You will learn more about inflation in the first five minutes of this conversation than you thought you could. The interview with Professor Antony Davies only gets better from there!

[Editor’s note: Professor Davies current book can be found at this link.]

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I’m Ed Kless with my good friend and co-host, Ron Baker, and folks on today's show, we are pleased to have Professor Antony Davies. Ron, how's it going?

Ron

Very good, Ed, I'm so looking forward to this.

Yes, it's going be a wide ranging conversation. Antony, as he has told us to call him, is very erudite and will often opines on anything and everything. So we're looking forward to that. We will not have, as we like to call it, the Tyler Cowen problem with Antony. So let me read his bio and bring him on so we can start the conversation. Dr. Antony Davies is the Milton Friedman Distinguished Fellow at the Foundation for Economic Education (FEE), associate professor of economics at Duquesne University, and the co-host of the podcast Words and Numbers with James Harrigan. He authors monthly columns on economics for public policy for the Philadelphia Inquirer and Pittsburgh Tribune review. And he has written books on understanding statistics published by the Cato Institute. I'd love to ask him about that because I can't find it on the Cato Institute's website, and co-authored hundreds of op-eds, in, among others, The Wall Street Journal, Los Angeles Times and the Washington Post. Welcome to The Soul of Enterprise, Antony Davies.

Well, first, a couple of quick connections. First, you should know that both of my in-laws are Duquesne grads, although they graduated in the late 60s. But I am very familiar with Pittsburgh having a family of origin that started there, love the area. I think it's one of the most underrated places in the United States, actually, in my view, so I'm not sure your feelings on that. But the other connection I wanted to make is in your bio I saw you went to the all-male Catholic bishop [St. John] Neumann High School in Williamsport, PA, and I too am a graduate of an all-male Catholic institution, Chaminade high school in Mineola, NY. So, I think that that changes us somehow, I think there's something in there. What I wanted to ask you right out of the gate is I wanted to talk about inflation. You most recently did a great interview, I guess it was a video piece, for the Foundation for Economic Education refuting a Vox piece that really mis-defined inflation. So I'll ask the questions in succession, and we can unpack them. What do most people think inflation is? What is it really? And why is that important?

Sorry. What is it really? Why is that distinction important, too?

And I've might have heard this, but it seems to be that the money supply has increased recently. I don't know where I heard that?

Yeah, I remember when the Reese's Peanut Butter Cup was a quarter. But why haven't we seen inflation as a problem? If it's been going up since the 70s, the money supply [going up] since the 70s? Why haven't we seen it reflected? Has growth been equal to it, at least to some degree?

The one other aspect of inflation that I wanted to ask you about, because I've seen you talk about it quite eloquently, is that we also don't see in my iPhone, for example, does in 1976 $200,000 worth of stuff, or perhaps even more, and that's not reflected in the price either, because I only paid say $1,000 for this, correct?

Yes, tremendous. But then there's also the timing problem too, right? When the government pushed all of this money out, especially to the markets, and now even to us, it's six months late. We're already in recovery, so to speak, unless everything begins to reverse, which we saw a little bit at the end of this week, but let's not think about that. That's a timing problem, too?

Well, this is great conversation, flying by as usual, but we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody, we're here with Professor Antony Davies. And Antony, I'm probably going to bounce around on you a little bit more. But just to keep with what you were explaining about inflation, you wrote a great article in FEE, “Modern Monetary Theory Isn't Economics.” And you talked about the sleight of hand because it focuses on debt and dollars, rather than resources and products. And I just thought the way you explained it was fantastic. Can you kind of explain it and tell us why it's a sleight of hand?

Do you think this Modern Monetary Theory idea has permeated the halls of Congress and other politicians in Washington? It seems to have happened pretty fast. I mean, like faster than Keynes?

Well, I hope the economists can push back on it. The other thing, Antony, in just reading some of your stuff, you're not just an economist. I know you're a Chicago School economist, right? Very empirical, modeling, data, all of that. But you're a serial entrepreneur, as well. That's kind of a rare trait for an economist.

You just gave, very eloquently, why our show is titled The Soul of Enterprise; that is exactly what we try to convey. The thing that fascinates me about it, were you frustrated when you got to Chicago and realized that the economics profession doesn't have much to say about the entrepreneur, outside of maybe the Austrians, and I know you came to the Austrian School a little bit later, after your academic career. Outside of Schumpeter and maybe some amateurs like George Gilder, who write very passionately about the role of the entrepreneur, [they’re ignored by mainstream economics]. I mean, they're the lifeblood of a dynamic economy, without entrepreneurism an economy is just dead.

That’s very true. You did a podcast back on June 14 of 2017, “What You Should Know About Poverty in America.” And that made me think back to Nicholas Eberstadt, who wrote a paper once and he said, if we measured poverty by looking at consumption, rather than income, it would be like two or three percent. And it kind of set the world on fire, was [and still is] very controversial. And I think about the war on poverty and it seems poverty has won. What are the flaws in how we measure poverty?

