Per Bylund Profile picture
Prof @OSUEntrepSchool @okstate. Books: https://t.co/LPiISBmreQ columns: https://t.co/XNMgUKbW6I. Tweets my own.
Vænir Profile picture Gerald Timmerman Profile picture Darel Boyer Profile picture Manuel Garcia O'Kelly-Davis Profile picture gtpk Profile picture 6 added to My Authors
21 Jul
Many seem to think it is "unfair" to say that #entrepreneurs who didn't foresee the #pandemic "should" lose their businesses, because it is an unforeseeable event. But this completely misses the point: *every* event is unforeseeable for entrepreneurs. When you invest your own
money, it's not simply about figuring out (or guessing) that something will happen, but also when it will happen and what it means specifically for your investment. It is also not about having foresight, but about exercising good and proper judgment about what might happen and
how to best respond to it. Their problems are less about "foreseeing a pandemic" than about expecting something to happen and thus refrain from irreversible investments that lock you in. Yes, there is luck involved. But only because the future is uncertain. Superior entrepreneurs
Read 9 tweets
22 Jun
Peer review is an imperfect tool, and should not be treated as a Swiss army knife (always applicable). It has its uses where it works and adds value, but there are other uses that are simply not helpful. Primarily, #peerreview can be used to assess empirical studies by finding
potential problems with the data and statistical analysis. Here more perspective can uncover non-obvious errors or limitations that the authors have failed to identify or, also not common, chosen not to present. The questions peer review can ask here are whether the analysis was
done properly, if the results may be reliable, and what they add to our cumulative knowledge. The review focuses on whether the authors have done their due diligence and have done enough to exclude errors in the design and check for errors in carrying out the study. But there are
Read 19 tweets
19 Jun
Those claiming #demand drives the economy (which is wrong) tend to be quite confused about what it means to demand, and on what basis demand exists. They are, strangely, less confused about supply, which is the much more complex economic concept. Let's start at the beginning:
demand is formally defined as the willingness and ability to pay. The reason for this definition is that the point of demand is to explain something about the economy. Demand means action (buying) with respect to specific goods at specific price. Without such action, there is no
effect on the economy. Supply-and-demand analysis aims to explain real market prices. Demand is different from wants, which are endless. We can want a vacation on Jupiter, but that has no economic impact. It's merely dreaming before an entrepreneur provides that service. Wanting
Read 19 tweets
9 Jun
We have the wrong intuitions about the #economy: we tend to assume that it is about #engineering rather than #entrepreneurship. This is fundamentally mistaken. Economists typically make that same mistake, and therefore focus their modeling on the wrong thing. If it is about
engineering, then it is about efficiency, technology, and resources. But it is not. It is about value. Production efficiency, technology, and resources are a first concern only when firms are competing head-on selling commodities, where every business produces goods that are,
from the point of view of consumers, indistinguishable (think gasoline). But this is hardly ever the case in the dynamic market process; it applies practically only to the final stages of an industry's life cycle: maturity and decline. For this type of head-on competition, in
Read 15 tweets
18 May
I'm surprised at the problems people have with understanding my pinned tweet. I realize many have ideological blinders that make it hard to see the actual words and their literal meaning. But a more fundamental, and much more alarming, issue is that so
many seem to not understand the concept production. The point of production is to make something more useful and thus more valuable. Our default and starting point as a species (and, typically, for us as individual beings) is to do and having done nothing. We do things because
that offers (or at least promises) more value in our lives (survival, reproduction, comfort, entertainment, etc.). If we do not act, we do not produce those valued outcomes. That is by definition to live in #poverty. The alternative, to have access to a great mass of produced
Read 8 tweets
14 May
#Economics has lost its way and made the study both impotent and of lacking relevance. It is easy to see how and why if we first recognize that proper economic thinking takes place two steps beyond the apparent. Non-economists typically take none of these steps. Modern economics
has lost the ability to go beyond the first step. This can, I think, be explained by its increasing adoption and reliance on mathematical and equilibrium models, which typically disallow the second step. What are the steps? They involve going beyond what is directly observed to
uncover, first, the immediate or atemporal tradeoff and, second, the temporal dimension of the tradeoff in an overall process. Bastiat famously distinguished good and bad economists by their ability (and inability, respectively) to see the 'unseen'. What he meant by this is that
Read 30 tweets
12 May
Much of #economicpolicy aims to 'fight' #unemployment. This is entirely unnecessary, because there is no such thing as lasting involuntary unemployment. This is unfortunately little understood today, but it is nevertheless a created problem. And since it is created, the solution
should be to remove the cause--not add countermeasures. That it is a created problem becomes obvious if we look at the basic market mechanisms. Labor is a means: it is effort, time, and expertise applied toward creating something that increases our wellbeing. Its value to us is
