The Answer Is Transaction Costs
"The real price of everything is the toil and trouble of acquiring it." -Adam Smith (WoN, Bk I, Chapter 5)
In which the Knower of Important Things shows how transaction costs explain literally everything. Plus TWEJ, and answers to letters.
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The Answer Is Transaction Costs
God Speaks Hebrew But Understands Yiddish
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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
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You can follow Mike Munger on Twitter at @mungowitz
Why Reviving Hebrew Was Unlikely
Michael MungerThis is Mike Munger, the knower of important things, from Duke University. In eighteen eighty, if you had walked into a market in Jerusalem, you would have heard a dozen languages Yiddish, Latino, Arabic, Russian, German, French, Judeo-Persian. But probably not Hebrew, not as a spoken language. Hebrew was the language you prayed in. It was the language you read the Torah in, the language that rabbis used to argue fine points of law. But you couldn't ask the price of an onion or complain about the weather or tell a joke. All these years later, Hebrew is the living, spoken, cursing, joking, newspaper reading science teaching language of a modern society. It's the native tongue of roughly nine million people. That almost never happens. Languages die out. Nobody reboots a language that has had no native speakers for close to 2,000 years and turns it into a perfectly good medium for computer science lectures. It is, by a wide margin, the only successful case of full language revival in recorded history, at least at any scale. We're going to ask the obvious transaction cost question, not was it a nice idea? There's plenty of nationalist movements that have nice ideas about language. And honestly, a lot of people have objections to the larger project of a Jewish homeland, with a language or not. Fair enough. Our question here is, what were the transaction costs standing in the way of a spoken Hebrew? And how did a society actually pay them down? The answer is complicated, but at least some of the credit goes to one very stubborn man. And a notion loved by my Buchanan Camp co-director, Lynn Keisling. That concept is inframarginality. A new to edge, letters, book at a week, and more. Straight out of Creedmoor, this is Tidy C.
SPEAKER_02I thought they talk about a system where there were no transaction costs, but it's an imaginary system. There always are transaction costs.
Multilingual Jews And The Status Of Speech
Michael MungerCommunication and coordination problems of a civilization are almost always transaction cost problems. We have to understand that Jews moving to the Ottoman and then British Palestine in the late 19th and early 20th centuries were not one people who were just geographically scattered. They were dozens of communities that had spent a thousand years assimilating, linguistically and culturally, into wherever they lived. If you were an educated, assimilated Jew in Berlin, you spoke German and High German, the German of Goethe and Kant, the German of the University in the Salon. In Paris you spoke French. You were proud that your French was as polished as any Frenchman's. Warsaw or Odessa, educated Jews increasingly spoke Russian or Polish. Language for the assimilated and educated classes was a status good. It signaled that you belonged to the surrounding civilization. You were modern, cultured. You had arrived. Below that stratum of aspirational assimilationists, there was Yiddish. The actual living everyday language of millions of Ashkenazi Jews across Central and Eastern Europe. Yiddish had something German and French didn't, an enormous existing network of speakers. Now, many of the assimilationists were horrified by Yiddish or Judendeutsch. The assimilated German Jews wanted to distinguish themselves from the Ostjuden, the Eastern Jews, many of whom flooded west to escape the savage Russian pogroms of the 1880s after the assassination of the Tsar. But Yiddish had a status problem. It was the language of the Shtetl, the marketplace, the street. It was nobody's language of science, philosophy, or government. Zionist intellectuals, including plenty who spoke Yiddish at home, at least when they were young, dismissed it as jargon. This separation became even more important after the Kisinev pogroms of 1903 and then again in 1905. The culture of the Shtel, the word world depicted in Fiddler on the Roof, which was set in 1905, and that was the Russian Revolution and the second Kishinev pogroms. That fiddler on the roof kind of living is what the assimilationists desperately wanted to distinguish from their own identities. We are not like that. Chaim Nachman Bialik wrote in The City of Slaughter, the poem in 1904 about the first Kishinev pogroms. He wrote it in Hebrew, interestingly, although the Yiddish translation for a time was much better known. There was another problem with Yiddish. It belonged to just one branch, the Ashkenazim of the Jewish world. It meant nothing to a Yemenite, Persian, Sephardim, Mirahim, who spoke their own languages. Hebrew was at least universally known as the language of the sacred, and for most Jews, at least the men, they could speak or read a little. But that meant Hebrew as a kind of museum language. Everyone with a religious education could read it. Rabbis and scholars knew it well, used it for correspondence and legal writing. But it had been asleep as a vernacular for something like 18 centuries. It had words for sacrifice and commandment and leprosy, because those words appear in the Bible, in the Talmud. Had no word for newspaper, bicycle, ice cream, battery, kindergarten, committee. A language is, among other things, a very large stock of accumulated tools, and they're the tools that you use. These tools had not been used for centuries. They needed to be built up. On that score, then Hebrew's toolbox for daily and scientific life was close to empty.
Hebrew As A Network Effect Problem
Michael MungerNow, an economist way to see this mess is that a spoken language is a coordination good. Its value to you depends almost entirely on how many other people speak it. A classic network effect. German and French were valuable because huge, prestigious populations already use them. Yiddish was valuable because millions of ordinary Jews already used it, and it was a modern language. Hebrew as a vernacular was valuable to basically nobody, other than as a religious language, because nobody spoke it as other than a religious language. Why would you invest the enormous effort of learning to actually live in a language that has no other native speakers to talk to? Yiddish was some people's first language. Hebrew at that point was no one's first language. So that's the transaction cost problem in its purest form, a coordination failure. Everyone might privately prefer a shared, neutral, national language, but no individual has any reason to go first. Well, this is where inframarginality comes
Ben Yehuda And The Focal Point Idea
Michael Mungerin. Suppose one person cares enough to start and provide the public goods because to them it's a private good. Well, that person was Eliazar Ben Yehuda. He was born Eliasar Yitzak Perlman in 1858 in a Lithuanian Shtel called Lushki in the Russian Empire. Yiddish was his cradle tongue. He got the standard religious education, Chater, then Yeshiva, along the way discovered secular Hebrew literature from the Jewish Enlightenment, including, of all things, a Hebrew translation of Robinson Crusoe. Rumsh's in the in English it's Furnace of Affliction, but it was a loose translation of Robinson Crusoe. It had been published in Vilnius in 1862. And the author, Yitzhak ben Musha Rumsh, had to make up words. He actually not for the first time in order to make Hebrew modern, and but the fact that there were modern words, and this was in effect a modern vernacular but Hebrew translation gave Ben Yehuda some ideas. That was his first hint that Hebrew could carry more than liturgy. From 1877 to 1881, Ben Yehuda studied at the Sorbonne in Paris, studied Middle Eastern history and politics. Now, Paris in this period was thick with different national movements, Slavic nationalism, Italian-German unifications, within living memory, Balkan independence movements all justifying themselves partly by appeal to a shared national language. Benyehuda absorbed the 19th century European idea associated with thinkers like Herda, that a nation is defined above all by its language, that you cannot have a real nation without a common tongue that belongs distinctly to it. No shared language, no Volksgeist. In his treatise on the origin of language in 1772, Herda had argued that language isn't just a neutral tool for expressing preformed ideas, it actively shapes how a community thinks and perceives the world. We think in language, as he put it. This was a direct challenge to enlightenment rationalists who wanted to treat reason as a universal faculty operating the same way regardless of the tongue it happened to be expressed in. From there, Herda built the idea of the Volksgeist, the spirit of the people. Herda held that every nation has its own distinctive character forged through its language, folk tradition, songs, and history, that this character is irreducible. It can't be judged against some universal standard of civilization, only understood on its own terms. And then in Paris, Ben Yehuda had a conversation with a Jew from Jerusalem who spoke to him in Hebrew. Not liturgical Hebrew, but Hebrew used as if it was an ordinary conversation. This was probably in 1879, though I couldn't find that out for sure. And something clicked for Ben Yehuda. If Hebrew could be modern books, if Hebrew could be modern conversation, and if Hebrew were the common denominator that almost all Jews shared, even haltingly, then one person, in principle, could lead a nation towards that language. Languages learned and used by individuals. If he could provide the example, then that example automatically would scale because languages learned one person at a time. So he put the logic in almost transaction cost economic terms. Hebrew could only truly live if the Jewish nation was revived and returned to its own land. Language and nationhood in his reading were the same project, not two separate ones. You can't have one without the other. And he picked Hebrew specifically for a hard-nosed strategic reason. Of all the candidate languages, Hebrew was the only one that was nobody's home turf, and yet everyone shared inheritance at the same time. Polish Jew, Yemenite Jew, German Jew each had equal, an equally partial, claim on Hebrew. In coordination game terms, then, Hebrew was the unique focal point, the shelling point, around which a fractured, multilingual immigrant population could converge without any one faction winning linguistically over the others. That symbolic neutrality is what made it, against all appearances, the lowest transaction cost solution to the coordination problem, even though on every reasonable dimension, vocabulary, the number of existing fluent speakers outside of liturgical use, ease of learning, different alphabet, it was clearly the most expensive option on the