I rather be poor today then rich anywhere 100 years ago. It's astonishing to me that we're still having this argument. Do you think Universal Basic Income (UBI), and I know there's all sorts of problems with, but as Charles Murray proposed it in his book, In Our Hands, where we have a Constitutional amendment that wipes out all the other programs, in his book even Social Security and Medicare, replaced it with a UBI, do you think that would be a better alternative?

Philosophically, Antony, if we did UBI the right way, I still worry about it from a moral level. Like, I'm here and the world owes me a living. There's something that rubs me wrong about that, the world was here first, it owes you nothing.

Sure, it's compassion and charity. It's just that those can't be coerced.

I love how you say that we've conflated poverty and inequality. My favorite proverb is a German one. And it says, “If you want equality visit a cemetery.” But Antony this is great, unfortunately, we're up against our next break.

Ed’s Questions: Segment Three

And we are back on The Soul of Enterprise with Professor Antony Davies. He is the author, with James Harrigan, of Cooperation and Coercion: How Busybodies Became Busybullies, and What that Means for Economics and Politics. And, Antony, let me ask you the question that all authors dream of when on a book tour: Tell me about your book.

So is using coercion in the first place that started the problem that you have to use coercion to correct?

Interesting. And so I want to ask you about that. And this is the notion of government getting involved in the price system. In most cases that's coercive, right? And I think this is why we see the high prices of healthcare and college education, all this stuff. It's government action begetting government action, correct?

Two quick points on that. Ron and I have interviewed Dr. Paul Thomas out of Detroit, he is one of the primary movers in the direct primary care movement, which I don't know if you're aware of that, but it is a great entrepreneurial solution to this problem, so again, this is a good example of cooperation out-doing coercion. But, the thing is, I think I've recently heard you talk tell this story on a podcast, and it has to get out there again. The absurdity of what you just painted with regard to wage and price controls, leading to all of this stuff, only to be outdone by Wickard v Filburn case, in the early 30s [1942 actually]. On how now the government controls absolutely everything, in the guise of interstate commerce. Tell the story of Wickard v Filburn.

By the standard of Wickard v Filburn, Winston Churchill is also a carrot. It's not interstate, it's not commerce, but it's interstate commerce. Okay.

And Winston Churchill is a carrot, again. Well, we're up against our last break, and I want to remind everybody that you can contact Ron or me by sending that email to asktsoe@verasage.com. We'd like to thank Professor Davies, he's going to finish up with Ron in the last segment, author of Cooperation and Coercion: How Busybodies Became Busybullies, and What that Means for Economics and Politics, go out and buy it at Amazon or a bookstore near you. But right now a word from our sponsor, and my employer, Sage.

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with Professor Antony Davies. And Antony, Jimmy Carter once said that “Our income tax system is a disgrace to the human race.” What would you replace it with, if you were King for the day?

That's really popular because people figure it’s going to get the drug dealer who goes and buys the Lexus, at least.

I am seeing more and more talk about, and a push for, industrial policy. You know, people are pointing to DARPA and moonshots, and especially Operation Warp Speed, and only the government can do this. Why is this a bad idea?

I know the idea that trial and error is done by the government better than the market is baffling to me. Operation Warp Speed, Pfizer didn't take any OWS money. And of course, the people that advocate for industrial policy, they don't have a good answer to that.

Which is kind of what the market does writ large, by itself, right?

A couple of weeks ago, we did a show on woke capitalism [Episode #349]. And I'm kind of concerned about the CEOs getting into these political fights and all of that. But more specifically, do you worry about the ESG regulations that are starting to come out of the SEC and the Federal Reserve? Because I think some of these things are just a wet blanket on the economy and innovation?

Yes, you've talked about the Cobra problems, right, the unintended consequences. I’d love your opinion on this. Do we need intellectual property laws?

The only thing that gave me pause, in my younger self, was what about drugs? You know, these need to be protected, because it takes so much money. But of course, a lot of that is government driven, too.

We've probably got time for only one more, but since it's close to our shores, what do you think will happen in Cuba? Do you think we'll see reform?

Well, professor, this has been quite an honor. Thank you so much for appearing on The Soul of Enterprise. And stay with us as we go through a live close. Ed, what do we have coming up next week?

Next week, Ron, we're going to have excerpts from our conversation with Dr. Reginald Lee and his theories on how costing and project management and subscription all work together.

Ron

Excellent. I look forward to it. I'll see you in 167 hours.

This has been The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. Join us next week on Friday at 3pm Eastern, that's Noon Pacific. In the meantime, please feel free to visit us on our Patreon site, https://www.patreon.com/TSOE. Or just https://www.thesoulofenterprise.com.

Other Resources

Here is Ron’s favorite line from an AMA on Reddit that Professor Davies did: “I’m not a fan of macroeconomics at all. To my mind, macroeconomics is simply microeconomics done poorly.” https://www.reddit.com/r/IAmA/comments/5ff92j/im_antony_davies_associate_professor_of_economics/

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits.