 This is Jeff Deist, and you're listening to the Human Action Podcast. Ladies and gentlemen, welcome back once again to the Human Action Podcast. And we are in, I guess, our fourth week, but the third section of the book. We are delving straight through Mises' magnum opus, human action. And for those of you who have been listening along, hopefully reading along, we had an introduction with Sean Rittenauer up at Grove City College. We went through Part One, which is all about acting man with our friend Dr. David Gordon. We went through Part Two, which is titled Action Within the Framework of Society with our friend up in Massachusetts, Dr. Bob Murphy. And now we are moving on to Part Three of the book, Economic Calculation. And now some of you may be sitting home as a result of this coronavirus scare. Some of you may have some extra free time on your hand, and especially a lot of you may be wondering, you know, exactly what is going on with the economy? What is going to be the result of not only these, what I would consider illegal and unconstitutional government shutdowns and control of movement of people, but also what the Fed is doing, which I consider egregiously wrong and actually immoral in response to this crisis. And I think that there were a lot of problems, first and foremost, the amount of debt in the economy that were baked into this latest financial crash, which is, from my perspective anyway, merely precipitated by fears of this coronavirus rather than caused by it. And I think a part of our mission here at the Mises Institute is to help people demystify all of this and to understand exactly what's going on with respect to central bank malfeasance. And this is a great time really to be giving yourself a little bit of a mental reprieve from everything going on on social media, everything going on in the world. Maybe you've got a little extra free time, as I mentioned. So going through human action is a valuable use of your time. It's going to make you a better, smarter person, maybe not a happier one, but certainly a better and smarter one. And so all that said, our friend and guest this week is Dr. Per Belund. He is, of course, a professor at Oklahoma State University. He teaches economics and entrepreneurship there. He's a senior fellow with us at the Mises Institute. He also edits one of our journals, several other journals on his own. And I think in many ways his two most important contributions in a sense are his Articles for Entrepreneurship magazine, which is really a different kind of animal than most econ professors or academics write for. It's aimed at a broad lay audience and his insights. Writing for that in a very different style I think are very valuable in terms of making economic concepts more readily available to lay readers. And building on that, he's absolutely outstanding on Twitter. I would consider Per's Twitter account an absolute must follow. One of the top three or four econ Twitter sites. No question about it. He's at Per Belund, which is P-E-R-B-Y-L-U-N-D. So if you're not following him on Twitter, you need to. He is absolutely fantastic at creating Twitter threads, which extrapolate on economic concepts would do so in a digestible fashion. And his Twitter threads are really becoming legendary. So Per, I hope that's not too much pressure for you since you're lauding your skill on Twitter. Yeah, no pressure at all. How did you get into Twitter anyway? I mean, is that something you just fell into, never really intended to build an audience? Yeah, I didn't really. I signed up for the handle on Twitter a long time ago because my previous career, I was in computers and systems development and things like that. So I knew early on that if there was something new coming and it might become big, I wanted my name. And I didn't want someone else to take it. So I had it for a long time, but I don't think I tweeted for many years. And I never really understood it. I mean, why the heck would people limit themselves to 140 characters as well back then? I mean, you know, it's high-pitched, really nasty comments. And of course, there's no nuance or anything like that. And I mean, it's basically the worst of mankind that's on Twitter. So I couldn't even follow other people much. But then I found sort of some people who seemed reasonable and had different perspectives on things. I mean, very political still. But I mean, some progressives, some conservatives and a bunch of libertarians, of course. And I started following them. It was sort of interesting. And I started commenting on them. And then eventually it just happened that I saw others doing tweet storms. I think Mark Andreessen called them. I think he was sort of the inventor of this concept, writing a number of tweets following each other, just responding to the tweets over and over again to make it into a story. And I tried that and people just liked it. And I just get back to it every time. Basically every time I read something that pissed me off, which would be every five minutes or so, I have something to write on Twitter. And very often it's pretty basic Austrian points about value subjectivity or what an economic good actually is and things like that. And it becomes a thread, maybe 30 tweets or something like that. And I just explained what it is and why it matters and connected with some of the issues that people are talking about at that time. And that's basically it. But apparently there's an audience for this sort of thing. So I have organically grown the following of almost 10,000 people now. Well, don't feel guilty about the time you're spending on Twitter because your tweets are actually substantive and they actually help people learn things as opposed to most Twitterers. But I was thinking before we came on air here, I wanted to ask you how and when did you first hear about and read Human Action? I'm curious about that. Oh, that's a good