Inventing Words And Building Institutions
Michael Mungertable. Well, knowing you've picked the right focal point doesn't get you there. Ben Yehuda, who emigrated to what was then Ottoman Jerusalem in 1881, faced a brutal set of transaction costs, and it's worth walking through them the way he had to. First, missing vocabulary. You can't run a household, let alone a modern economy, in a language that has no word for handkerchief, or many other nouns that either hadn't existed or hadn't seemed important enough to put into scripture. Ben Yehuda spent much of his life simply manufacturing words, thousands of them, largely by mining Semitic roots shared across Hebrew, Aramaic, and Arabic, building new words the way Hebrew grammar had always built words, rather than just importing foreign terms wholesale. This mattered economically by reusing an existing familiar internal grammar, a kind of shared source code that you could recognize even if you'd never seen the word before. New words were cheaper to learn and remember than arbitrary imports would have been because the human brain doing the learning was already fluent in the underlying machine code or pattern. He also crucially didn't do this alone. He helped found what became the Hebrew Language Committee, later the Academy of the Hebrew Language, precisely because a shared vernacular can't tolerate 10 different words competing for telephone, invented by 10 different enthusiasts in 10 different towns. Second, the bootstrapping problem. Who's going to do this first? Ben Yehuda's most radical move was domestic, and again, this is inframarginality. He raised his son, Ben Zion, later Itamar Ben Avi, and that's a complicated story all by itself. That basically means son of his father. And not only was he the was Ben Avi the son of Ben Yehuda, it also meant that he was the son that took up the project of speaking Hebrew. Well, Itamar ben Avi, as he was later known, spoke only Hebrew from birth. Even the Ben Yehuda objected when he heard his wife singing to the son in Russian lullabies. This there there weren't Hebrew lullabies, so they had to be made up. This was in effect a pilot experiment to resolve public uncertainty about feasibility, and he was doing it on his own son. So this was something where it was important enough to him as an individual to provide the public good. Everyone doubted a child could become a fully fluent native Hebrew speaker with no other native speakers around him. Some predicted the experiment would produce a disabled idiot, in the unkind phrase of the era. Instead, it produced history's first native Hebrew speaker in roughly 18 centuries, walking proof of concept that lowered the perceived risk for the next family willing to try it and the next, and so on. Third, distribution. A dictionary and a living child as a native speaker are not enough. You need a channel that puts new vocabulary in front of a wider public repeatedly, so that usage converges. Ben Yehuda ran a Hebrew newspaper, actually several Hebrew newspapers for this purpose, coining and testing words in print, lowering the cost of coordination because a newspaper reader in Jaffa and one in Jerusalem could pick up the same new word for kindergarten in the same week, rather than each community drifting towards its own local and likely idiosyncratic language coinage. Fourth, enforcement costs from the other
Backlash Costs And Personal Sacrifice
Michael Mungerdirection. The ultra-orthodox communities in Jerusalem saw the whole project as sacrilege. Hebrew was the holy tongue, reserved for sacred purposes, and using it to haggle over vegetables was to them profanation. Related to the problem that was faced by Martin Luther and the problem the people who translated the Christian Bible into the vernacular. It was a sacred language, Greek, Roman. It was being translated into German. How dare you? Well, the Jewish problem was different, but they had the same basic objection. Everyone was supposed to read Torah in Hebrew, but many people had only rudimentary knowledge, but still Hebrew was the language of the sacred. So where Martin Luther had taken the language of God and translated it into the vernacular, Ben Yehuda was taking the vernacular, words of commerce and coarse street life, and shoehorning them into the language of God. Blasphemy. Chilul Hashem. Desecration. Benyehuda's newspaper was shut down for roughly a year under pressure from internal rabbinic opposition. In 1893, he was actually imprisoned by Ottoman authorities after being accused, apparently based on a mistranslation of one of his articles, they weren't very good at translating Hebrew, of inciting rebellion. His personal life absorbed real costs. His first wife, Devorah, died of tuberculosis in 1891. Three of his children then died of diphtheria within 10 days of each other. He then remarried Devora's sister, Hemda, who turned out to be indispensable. So Hemda Ben Yehuda is one of the major