the imposition of the will of the majority on a minority that does not want it. He describes the Public Choice project as finding the right balance between the rights of individuals and minorities and the ability of the majority to impose its will Leviathan in Chains: Michael Munger on Public Choice Economics (2017).
Tort liability as an alternative to regulation
In both January 2023 episodes, Munger uses the price mechanism to argue that private liability can do work usually credited to regulation. Responding to the suggestion that landfill companies adopted rubber membranes only because of EPA regulation, he says the reason companies took additional care was exposure to private liability: there is a system in private enterprise called torts, where you can sue if someone damages your property from an adjacent property. Companies updated disposal technology on their own in response to the threat of lawsuits, and only eventually did the EPA start to inspect and make it part of the regulatory apparatus. Munger’s conclusion is that the system is self-correcting as long as you let prices operate and lawsuits for torts or damages are an important part of that, and that you do not need external regulation The ‘Broken Window Fallacy’ is Back (2023) Is Environmentalism a Religious Movement? (2023).
Across episodes: no development, one recurring argument
The excerpts show the same claims argued in more than one episode without the treatment changing: the informational function of prices is stated by Zadek in 2019 and by Carden in 2022; the rent-control illustration of shortage is given by Munger in both the 2023-01-15 and 2023-01-16 episodes in nearly identical words; and the subsidy arithmetic belongs to O’Toole alone in 2020. The episodes that touch the topic are the 2017 Munger conversation on Public Choice, the 2019 Munger conversation, the 2020 O’Toole conversation, the 2022 Carden conversation, and the two January 2023 Munger conversations; the excerpts show no development from the earlier to the later treatment.
What the sources do not cover
The excerpts do not state the outcome of any case discussed, the name of any bill, or the amendment on which any decision turned. They do not give the founding date or institutional history of the Cato Institute or Duke University, nor the title of any speaker beyond what the labels and self-descriptions supply. Several excerpts break off mid-exchange — the 2019 episode ends on Bob Zadek’s name with no following text, and the 2020 and 2022 episodes end at a speaker label with nothing after it — and nothing is reported from those breaks. The sources also do not describe any empirical measurement of price distortion beyond the subsidy figures O’Toole gives.