 This is Mises Weekends with your host, Jeff Deist. Ladies and gentlemen, welcome back once again to Mises Weekends. We're pleased to be joined by a good friend of ours, Pere Byland, whom I'm sure many of you know from his many appearances at Mises University and at the Mises Institute. He is Professor of Entrepreneurship at Oklahoma State University. He studied under and I believe obtained his PhD through our Professor Peter Klein at Missouri. And he is the author of obviously many academic papers, but he also has two full-length books and I recommend both of them to you. You can find them on Amazon. One of them is called The Scene and The Unseen and The Unrealized, how regulations affect our everyday lives. I assume that's a playoff of Basiat. The other is his more recent book called The Problem of Production, A New Theory of the Firm. And that's roughly what he spoke about a week or two ago at our research conference here in Auburn. All that said, Dr. Byland welcome. Thank you so much. How are you? Thanks for having me. I'm fine. Well, I have a question for you that I asked a lot of PhD economists who are generally in line with our way of thinking. Our ideas, generally free market ideas, but more specifically Austrian school ideas, tend to get more traction in business schools than they do in economic departments. Why do you think this is? Is that a fair assessment? Yeah, I think it is fair. And I think that has to do with entrepreneurship and how entrepreneurship is now a growing field in business schools. It is usually housed within management departments, but it has become a specialization for business school professors. And of course, entrepreneurship, where do you go? There aren't all that many theories out there. All the traditional theories are either Austrians or proto-Austrians. So you need to be Austrian. And actually in the literature, the two classical theories used mostly in entrepreneurship literature is Schumpeter and Kirsner. So if you're an Austrian, you fit very well in immediately. You almost don't have to learn anything really. I mean, Mises is cited in the top journals in management and entrepreneurship. I don't think that happens at all in economics, not even lower level journals. Well, it's kind of interesting because here we're always labeled as the more theoretical branch of economics, at least in methodology. But yet, I would say, would you agree that it's a bit of a badge of honor to be cited in business schools because that's more of where economics is actually applied in the world of business? Well, I think so. Absolutely. And what we're talking about all of entrepreneurship and all of Austrian economics too is about the dynamics of the market and what happens. And everybody can see, I mean, basically even the blind can see that the market is changing, the economy is moving, stuff is happening. It's not basically the economics gang sign, if you will. I usually tell my students that, supply and demand, right? We're never where those curves intersect. And that static world, it doesn't exist. And the business school, it's obvious because you start from the bottom. It's bottom up rather than looking at the structures in the economy. So for anyone in the business school, they would look at how do I make my business stand out? How do I get competitive advantage and all these things? So basically, how do I cause inefficiency in the market? I mean, to an economist, that's basically what we're talking about. How do I make sure that I'm so much better than all the others, that there is no efficiency? And if that is what we're teaching, then we're sort of teaching anti-mainstream economics. Well, would you go as far as to say that economics belongs in business schools rather than social science departments in universities? Because ordinarily we think of economics as a social science. Yeah, well, business schools originally were practically oriented, right? Training people in how to run businesses and things like that. I see really business schools as applied economics. So if you have sound economics, then you will be able to explain all these things that are happening and basically how to do them as well. And if you apply Austrian economics on the real world or how people run businesses and so forth, what do entrepreneurs actually do? Well, then there you have it. There you have basically a bullet point lift for how to make sure that you stand out as a business. And economic theory is important there to guide both educators and practitioners in the real market. I mean, not the formalized sort of gang sign market. Well, when we're talking about entrepreneurship, obviously the Austrian school makes the role of the entrepreneur paramount in ways that I think other schools don't. You know, conceptually entrepreneurship, this is always a criticism. I know it's a loaded question, but do you feel like entrepreneurship can be taught? Is that what you do in your mind at Oklahoma State or is it something more that you study? Well, that's a good question. And I think I have two answers, really, because there are really two things we mean by that. And one is entrepreneurship as starting a business and going through the motions. I mean, how do you practically start a business? And there's plenty to that today where you need to go through all the legal hoops. You need to get the proper licensing. You need to figure out who is your customer. You need to figure out what type of product are they actually looking for. What does the competition look like, market analysis and things like that? That can certainly be taught. And we've taught that for well over 100 years. That's not a big issue. Then you have the sort of economic theory version of the entrepreneur as the driving force in the market to use Mises' phrase. And do you teach that? Well, that's more about understanding how the economy works. And I personally think that an entrepreneur, a real person starting a business, would benefit a lot from having an Austrian understanding of the marketplace, because that means that you can see what it is you're actually doing, rather than just starting a business and going through sort of checking boxes when you're starting a business. I mean, one example of that would be pricing, for instance, where in MBA programs, we teach students how to set a price cost plus. And I wrote about this at Mises.org as well. And that's a disastrous method, really. You don't start there as an entrepreneur. What you do is figure out who is the customer? What is the product? And then you say, okay, so what is this worth to the customer? What can I possibly charge? And then you figure out, okay, can I cover my costs with this price? So it's backwards. So teaching costs plus, that's just a certain way of failure. Well, on the idea of what universities do, I know Peter Klein has written not always favorably about this concept of business incubators at universities. Setting aside for a moment the notion of whether they're publicly or privately funded, give us your thoughts. Is the concept of a business incubator at a university a valid concept of something that we ought to be promoting or is it a boondoggle? Well, in a sense, it's really the infant industry, sort of an infant business argument, right, that it's protectionism. You protect them until they grow strong, and then you can release them into the wild or into the market. And I mean, when you put it like that, then it's obvious that it's a pretty stupid idea. I mean, to put it plainly. On the other hand, I mean, you can still learn a lot. You usually have entrepreneurs who are amateurs. They're beginners. They don't really know where they're going with this. They just want to do it. And you do have mentorships. You do get contacts and networking and things like that in these incubators because you seem to co-locate it with other people interested in the same thing. So there's knowledge sharing going on in these places that is not harmful in any way. It's very beneficial for people. But then you have the infant business argument. I mean, you don't know if you actually have a business or there is an opportunity before you go out there and you try to talk to and sell stuff to customers and compete with your competitors. Per, even amongst Austrians, as usual, there's more than one view of what the entrepreneur's role is and what the entrepreneurial process consists of. But in particular, there's sort of a split between how Kersner viewed this and how Mises viewed this. I'll just summarize briefly. Kersner talked about this notion of being alert to opportunities so it was really a discovery process whereas Mises made it sound more like there's a rational actor fighting against uncertainty and the role of the entrepreneur is to take risks in the face of that uncertainty. So you've got discovery versus uncertainty. Is this something average people who aren't studying economics should concern themselves with? Tell us what you think of these two ideas. Well, I don't think it actually matters for most people, which it is, if either. I think probably Kersner and Mises were trying to explain different things. And if you go with Petke's story about this, then Kersner is really trying to say how the markets equilibrate or at least have this tendency toward equilibrium. And he's doing this by talking about the pure entrepreneur, the sort of very theoretical view of what an entrepreneur does to function as being alertness in the market, alert to opportunities. And then basically you cannot, as a pure entrepreneur, then fail because you see an opportunity and you act on it. Mises, on the other hand, was trying to explain the whole economic system and the dynamics of the market rather than just that tendency of it. And of course, as a real entrepreneur, it doesn't really matter to you. But contrast with what we'll grudgingly today anyway call mainstream economics, what's the difference between the Austrian school emphasis on entrepreneurship as part of the process of understanding and studying economics versus more orthodox or mainstream economics? What's the difference in how entrepreneurship is viewed? Well, I mean, if you want to, just in one sentence, I would say that mainstream economics doesn't have an entrepreneur. On the other hand, you do have mainstream economists who study entrepreneurship, which is sort of a, seems like a contradiction. But what they do is look at small businesses and how many self-employed are there as a fraction of all people employed and things like that. And they talk about how economic growth follows from the number of businesses and how many businesses you have. There are small, medium-sized and so forth. So what they're talking about is really the market structure or industry structure. Whereas what we're talking about is a function in the market, someone who is the driving force and pushing the market one way or the other but always toward more one satisfaction and the solution to problems. But of course, not everybody shares our view of that we tend to have this image of the entrepreneur as an individual or a small business and almost a heroic individual, someone who's willing to take risks, personal, professional, certainly financial risks, even with their own family. But our progressive friends who don't always share this, if you recall a few years ago, Obama made his famous gaffe where he said you didn't build that. The idea being that in the view of a lot of progressives and probably a lot of conservatives too, entrepreneurs are sort of the lucky beneficiaries of this system that the government built and maintained and they just kind of lucked into it. So not everybody views the entrepreneur so nobly or heroically. In fact, some people almost view it with a jaundice die. Yeah, I think the problem with progressives is that they sometimes get some things right. So they're the proverbial squirrel with a nut, the blind squirrel who occasionally finds a nut. And I think they're right in the sense that yeah, the government has provided a lot of things and yes, entrepreneurs benefit from that but that's usually because the government has monopolized these things and it said without government there would be no such thing as healthcare or roads or anything like that that we actually use, no infrastructure whatsoever. I mean, that's silly, of course. And entrepreneurs would do that sort of thing if government didn't prohibit them from doing it. But in the real world as it is today, when entrepreneurs say benefit from these things, we all do to some extent. We would probably benefit a lot more if government did not prohibit others from doing this. So it's a very inefficient solution, of course. And it's funny you would say that the entrepreneur is a hero because I'm teaching a course every semester actually at Oklahoma State called the entrepreneur a hero or a villain. Where I talk to students from all over campus, it's a humanities designated class. So we talk about entrepreneurship, different forms, different types, in different shapes and forms using movies and things like that to sort of illustrate what entrepreneurs can or can't do. And then we talk about the ethics of it all. Is this a good thing or a bad thing? What are the consequences? And we use different theories of entrepreneurship to sort of illustrate our discussions. And part of the readings is HAPPA, for instance, the Ethics of Entrepreneurship. But we read Jean-Baptiste Say and Mises and others as well and watch Hollywood movies to try to figure out not only how entrepreneurs are portrayed, but what do they actually do? How are we supposed to understand this? Well, I guess one point we can make is they're not spectators, unlike so many people in the world. Let me also offer up a little bit more of a right-wing critique of the view of entrepreneurs. As I'm sure you're aware, there's been what we would consider a Fed, a central bank fueled M&A boom, really for the last 20 years almost. Someone like a David Stockman, who's more of a right populist, he would criticize this and say, well, a lot of times we're just talking about reforming capital combinations. We're just kind of moving money around. And that in and of itself is perhaps not as heroic as creating the next life-saving device or what we think of as the mom-and-pop entrepreneur. So do you think Stockman's right? Do you think, for instance, a lot of what Wall Street does and a lot of what the M&A markets do is not really entrepreneurial, but it's for lack of a better term, moving money around? Well, I think that can be entrepreneurial and there are plenty of financial innovations as well. And Wall Street, per se, might not be very entrepreneurial because it gets all these newly printed monies. So that's not very entrepreneurial. On the other hand, everybody, if you would go with Mises, is an entrepreneur in just acting because we bear the uncertainty of that action. And of course, in that sense, we are definitely in all ways entrepreneurs and they are running businesses as well. They're making investments and they could choose other investments. Yeah, of course, they're entrepreneurial. They're moving money around, but that's how they make money as well. That's how they create value, even though you could definitely argue that this is fraudulent or based, at least, in fraud through the central bank printing all this money because it changes the whole monetary situation. So, Per, one last question for you. You're Swedish. How long have you lived in the United States? Since 2007. Okay. So, in economics, we talk about the concept that incentives matter. Talk a little bit about how, I won't say socialist, I'll say in more socialist countries in the United States. How does a socialist system sort of drive entrepreneurs away? How does it beat the entrepreneurial spirit out of people? If we talk about incentives matter, then it seems like in a socialist world, there's a lot of incentive to be the next Apple, to be the next Tesla. But yet, our friends on the left would say, well, people pretty much do what they want to do regardless of incentives. Well, if they do what they want to do, then they have an incentive to do just that because they want to do it. That's the very definition of an incentive in a sense. So, that's a silly claim on their part. In socialist economies, or more socialist economies, the obvious problem would be that you don't get to keep what you make. So, if you make money as an entrepreneur in a socialist country, then of course you keep a very, very little piece of it. And you also have all these other regulations that really take choices away from you. So, you don't have all these alternatives to choose from. Basically, in any situation you would have in a totally free market been able to choose from all of these different options. Whereas in a regulated economy you have all of these few options that are allowed. And of course that means that you're going to create less value. So, in that sense the value that you do create that's less than what otherwise would have been and part of the value is also taken from you by the government. So, in that sense of course we have less entrepreneurship than successful entrepreneurship as well probably. So, from your perspective is America still among the most entrepreneurial countries in the world? That's a very tricky question because it sort of means it depends on what you mean by that and on what level. I think the US is probably it has a lot of incentives still in place because taxation is I thought it was going to be lower than it is. Let's just put it that way. And it's sort of free to start business. But America is wrestling with a lot of problems as well in health care and all these other industries that are super licensed and super regulated and I lived in Taiwan for a while in the early 2000s and Taiwan struck me as a very entrepreneurial society. But on a very different level because here in the US you would start a business and you would try to make it grow and become really big and prosperous. And of course you have a huge market in Taiwan you had all these street vendors and they were cooking in the streets and they were selling stuff and you had all these small private schools in the black markets. They didn't have the proper license and what not from the government. So, they taught kids anyway because there was so much demand and then they had all these procedures for how to escape when there was a raid and all these things. But that's very highly entrepreneurial. I don't see people starting schools in the black market in the US for instance. I don't see street vendors very much either. So, it all depends. Formal business is probably more commonplace here whereas it's more sort of everyday acting in other countries like Taiwan. So, it's different types of entrepreneurship but still very entrepreneurial. Right. I think that's an important point. We tend to think of a startup as a Silicon Valley IT firm that's out there getting venture capital money when in fact a roadside pop-up restaurant on a side street in Taiwan is every bit as much of an entrepreneurial effort. With that we're out of time. Dr. Pair Bailand, thanks so much for your time ladies and gentlemen. If you'd like to check out his books again they're both available at Amazon and you can also read his stuff at Mises.org and at www.PairBailand.com So, Pair, thanks so much for your time ladies and gentlemen. Have a great weekend.