figures of this story, and it's not at all clear that Hebrew would have succeeded if it were not for her. She managed the project's finances and international scholarly correspondence, and after his death saw that the great Ben Yehuda dictionary was seen was taken to completion. So put simply, reviving a language is not a matter of writing a dictionary. It's building, more or less from scratch, the whole institutional infrastructure that a shared language needs. A standardizing authority, a demonstration case, a distribution channel, and enough social tolerance to allow it to survive the backlash, all before the network effects that make the language valuable have even started to kick in. Benyahuda basically had to subsidize the coordination good out of his own household, his own health, and his own children until it became self-sustaining. By the time he died in 1922, tens of thousands of people turned out for his funeral. The historian Cecil Roth put the achievement about as tightly as it can be put. Before Ben Yehuda, Jews could speak Hebrew. After him, they did speak Hebrew. But the Ben Yehuda household wasn't the only front.
The Technion Fight Over Science Language
Michael MungerThe most vivid public test of whether Hebrew would actually tip from curiosity to genuine national language happened not in the marketplace but in a boardroom, over the founding of a science and engineering university in Haifa. The Technikum, which is Germanized Greek, but we now know as the Technion, which is Hebrewized Greek. And in that lies the story. German was the leading language of European science and engineering at the time. It already had the vocabulary, words for turbines, thermodynamics, structural loads. Hebrew simply didn't come close to having yet. The German-speaking faculty were much easier to recruit. There almost no one knew Hebrew, and no scientist knew Hebrew. Science was published in German, even in the United States. If you got a PhD, you had to learn German. On October 26, 1913, the then Technikum Board of Trustees made it official. And they didn't think it would be a big deal. German would be the language of instruction for the planned institute and for an affiliated high school that we would now call STEM in Haifa as well. The reaction was immediate and frankly out of proportion to what you'd expect for a university curriculum decision. Now I guess that tells you something important. It wasn't really a dispute about pedagogy. It was a dispute about whose national project this was, about the Volksgeist. Within weeks, the fight had pulled in students, teachers, writers, and Hebrew language journalists from across the religious secular divide, an unusually broad coalition for the Yeshuv at the time. Teachers and students walked out at the Ezra, which is a German organization, the Ezra Run School in Jaffa, and at a teacher's seminary in Jerusalem. When teachers who had struck were fired in Jerusalem that December, the strikers went and founded a rival institution, a new Hebrew teacher seminary, essentially building competing infrastructure rather than accept the policy to teach in German. Now, why did a funding decision at one technical college ignite mass mobilization? Because by 1913, because of the efforts of Ben Yehuda and those who followed him, a critical mass of the scholars of Israel had already been through Hebrew language schools. They spoke Hebrew at home, they read Hebrew newspapers. So the subsidizing of that coordination good had actually worked out. Hebrew had become the focal point people had genuinely converged on. A German speaking science university wasn't a neutral official. Choice anymore. From the perspective of everyone who had already paid the cost of learning Hebrew, in fact, it looked like a wealthy outsider, the again, the funder, Ezra, trying to unwind the whole national project at the exact moment it was starting to succeed. And to unwind it specifically in the domain, science and higher learning, where Hebrew's word poverty was still most exposed. So, to be fair, the scientist had a point. This was going to be really hard. Let's just do it in German because that's how we have to communicate anyway. This was important because it was the it was the hardest, it was the most expensive thing. If he Hebrew was going to be spoken at Technion, and if the name was going to be changed from the German inflected technicum to the Hebrew inflected technion, then they could win everywhere. If Hebrew couldn't be the language of engineering, then the old museum language critique would have won by default. And the board back down, reversed itself in January 1914, formally adopted Hebrew as the language of instruction February 22nd, 1914. But then the First World War had intervened that summer before the Technic Technion could actually open, and the school didn't hold its first classes ultimately until the winter of 1924. And by that point, Hebrew instruction in the sciences was no longer a controversial experiment. It was simply how the Technion and the rest of the growing university system in what later became Israel operated.
A Joke About Hebrew And Yiddish
Michael MungerWhoa, that sound means it's time for the twedge. An old Jewish man is talking to his grandson about the languages that Jews use. Grandpa, the boy asks, what's the difference between Hebrew and Yiddish? The grandfather smiles at the young boy and says, Hebrew is Loshen Kodesh, the holy tongue. It is the language saved for praying to God, for studying the sacred Torah, and for studying of high and holy manners. Yiddish is Mame Loshin, the mother tongue. It is the language we use for arguing with the neighbors, complaining about the weather, yelling at the children and telling God how hard our life is. The boy thinks and then shakes his head and says, I'm not sure I understand. Grandpa nods and says, Well, think of it this way. God speaks in Hebrew, but he understands Yiddish. I don't know if that joke is funny or not, but I thought it was insightful.
Rawls As Insurance Under The Veil
Michael MungerGot a letter from D. B. He writes, I was recently listening to your Win Bat's Attack, Tidy C episode, and it prompted a memory of a favorite extension topic from an almost throwaway exercise in undergrad microeconomics, connecting insurance to political philosophy. So here was the discussion question. John Rawls has an interesting approach to income inequality. He essentially argues that income inequality is inefficient because if people could purchase insurance before being born, they would choose to smooth out their consumption across states until all inequality was removed. This characterizes the maximum or difference principle in terms of an insurance purchase decision and highlights the embedded assumption in how Rawls and the many influenced by his thought think. Individuals' risk aversion, and if there's sufficiently low transaction cost and political redistribution, the cost of such social insurance would be close enough to the actuarially fair price that people would prefer to actually preferring full insurance. I've always enjoyed how such a simple observation can prompt deep philosophical questions and lead to such a clear understanding of Rawls' theory of justice and the related consequentialist views. I hope you might enjoy this extension as well or have some comment of your own on how a government's transaction cost might relate to its legitimacy of taking on various roles. Best DB. Well, thanks, DB. I had not thought about Rawls in terms of a willingness to purchase insurance, but that's a terrific insight. I think it's right. It sounds like if I in the behind the veil of ignorance, if I'm not sure what the distribution of income is going to be, if I'm risk averse, I would be willing to buy insurance to limit the downside about how poorly off I could be. And if I'm willing to pay something for it, that means that I value it. And that is a way of justifying, I don't think it fully justifies,
Book Pick And Closing Notes
Michael Mungerbut a way of at least partly justifies Rawls' difference principle. So thank you. The book of the week is Proclaiming Liberty by Timothy Sandifer. It was published in 2026 and it came out from Cato, and it's a terrific book about, well, the founding, John Adams, Thomas Jefferson, the Declaration of Independence, and the meaning of the different ways of proclaiming liberty in the U.S. I recommend it on this 250th anniversary of the publishing, the signing of the Declaration of Independence. Well, that's it for this week. I'll we're it's almost time to start up again the monthly podcast. Next week is the last of the summer weekly ones. It's been fun, and I'll look forward to talking to you again next week on the Answer is transaction cost.