derived from the wellbeing it creates. If we are living like Robinson Crusoe on a deserted island, we might invest our labor to gather food and branches for a fire. Without this labor, we'd have neither. But it is not the labor itself that is wellbeing, because if Crusoe would
Read 18 tweets
27 Apr
Many call for 'pausing' the #economy during the #pandemic, and then, presumably, 'press play' again when it's safe to do so. But this fundamentally misunderstands what an economy is. The market economy is better understood as an economic organism than a machine or mechanical
system. An economy does not come with levers and controls, it has no brakes and no gas pedal, and it certainly cannot be stopped to then be restarted. The economy is, simply put, our collective organizing of scarce (meaning we would be better off with more) resources toward
satisfying people's wants through the production of goods and services. This 'organism' consists of the constant improvements and adjustments of autonomous producers who are interdependent in the web of creation directed by the generation of valuable outcomes. While many prefer
Read 24 tweets
21 Apr
Suddenly everyone is an #epidemiology expert, which understandably frustrates 'real' experts. But it is good that people read/share information and form opinions. The problem is the widely shared fantasy about what empirical #science does and how it works. Science is not a one-
shot game where you design one impeccable study to deliver the knowledge we need, and then a "settled" science based on The Truth™. There is no such thing as an impeccable, truth-generating study. There are always things to critique and that can be done better. This means two
things: that we should not take any one study as gospel, and we should not dismiss every study for having weaknesses. Scientists work in the very opposite way, and slowly build a widely agreed-upon body of theory by incrementally refining methods and adding to the evidence. Even
Read 21 tweets
9 Apr
Every year when preparing for my doctoral seminar I reread (among other things) Schumpeter's Theory of Economic Development (1934). I think it is a great book with lots of insights, but also a number of problematic assumptions and conclusions. But what I find most fascinating is
how poorly it has been understood by scholars. For instance, many would refer to Schumpeter's circular flow as a modernistic equilibrium construct. It is not. Chapter 1 is very clearly a restatement of the value-based equalities per Say's Law. Schumpeter spends some time
discussing how a person's supply is his demand, that one does not have purchasing power unless one first provides value to another and thereby earns this purchasing power. Thus, (one's) demand is constituted by (one's) supply. Schumpeter interprets this as meaning there is no
Read 8 tweets
7 Apr
In our present dire economic situation, lots of businesses are expected to go bankrupt. The question nobody seems to ask is, why do they fail? There are *two* issues at play here, which are very different, have different causes, and should require different solutions. [thread]
The first is failure because businesses are prohibited to continue operations, their customers are curfewed, etc. This is not an entrepreneurial failure, but one that is imposed on these businesses. For these failures, government is to blame. These businesses go bankrupt because
they are simply not allowed to do business. But the goods are wanted and there are (presumably) customers willing and able to buy them. For example, restaurants not allowed to serve guests but can only offer curbside or home delivery. This lowers the value of their offering and
Read 20 tweets
26 Mar
The #coronavirus #pandemic/#panic has already fundamentally changed our society and #economy. We're already seeing #quarantines along with #unemployment, #bankruptcies, and empty shelves in stores. And we see how entire states are being shut down as government asserts they know
which businesses are 'essential' and thus may operate and which are 'non-essential' and therefore forced closed. Whereas this obviously will cause enormous economic problems, let's take a look at what is actually going on. We are not only in the midst of a virus pandemic, but
also a major economic shift: from industry to information. Such shifts can happen smoothly, but government's actions are forcing the shift and disrupting all industries--uprooting the traditional employment model and creating a gig and work-from-home economy. Part of this is the
Read 13 tweets
20 Mar
Why are people shocked to find stores running out of #essentialgoods, #hospitals suddenly lacking supplies and equipment (even beds), the general lack of flexibility by actors, whether #government or #privatebusiness, to respond to the crisis? It is exactly what we should expect
from an economy that is heavily regulated. So, we need to talk about #regulations, because they are at the core of many of the problems we are dealing with. Regulations make economies function poorly--and much, much *worse* in times when we need solutions urgently. People have a
romantic view of regulations as something inherently beneficial, but the fact is that they are simply restrictions: regulations stipulate that some actions are not allowed or are otherwise penalized (added cost, such as a fine or tax). In normal times, this means it is more
Read 20 tweets
13 Mar
There are some very disturbing calls for quick fix "solutions" following the reporting of how countries have and have not handled the #COVID19/#Coronavirus. It is not about how contagious or dangerous the virus actually is, which is not my expertise, but the typical and dangerous
misunderstanding of the supposed efficiency of hierarchy and, therefore, the effectiveness of control societies, authoritarian rule, and dictatorial regimes. To put it simply, the claim is that #China "handled it right," was able to do something by acting fast and forcefully,
and, by implication, that open societies are impotent to threats and fundamentally fragile. But this is exactly wrong. This misconception arises out of a common but fundamental misunderstanding of social organizing (such as society, markets, etc). And, interestingly, it is put