question. I have no idea when I heard about it. I don't know that at all. I mean, I've read excerpts and I think a lot of people have for a very long time. And I know the first time I actually held Human Action in my hand was when I bought a very expensive copy in leather and everything like that for my then girlfriend, now wife. So I ordered it from the U.S. I think from those fair books or something like that to have it shipped to Sweden for her birthday or something like that. I think that's the first time I actually held it in my hands. But the first time I read it, cover to cover was I think for Rothbard Graduate Seminar. Okay. And for those who don't know, that's a week-long seminar we hold here at the Mises Institute and it usually covers one book, one lengthy book in full. So, Pair, that said, part three. Now, as I mentioned, we've been through the first two parts with some other guests and for those who are following along, part three is really short and it's an easy read of about 30 odd pages. It consists of chapters 11, 12, and 13 in the book. The entire part's called Economic Calculation. And Pair, he gets into the beginning of this part sort of where he left off at the end of part two talking about how important money prices and calculation have been and that really the ability to assign numbers to things and as a result of that calculate is, for Mises, a substantial human achievement. It's not just bookkeeping. Yeah, exactly. So, I mean, he starts out by talking about how we prefer between different things and we can choose between different things because we value them differently. But going from there to an advanced economy with production in different stages and very specific kinds of tools and everything like that, just preferring is not enough anymore. You can't really get anywhere unless you have a common denominator so that you can compare. And he goes into that just simply choosing between two, I think it's two plays or something like that on the very first page. That's not a big deal because you're doing it for yourself and you sort of have a feeling for which play you would rather see at a certain moment and maybe the next moment is different but that doesn't really matter because choosing between those things is not a big issue but the problem becomes, of course, when everybody specializes in producing different things and different options and you have delays as well where you supply the economy with some good or service that others have fine value in and you get purchasing power back from them and that you then can invest in something and maybe save a fraction of it and so forth but then it becomes really, really messy and actually impossible without a money and a single unit. Right, and he talks about pre-money societies in other words with barter which is awful and makes everybody poor because of the lack of coincidence of wants, double coincidence of wants but in barter you see the inputs and outputs you say, hey, do I want to trade my chicken for some of this guy's wheat what the money process allows us to do monetary calculation allows us to better understand the inputs and outputs when things are more complex and we're not in a barter system. Exactly, and in the barter system you can really only do very simple things I mean, you can imagine if in a small society where you have someone that's good at picking strawberries and doing that and someone is maybe fishing and whatnot else and then you have someone who wants to build boats well, I mean, how do you build a boat and sell it to someone who has a bunch of fish or something like that and how many fish exactly for that boat you don't want all that many fish because you can't really store the fish and you can't really also buy a part of a boat for one fish or two parts of a boat for two fish and so forth so you can't really produce these big things and big capital, it's not really possible unless you have some kind of unit and medium of exchange. And of course he gets into value heavily in this chapter and so he's talking about value goes to ends but as actors we have to look at means to obtain value and whether we prefer A to B and he has some criticisms for what he calls the elementary theory of value and prices so first of all I guess we need to impress upon our listeners that Mises insists there's no unit of value money's not a unit of value value is subjective and it's imbued upon things by the actor, by the individual so he's got some criticisms for not just the socialist but also the new classicals who didn't really understand value except in terms of inputs or the labor theory of value how much time and effort went into something how much cost went into something how much interest went into something and because these conceptions of value were wrong they don't fully understand how to rebuke socialism for example. Yeah exactly so value is simply put it's just a satisfaction you get out of consuming or using something that's it and from that point of view then you would use a certain means only if you think that it will lead to a value that is greater than having that means itself and you'd only choose the greater value that you can get from it whereas most of the other schools and the older schools and well except for the Marxists who are still believe this stuff they start with the cost and the value sort of result of the cost whereas for Austrians and Mises the point is the value I mean you start with the end product that is what is valued and whatever is used to produce that end product has value in use simply because the end product is expected to have value and to thereby bring us some satisfaction So he has this great quote here at page 204 for those of you who have the scholars edition where he says an inveterate fallacy asserted that things and services exchanged are of equal value and this goes back to his earlier chapters on acting man he says look if we're just the same after an exchange we wouldn't be bothered to engage in it and this is what even neoclassicals or classical economists in his era have failed to understand is that people don't do these things to come out equal they do these things because they have preferences and they think they're better off that's why exchange happens in the first place Exactly and this is something that already Manger was talking about in Bombardica so copying his example too talking about how there's really no reason to exchange unless you think you're going to get better off from it and I remember Manger is talking about it's really attacking Adam Smith talking about do we actually have a propensity to truck barter and exchanges as Smith puts it and Manger says well if that is the case then we would see two neighboring farmers meet up and just exchange barley for barley and they would just exchange for fun because they have propensity to truck barter and exchange and he says no, that's ridiculous that's not the case we exchange because we want something and we want that something more than what we give up and the other person is exactly the other way they want what we're offering in exchange for that thing more than what they are giving us so it's always for value and for becoming better off which really means that we sort of escape some felt uneasiness But you know Dr. Whelan there's always these people who are sort of suspicious when we say that both parties think they're better off after an exchange you know what I mean there are people who criticize certainly free market economics but economics as a whole is a discipline saying no no no Jeff you're being facile people have to eat they have to have shelter over their head so these exchanges are not really what Mises makes them to be of course yes sure they pay their money in order to have let's say rent an apartment because they think they're better off but it's not really a voluntary exchange I mean I'm just throwing this out there because I think what Mises is getting at here is almost a pre-political argument Well absolutely I mean it's praxeology so it really comes from action we choose to act in a certain way because of something and action is always directed towards getting some kind of value on our own terms I mean and from our own position and whatever it is that we see in that situation it could be that we have as these critics would put it no choice meaning basically that one option is so much better than all the other options so we don't consider it a choice even we just automatically go for it but it's still because we have to act and make the choice to act it has to be for something that we value more than the options or we wouldn't do it Right and of course one thing Mises really drives home here is that how important a new technology at the time was called money prices the ability to compare inputs and outputs on some sort of common basis is really something you and I we get up in the morning we take that for granted but we shouldn't take it for granted and people who have God helped them who have lived through hyperinflationary episodes in life and these days that's mostly older people unless maybe you're in Argentina or Zimbabwe you know this is the ability to compare inputs and outputs on this common basis of a money is actually a huge marks a huge advancement in human civilization yeah potentially the the most important one I mean not just an important one but the most important one maybe more important than the wheel who knows it's simply because you can compare and contrast you can figure out how to move ahead and you can produce for others which of course releases productive powers of everybody quite a bit because that means that I can focus on producing what I am good at producing whether or not I I want the outcome I can use the outcome and sell it in order to get the purchasing power so that I can buy something that I want instead so even my production my activities are sort of indirectly for my own benefit and that's simply impossible without any money right and money of course is a way for us to hopefully obtain things we want without having to barter and part of what obtaining things we want means is that we're going to obtain them in the future and that's really what chapter 12 was all about it's called the sphere of economic calculation and this is one of those little chapters hidden little chapters in this book that to me has some delicious examples of Mises's philosopher hat coming on I'll get to it in a second here but there's some parts of this chapter that are almost eastern in orientation so he starts out by saying look historians talk about prices in the past what things used to cost but really money facilitates anticipating the future and that's why it's scary even what's happening right now in our own country with the Fed on the monetary side and the Trump administration on the fiscal side talking about maybe sending everybody a check for $2,000 or whatever it might be is that we've become accustomed to sort of anticipating at least somewhat what our dollars can get us in the future and if that change radically or rapidly that makes things more difficult for us yeah it does but that's also it's a fallacy to think that prices are stable or that prices will always change slowly and so forth and it goes through this too in this part of the book the prices are always fluctuating and they're always changing so even though we do have a common denominator everything is in a sense speculation I mean you can learn from history in our own experiences of the person power of the dollar or what not but the fact is that as soon as we act all the costs and all the prices will be future prices we don't just because it was a certain price yesterday doesn't mean that it will be the same tomorrow and of course if someone starts meddling with the currency itself as you referred to then we're totally screwed because then there's really no reason for assuming some kind of path dependency in terms of purchasing power and I mean we've really experienced this maybe not at this scale but for a very long time I mean everybody knows that prices go up over time we all have that experience and I bring this up to my students asking them so what is the natural the natural development or evolution of prices and they all say prices go up that's what they do everybody knows that and then I ask them okay but why do they go up is it because of competition because businesses are trying to beat each other and produce much more productively or is it because of innovation that they produce something in a better way or something new more valuable or what is it that makes all these products go up in price and they look at each other and look at me very confused thinking well this doesn't make any sense if this is how the market actually works then shouldn't prices actually fall and yeah they should fall prices should always fall because of competition because that's how the market works but since someone is meddling with the actual currency the common denominator prices go somewhere else and of course that's the experience we have so we're going to think automatically that that's probably going to happen in the future too and of course as Mises points out a money price is nothing but an exchange ratio and falling prices are of course a good thing for consumers so this exchange ratio is not fixed and that's really the whole point of this part of the book is that calculation deals with change and change is inherent in human society yeah absolutely and I mean when it goes into the businessman what the businessman does and of course the businessman in one way or the other produces for other people so they can get a profit hopefully I mean both the costs and the revenue both are future prices so I mean this poor guy is speculating like crazy on both sides so but had he not had a common denominator for both sides there is no way he could compare those he could not figure out whether this would be potentially a profitable enterprise or if it would just cause him a loss or what to expect at all yes and as but as you mentioned he goes into it in a whole sub chapter here discussion of stabilization this sort of fetish that economists and so called policymakers have to for stability and he says well no no no no this stabilization is a contradiction and it leads to all kinds of errors when we try to stabilize prices yeah he does and you can sort of understand stabilization because if you want to produce a plan for society or a plan for the economy it really sucks to have to update that plan all the time and if everything changes then that sucks I mean when I teach entrepreneurship and the way entrepreneurship has traditionally been taught you start with an idea and then you put together a business plan and you put all this numbers and all this text and produce this 100 page long document and then you go to the banker and you get a load and you start your business basically but then of course the real world is not how you planned it it never is so you this business plan is supposed to be a living document so you're supposed to update it all the time well that really sucks who wants to write a 100 page document with numbers and budgets and all this stuff when you have to update the freaking thing every day you don't want to and some things you simply can't do if the plan doesn't hold unless you plan for a long time so from the point of view of politicians and the rulers of society they want to stabilize everything and fix everything and they want one big company producing this type of item and another big company producing this other item and you want not a lot of people trying to get jobs and a negotiation for wages it's probably better to have one national union to set wages for everyone at once because then you can plan ahead nicely and have a smooth curve and all this stuff so from the point of view of planners especially if you have plans for a large chunk of society then you want stabilization that's an illusion but if you can somehow force a stabilization or a static non-changing society that would make it easier to plan what's so interesting here is the progressives who are actually the static right is the progressives who don't want change who were at least in his era pushing all the stabilization there's this great paragraph on page 24 where it says human action originates change and it's beyond the power of man to stop it and to bring about an age of stability in which all history comes to a standstill and when I read that again the other day it was interesting to me I almost thought that there was something eastern or zen about this this idea that we have to make friends with impermanence doesn't sound like it doesn't sound like a hard headed western capitalist it's the kind of writing that you find all throughout human action which is surprising for one it's also engaging but it's so unlike an econ textbook oh sure but I mean the fact that you have words and sentences is also different from an econ textbook so yeah it's very different I mean the more you dig into Austrian writings maybe not all of it but most of it and human action as well you realize that everything is sort of in a sense very stringent in terms of the logic and very clear but also very fuzzy because we're talking and dealing with people and the core component is subjective value and we can't say anything about how people value things or what they value we just know that they do and then they act on it somehow and that causes all these structures we can say something about the structure through praxeology but I mean exactly what people choose and how all this stuff we really don't know anything about it and we don't need to know it either for economics it's just modern economics pretending to be both statisticians and psychologists who want to be able to put everything in math equations and so forth they do that stuff but I mean there's nothing no other types of texts in economics that I've seen who where the theorists actually treat people as humans which is definitely the case with Austrians well what's interesting maybe a little perplexing and unnerving is that if you read Mises if you read praxeology heck if you read Hayek the use of knowledge in society there's a huge amount of humility there the idea that we can't know everything we can't plan everything we can't structure everything and yet sometimes all of us as economists or fans lay people we can sometimes be a little strident and know it all that we're right about everything but precisely because we're not necessarily right about everything or know everything that we promote the kind of libertarian policies that we do in the first place yeah absolutely I mean as you can't know then you can't also can't plan and you can't decide for others so the only option that could possibly work is to let people make their own choices the more choices are being made and the more different choices are being made the more we're going to realize what actually worked out and which way was a better way and we can observe others so I mean there's a whole learning process going on throughout society's progression and I mean there's only one way to make this happen and to benefit from this and that's to let people free let me give the readers or the listeners another example of his pros here on page 227 there are in this world no such things as stability and security and no human endeavors are powerful enough to bring them about there is in the social system of the market society no other means of acquiring wealth and preserving it that successful service to consumers now that's music to my ears and I have to say before we exit this chapter as an aside he does manage to get in a little dig at Irving Fisher who probably many of you have heard of as one of the preeminent mathematical economists he was born just about a generation before me but I was digging around about him over the weekend and right before the 29 crash 1929 crash Irving Fisher actually sounded a little bit like Donald Trump saying oh you know there's the greatest economy ever and the stock market's a really good shape and it's just going to go up, up and up and so of course Fisher is responsible for giving us at least in part he's credited with creating m times v equals p times t and so he was not only mathematical but he was someone who was really behind some of these legislative efforts to create stabilization of the US dollar and I always like it when Mises throws in a name or discusses something it's a little more than current because so much of this book you're reading it, he's writing it in the 1940s but so much of it is almost ethereal and that it doesn't seem it seems timeless and not necessarily grounded in his era. Yeah it is, I mean some of the examples obviously are a little bit dated but I mean that's the point of having a logical deductive science too, I mean there's nothing in math or logic or geometry, it goes oh old style triangles I mean triangles are triangles right and it's the same thing with economics the way we do with praxeology that no the logic is there and a human is a human there's nothing that changes much in what is the human condition so if we just start with people valuing subjectively and then from there as we do in praxeology derive all these truths about what must be the case in interaction and in action I mean those are timeless truths it can be no other way unless man turns into something else and at that point we're not going to use economics anyway Well I think a lot of our friends in government that's their job, that's their goal is to turn man into something very different let's talk about this final chapter chapter 13 of part 3 monetary calculations tool of action this is one of those little two or three page chapters that you find in the book here and there it's really interesting because he's talking about praxeology and he says you know monetary calculation requires both money as opposed to barter and it requires math numbers and to him this is so important that not just praxeology but it's subset economics sort of emerged when man started to figure out how to think about how to calculate Yeah exactly because it's only through calculation that we can produce like we talked about before but it's also the case that we can start producing very advanced things and through very advanced processes we can start to discover really how productive we can be through development of capital and very elaborate around about production processes and so forth simply because we can calculate and thereby we can forecast whether something will turn out good or bad and so forth And of course the Austrians like some of the free market schools that are that are still sort of tangling over the mantle never fell for the homo economicus argument and we see a little bit of that from Mises on page 231 where he says he's basically talking to the left here I think to the people who think life ought to be art and beauty and not this hard economic calculating approach to everything and he says there are people to who monetary calculations repulsive they do not want to be roused from their daydreams by the voice of critical reason reality sickenes them they long for a realm of unlimited opportunity and you know it's so funny because those lines just remind me that we always have had this this call in society to live in some sort of post scarcity fantasy world and it existed you know 80 years ago it's going to exist 80 years from now there's always going to be people who think that we shouldn't have to get up and produce in the morning absolutely and I mean they sort of seem to assume that we're already in a post scarcity society and I think part of their reasoning starts with thinking simply that scarcity itself was created and it's because we have capitalists who sort of occupy land that we don't have enough land and it's because capitalists occupy factories that we don't have enough work for people enough income and it's because capitalists produce food and therefore have monopolized food production that we don't have enough food and so forth but I mean I don't think you can find anything even close to confirming that view if you look at any of the data in terms of how much more food we're producing and how much less resources we're using in this production and how prices of all these resources and these goods are falling over time and what's happened over the past two to three hundred years through industrialization and adopting more of markets and more of trade I mean it's just ridiculous to claim that there is any type of scarcity because some people are occupying the resources I mean then this being said I'm not saying that no one is occupying resources I mean you mentioned the state before except for occupying resources and making us less productive but still I mean we're producing so much more in terms of goods and services to satisfy people's wants at much lower prices than ever before so claiming that this is some kind of cold and hard and brutish society where we're all enslaved because of money I mean money is Mises talks about in these three chapters and elsewhere money releases the productive powers of people and releases in a sense the innovativeness of people too so we can have people innovate new types of products, new ways of producing things and new types of materials and all these things that we then benefit from Pair I'll leave you with this I know that in some of your courses at Oklahoma State you assign Mises and other Austrians do you assign portions of this book in any of those and how do your students respond? Yeah absolutely I mean I teach a course in Austrian economics and also I have a PhD seminar on value creation in society where I have a bunch of this stuff and I assign Menger and Bombavar and Mises and Rothbard and some Lochman and stuff like that too I have them read Mises 1920 SA and some excerpts from Human Action as well and I think they're a little bit confused at first because they've never seen anything like this whether they're economics majors or entrepreneurship students or from some other discipline it doesn't really matter they've never seen this type of logical reasoning and you can tell sometimes my favorite lecture when teaching Austrian economics is when we basically go through the paradox of savings high excess even though I don't have them read necessarily that essay just going through how consuming less means we get growth and more jobs and more investment more entrepreneurship and we get wealthier and you can see how they follow along in the logic and they find nothing wrong in the logic and that's super frustrating because they know that spending is what makes the world go round but they can't poke hole at it and you can tell that all of them really want to so it's a fun exercise as an instructor to assign this sort of thing because since the logic is so obvious and it's so easy to follow it's so compelling the argument yet everything you've been taught is very different so how can this be true? it's so interesting that they've always been taught that spending and consumption is the key to economic growth but they all know as individuals if they overspend or over-consume that bad things happen to them and they might find that out with respect to their student let's hope they don't all that said Dr. Pair Bielund I want to thank you I want everybody to follow him at pierbielund p-e-r-b-y-l-u-n-d on twitter we've been promoting the book The Cause and reading it, following along it will link to our bookstore version of this also our free html version you can simply follow along online there's no need to purchase the book if you don't want to the code from the podcast h-a-p-o-d for Human Action Podcast that's h-a-p-o-d gets you a discount in the bookstore both on the hardcover scholars edition which is really well worth your while it's a beautiful book you're going to enjoy owning it as opposed to just having it on your kindle or whatever this is one of those books that you need to I think physically own but we've also got a great paperback that's just a few bucks I think it's five dollars or something a little tiny print for you young people and this is a journey it's a book that going through it is going to make you better off it's not always going to be the easiest thing I think we joked with Shawn Rittenauer that sometimes it's like going to the gym or eating your broccoli or whatever but nonetheless Mises is someone who still has to be grappled with and when Dr. Bielund talks about having students presumably in their early, mid or even late twenties in his undergraduate and then Ph.D. programs at Oklahoma State who have never come across Mises or Hayek well that's an indictment of us that we have as a society and as an Austrian movement sort of allowed this state of affairs to exist and so it's incumbent upon us to have people reading the Austrian school and promoting it and they should be reading Marx and Thomas Piketty too and if they come to their own conclusions that's fine but we need to be out there we need to be a voice and we're so grateful and thankful to people like Pair who do such an excellent job of making this school of thought come alive for people so that said Dr. Bielund thank you so much Thank you Jeff The Human Action Podcast is available on iTunes, SoundCloud, Stitcher, Spotify, Google Play and on Mises.org Subscribe to get new episodes every week and find more content like this on Mises.org