Sunday, November 7, 2010

The Yelling, Screaming, Clueless Gonzalo Lira

EPJ's very own Taylor Conant has been charging confused thinking on the part Gonzalo Lira for some time. See here and here. Now, Zero Hedge is out with a Lira piece that proves Conant correct in spectacular fashion.

Incredibly, at one point Lira writes:
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.
Robert Blumen writes in response to this Lira comment:
I challenge Lira to find even a single example of an Austrian economist who has advocated raising taxes as a solution to the bust or to anything else. I did a google search of the site on the keyword “taxes” and opened the first page of links. Every one of them had a negative view of taxes or reported on a tax without comment. On top of that, most Austrians don’t like GDP as a measure of economic output. Even the form of the prediction – if spending is cut and taxes are raised then GDP will not fall is a quantitative prediction of the type that Austrian economics cannot make.
At another point, Lira seems unaware that Austrians reject the mainstream methods of economics, such as, empirical modeling and forecasting methods. In this article, where the main focus is Austrian economics, he writes:

That hasn’t stopped economics from pretending to be a science. That’s why the discipline has spent the last 60 years importing math and physics wholesale: So as to create a veneer of scientific certainty and respectability.
He writes this without pointing out that Austrians explicitly reject " importing math and physics."

It's clear, he has never read Mises or Hayek. He writes:
Economics isn’t a science—it never has been. It can’t be—because its subject matter is people: And people aren’t predictable. 

Hayek clearly explained how you can have different sciences and methods. The science of biology isn't like the science of physics and both are different than the science of economics. But to say that because one is studying "people" one can't have a science is absurd. Mises from the premise "man acts" has in logical fashion spun huge swaths of the science of economics.
Does Lira deny that price controls cause shortages? Does Lira deny that minimum wage laws increase unemployment? Does Lira deny Gresham's Law that bad money drives good money out of circulation? Does Lira deny that the division of labor increases the standard of living for all? Does Lira deny comparative advantage?  All of these observations are part of the science of economics. They involve "people", but they are still ironclad laws explained by the science of economics.

He also writes:
 Now, I have no truck with micro-economics, generally speaking; accounting and finance.
What has Lira exactly been reading that makes him think micro-economics is "generally speaking; accounting and finance"? How is marginal utility theory accounting or finance? How is entrepreneurship accounting or finance? One needs accounting to determine profit and loss, in the same way one needs a telescope to spot distant stars, but astronomy isn't, generally speaking, about telescopes.

Lira also writes:

Austrians are no different from Keynesians, or Neo-Keynesians, or Monetarists, or Modern Monetary Theorists, and these all have absolutely no difference from Marxism: They all come from theoretically arrived at principles, which are then applied to the empirical data. If the data does not fit the theory, then the data is dismissed, and discounted as not germane to the problem at hand.
Monetarist positive economics is far different methodology than the Austrian methodology of apriorism. And Keynesian economics is a jumbled mixed bag of empirisits, aggregative deductivists, and beyond, that in no way can be linked with the consistent methodological individualism of Austrian economics.

Lira is obviously commenting on a subject he has neither read nor understands.

He then tells us his solution:

My solution to this problem? “Cut spending and raise taxes, so as to balance the budget. With a balanced budget, begin building a solid economy on a solid economic foundation.”

This apparently makes me an Austrian—Monetarists and Neo-Keynesians dismiss me, of course. They assume that, like all Austrians, I believe that cutting spending, raising taxes and closing the budget deficit will magically spur growth in GDP.

Actually, I don’t.

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.
Again, there is no known Austrian economist on this planet calling for an increase in taxes. Lira does tells us that  he is not an Austrian. But, he is much more correct on this then he realizes. He also tells us that he should not be called an economist. He is right here, also. But, it seems he thinks of himself as an S.O. B. Nah, he's wrong here. He's more like a delusional guy on the street yelling and screaming about things, who puts words together on current day topics, but has no clue as to what  any of them really mean.



  1. It should be pretty clear to everybody at this point in time that these "Fed butt boys" are just going to flat out lie and smear about what Austrian economics is in hopes of keeping the unaware, unaware.

  2. Wenzel,

    Glad to see the truth splattered in all its visceral glory over the pages of Economic Policy Journal.

    -Taylor "Austrian bloodhound" Conant

  3. I thought he made a useful differentiation between "inflation" and "hyperinflation" on one of his blog posts (the former is people seeking more of the currency during an economic boom, the latter is actually people trying to get out of the currency). His statements about Austrian economists are surprisingly way off, to say the least.

  4. There is a lot of confusion over what constitutes Austrian economics. Many believe it is simply some form of austerity. The charge usually goes something like, "you can't cut taxes without deficit spending..." and is constrained by the paradigm and paradoxes of mainstream economics.
    However, it is a step in the right direction that more people are at least becoming aware of it. I, myself, had not heard of Austrian economics two short years ago, and here I am writing for EPJ :)

  5. Bob,

    There is nothing wrong with trying to understand Austrian economics, but to pop off on methodology, policy etc, when you don't have a clue is something else.

    It reminds me of a story a former Boston Bruins coach told about a reporter who was assigned to cover the Bruins but didn't know anything about hockey. The coach took quite a bit of time to explain the basics to the reporter, within a week the reporter was second guessing the line changes the coach was making.

  6. Wenzel and BobE,

    Good story, but Lira goes one step further into intellectual debauchery: he takes pride in being ignorant. He basks in it. He revels in the "glory" of not being tainted by having a clue about economics.

    In your story, it would be as if the reporter, when being explained the game by the coach, covered his ears with his hands, closed his eyes and shouted "NAH NAH NAH NAH! I CAN'T HEAR YOU NAH NAH NAH NAH!" in an effort to avoid learning anything whatsoever about how the game is played.

    And then proceeding to question not only line changes but scoring, recruitment policies, players' salaries, etc.

    Lira is a mind-ragamuffin. He has confused himself into thinking he is a polymath because he knows very little about everything, yet never so little that his humongous ego doesn't have a problem spouting off.

  7. I agree with RW and The Bloodhound. Nothing I said should be construed as a defense of Lira. My comments about the spread of Austrian economics were a general observation.