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What happens when we stop seeing politics and markets as separate spheres and start recognizing their deep entanglement? Mikayla Novak, senior fellow at the Mercatus Center, challenges conventional economic thinking in favor of Dick Wager's "entangled political economy."

Drawing from her fascinating career path through Australia's Treasury, free market think tanks, and her pursuit of multiple courses of study, Novak offers unique insights into institutional economics and political networks. Her background bridges disciplines in ways that embody Hayek's wisdom that "you can't be a good economist by just being an economist."

We consider Boettke's distinction between "mainstream" economics—with its equilibrium models and market failure diagnoses—and the "mainline" tradition that views economies as dynamic processes shaped by institutions. This conversation reveals how Richard Wagner's entangled political economy theory helps understand policy failures. When government and markets form complex networks rather than separate spheres, simplistic reform attempts like "just cut spending" are disastrously unsuccessful.

The discussion vividly illustrates why transaction costs matter deeply for institutional analysis. We examine how political networks form with elites enjoying low-cost access while ordinary citizens remain at the periphery. This structural understanding helps explain why some inefficient policies persist despite their obvious flaws—they benefit the well-connected core of our political-economic system.

Mikayla Novak's page link

Richard Wagner: 

• Entangled Political Economy Research Network
• Buchanan's Liberal Theory
• Politics as a Peculiar Business

Previous TAITC Episodes of Relevance:

• Randall Holcombe and Political Capitalism
• Donald Boudreaux on Law and Legislation

Late Bloomers book, by Rich Karlgaard

Munger on tariffs and costs

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz