A lot of people are flipping out over Gonzalo Lira’s latest tirade. His object this time is not the banksters, the government, or Paul Krugman. No, his target is the Austrian School of economics, and specifically its predilection for mathematical prediction, GDP maximization, and tax increases. (Yes.)
When I was reading Lira’s piece, at first I was annoyed. After all, I’m an Austro-libertarian; we are genetically predisposed to take offense at 95% of anything on the internet.
But after some of the following passages, it was apparent that Lira truly had no idea what he was even talking about. It would be like someone accusing Billy Graham of popery.
Anyway here’s Lira, lashing out against the Austrian School:
Well, economics claims it is a science—yet for all its “scientific” models, economics found itself in 2007 with its hands up against the wall and its collective pants down around its ankles, when it utterly failed to predict the Global Financial Crisis, and the subsequent Global Depression.
Actually, there were a number of non-economists whose predictions were far more accurate than any paid economists’. But all those eccy Ph.D.’s with all the academic trimmings? They got the big ol’ raspberry, when the Global Financial Crisis hit.
Why be coy: Economics isn’t a science—it never has been. It can’t be—because its subject matter is people: And people aren’t predictable.
Yet economics—ridiculously—claims it has models which can predict the future—but what’s even more ridiculous, there are many who believe them.
What did economists and the other clergy of economics claim, in the Fall of 2008? “If we don’t save the banks, we are all doomed!!!”
That was of course not true: If the banks had not been bailed out, they would have gone into bankruptcy, the stock holders would have been wiped out, the bond holders would have gotten a haircut (or a buzzcut, rather)—but life would have gone on.
But not one economist in any position of influence advocated the bankruptcy and restructuring of the Too Big To Fail banks. Some actually advocated a “hold your nose and get it over with” approach to the TBTF banks—
Austrians argue that the government should cut spending and raise taxes, so as to balance the budget—and magically, the economy will improve, with no loss of GDP.
Austrians are smoking something—and whatever it is, it’s powerful. So I want some.
Lira then says: “See, I’m not an Austrian. Not only that, I do not commune at the church of economics. Call me a son-of-a-bitch if you must, but don’t ever call me an economist.”
OK, Mr. Lira, it’s a deal.