Forgive Him, Mises, For Gonzo Knows Not What He Writes
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.
P.S. If newcomers to this blog don’t understand why the above quotes are so funny, try reading this and this. Also, check out Robert Wenzel and Robert Blumen’s reactions to Lira.
This is off topic, but I have a question for Bob.
Paul Krugman writes: “You have Germany, whose economy is kept afloat by a huge trade surplus, criticizing America for running trade deficits”
Is this correct?
I know that the US is criticizing Germany for its trade surpluses, and that Germany has been criticizing the US for many of its economic policies. But has there been any direct attacks on US _trade_deficits_ by Germany? There can’t be surpluses without deficits.
Would you say that US trade deficits, ceteris paribus, cause any direct harm for Germany?
I feel sorry for Lira with exposing his poor research of Austrian economics . He had made some good fun reading. Personally, I liked how he pointed out that the “hyper inflation” BOOM happens — and isn’t just regular inflation slowly ramping up to “hyper” speed. Mises would have been pleased I bet with this portrayal of how a “crack up boom” can happen. But now this. He also is misinformed about the benefits of unfettered global free trade. Oops.
Most of what you quote is most emphatically NOT Lira “lashing out against the Austrian School,” but him criticizing macroeconomics in general. Free Advice is not adopting Rothbardian standards of scholarship, is it?
“Most of what you quote is most emphatically NOT Lira “lashing out against the Austrian School,” but him criticizing macroeconomics in general.”
Indeed, but I think that was one of the points Murphy tried to make.
OK, I’m confused — if that’s what Bob meant, why did he call what he was quoting “Lira lashing out against the Austrian School”? Lira himself never said “Here are my criticisms of the Austrian School,” he specifically says, “Here are my criticisms of macro.” So if both he and Bob agree that these are criticisms of macro in general, what was the point of mischaracterizing them as “lashing out against the Austrian School”?
Gene, I have a hard time believing that you don’t understand what I am saying in this post. Yes, Lira is ripping on macroeconomics in general, in which he includes Austrian economics. The article starts with him explaining why he is not an Austrian. And near the end, he explicitly says that Austrians are no different from the monetarists, Marxists, blah blah blah. So it is 100% crystal clear that he thinks he is ripping on Austrians throughout the article. If he weren’t, then it would be incoherent; he wouldn’t be explaining what his criticisms of non-Austrians had to do with the question posed in the beginning of the article.
So it’s like someone saying, “Am I supporter of Billy Graham? No I’m not–I can’t stand religious people, what with their pope-worshipping and belief in transubstantiation.”
So would such a person be lashing out against Billy Graham? Yes and no, and I acknowledged both senses in my post on Lira.
I can’t believe I just had to spell that out. Of course you are aware of all of the above.
“I think that was one of the points Murphy tried to make.”
This is the problem I have with Murphy’s post. Why doesn’t he explicitly say what his issue is with Lira’s rant? If it’s simply that Lira mis-characterizes the Austrian position, then fine, it’s true. But there is more to Lira’s post than that, and I can only assume that Bob read it once and then emotionally responded as to why he had that nasty feeling in the pit of his stomach.
Delving a little deeper, I don’t see much wrong with Lira’s post.
Yes, he mis-characterizes the Austrian school at almost every mention, but get past that.
His whole point is that individuals should do their own thinking when it comes to economics, i.e. not blindly subscribe to one of the “religions.”
Every single person who does this will find out sooner or later that they are an Austrian, Lira included (even though he apparently doesn’t think so since he doesn’t seem to understand this particular religion).
I think that is a great message.
Hi Gene,
Could you please explain what you mean by “Rothbardian standards of scholarship”? Thanks,
Robert Fellner
Rothbard would pretty much write anything that came to his mind when he wanted to trash someone, without any regard for its truth..
It was surprising to see that Lira knew this little about the Austrian School, but I didn’t get too worked up about it. With his stuff, you have to realize that you’re getting some entertainment along with some substance.
“Austrian Economics”. You keep using that phrase. I do not think it means what you think it means.
OK this post by Lira was a bit off the mark, but his post about DeLong and Krugman was quite entertaining.
Careful, Aaron, Gene’s going to accuse you of partisanship.
Looks like somebody borrowed one of Bob’s Krugman debate promotional vehicles: http://www.xtranormal.com/watch/7570703/
Well, I was hardly the first to use that vehicle, though it’s possible the person got the idea from me. S/he has 15,000+ views for a 10-minute video, that was created only a few days ago. That’s impressive.