Read 17 tweets
4 Mar
There is a lot of confusion regarding what #entrepreneurship is and how entrepreneurs earn profits. This confusion causes a distinction between "market" entrepreneurship and "social" entrepreneurship that does not, in fact, exist. Generally speaking, #socialentrepreneurship is
the providing of value to those in need, with the implied understanding that there is no "room" for earning profits. But this type of activity is either charity, plain and simple, or it is a fundamental misunderstanding of entrepreneurship. This becomes clear if we distinguish
between value creation (really, facilitation) and distribution (value capture). They are often misunderstood for being the same thing--or value creation is overlooked completely. What entrepreneurs do is create new value, which is how they constitute the "driving force" of the
Read 24 tweets
18 Feb
#Trade is good. It is amazing that so many fail to comprehend how trade works. But, more importantly, even fewer the huge implications of it. Let's take a look. When two parties voluntarily exchange, they do so because each of them expect to become better off by doing so. It
doesn't matter if they are equally wealthy, or if one has a more pressing need. The simple truth still holds: they wouldn't exchange unless they saw reason to. Any trade that takes place is thus the result of each of the parties' striving for a situation that is more satisfying
to them. This makes exchange different from redistribution, which takes from one to give to another, and it requires the absence of fraud, where one party tricks the other into exchanging based on (intentionally) false information. Without the use or threat of physical force or
Read 16 tweets
14 Feb
Free-market economics is often ignorantly dismissed for being "ideological" rather than scientific. It probably sounds smart to the economically illiterate, but it is decidedly not. It doesn't mean nearly what most people assume it does. The word "free" in free-market economics
is not used as a normative value judgment but indicates an economy that is unaffected by exogenous (from the outside) factors. "Free" therefore means that it is the market economy in and by itself that is subject to theoretical analysis. This is, in fact, the only way to identify
any and all "pure" market mechanisms and processes. If economics would try to inductively extract theory from data, we could never know what it is we capture in those data: is it the actual (underlying) economic mechanisms, or the effect of regulations, or of a specific temporal
Read 19 tweets
31 Jan
Economists are known for typically having a Whig view of their science, as @PeterBoettke nicely summarizes in this piece: econlib.org/library/Featur… . Other social sciences often follow the same reasoning, with the implicit view in e.g. management being that new contributions must
"build on" (not question or criticize) what has already been published. The rationale economists use for subscribing to the Whig view of theory is fundamentally mistaken, however. It is based on applying a view of markets as selection mechanism onto the development of theoretical
knowledge. The problem is not that the market principle may not always be applicable on the theory development process, but that what is applied is a hagiographic misconception of the market process. The market process does not select the "best" ideas; it selects the most
Read 13 tweets
26 Jan
Will #deflation be the end for business? Hardly. Deflation is only a problem for businesses in an inflationary economy. Sounds contradictory, but the point is that business is properly operated aimed toward (meeting or creating) the future--not to repeat but to *leverage* the
past. Entrepreneurs and managers continuously forecast and try to position their businesses with respect to the future market situation. In today's heavily distorted, #inflation-suffering markets, businesses have learned to anticipate that prices will continue to rise: buying
(factor, input) prices as well as selling (output) prices. This is more than simply relying on experience, which is a shaky foundation for predicting the future. In present markets, government through central planning of national currencies *promise* to *enforce* inflation. The
Read 7 tweets
22 Jan
The eloquent 19th century French economist and liberal Frédéric Bastiat famously noted that what separates a good economist from a bad one is the ability to consider both the seen and the unseen. A bad economist does not recognize the costs down the bastiat.org/en/twisatwins.…
road, and may thus come to advocate all too costly solutions (as in the commonly used analogy, peeing in one's pants in the dead of winter to escape the cold--warm at first, followed by freezing). The distinction between the seen and the unseen is an important one, without which
the true tradeoff cannot be understood. And the tradeoff is core to economics: every action is a choice, which means the alternatives must be known to figure out the better alternative. Anyone can suggest solutions to problems without reference to the cost. But those are not
Read 23 tweets
19 Jan
It is interesting how many astute observations one finds in e.g. Marx that are then used in a 180-degree turn to prove the opposite. Here's one, summarized by Kevin, where Marx correctly noted that cooperatives generally don't work very well in a market setting. There is a huge
literature on this, which typically finds that there are rather significant inefficiencies due to poor leadership and/or ambiguous goal-setting. Cooperatives work when they're limited to asset-sharing, e.g. where farmers pool their capital to share a grain elevator. But when the
coop becomes more of a business in itself, it struggles. Very often, these problems can be dealt with by instituting professional management, which then makes the coop into something resembling a corporation--but with problems due to the membership (rather than share ownership)
Read 12 tweets