Friday, January 14, 2011

The Tragedy of Gonzalo Lira

Gonzalo Lira is out with another piece telling us he was lazy in his studies of philosophy and history, but nevertheless the studies were rigorous, and that therefore he knows that economics is nothing. I kid you not:
When I was growing up, finance was mother’s milk to me, especially as I was a bit of a math geek. But for my formal education, I was trained—rather rigorously, and in spite of my laziness—as a philosopher and a historian. This odd combination is why I have such a jaundiced view of economics: I don’t find economics particularly intimidating, or even particularly challenging—it’s just finance’s snooty but poor (and slightly daft) older cousin. History’s surprisingly ignorant and blinkered accountant. Philosophy and Math’s lightly retarded, Puritanically rigid, and altogether rather embarrassing spawn.

He then takes special aim at the Austrian School of Economics:
Since the Austrians cannot explain why deficits happen and eventually lead to national bankruptcy, they are simply positing them, much like tenets of a religion. These arguments might appeal more to our experiences in the real world—especially when compared to the a priori drivel of Neo-Keynesians, Monetarists, MMT weenies, and their ilk: Peddlers of arguments as unsound as atonal clamor. But a posteriori arguments based on intuition and “common sense”—gussied up in German though they may be, and attractive though we may find them—are of no help, because they are based on faith, not reason.

If anything has to be taken on faith—if it can’t be analyzed, its premises scrutinized, and the overall argument judged to be sound or unsound—then it’s really no argument at all.
Lira then tells us, he has solved the problem and will explain to us why democracies always go bankrupt:
I have the argument that explains why fiscal deficits happen. Moreover, I can explain why fiscal deficits occur in a democracy in a manner which is different from any other sort of regime. My theory can explain why fiscal debts in a democracy grow once they start, and I can explain why this growth in debt inevitably, inexorably leads to the bankruptcy of the democratic regime. Further, I can prove—by sound and valid argumentation—that the United States is going bankrupt right now because of this process. 
It’s an overall concept I’ve designated as the Democratic Bankruptcy Paradox: The paradox by which every democracy eventually goes bankrupt—regardless of the people’s will and intention of keeping it from going bankrupt.
It's too bad that Lira hasn't read more economics, because the effort he then goes through to outline his "discovery" amounts to little more than an unpolished, incomplete, poorly structured and formulated version of what economists, across the board, know as the Tragedy of the Commons. Garrett Hardin discussed and developed the Tragedy of the Commons in a much clearer, refined and better thought out manner in a December 1968, Science Magazine article ( Vol. 162 no. 3859 pp. 1243-1248) as part of a general article on population. Hardin, who apparently has read more in mathematics than Lira, referenced an 1833 pamphlet by a mathematical amateur named William Forster Lloyd (1794-1852), as he developed his theory.

But aside from Lira's missing all this "anticipation" of his theory by Lloyd and Hardin (neither of whom Lira mentions). Lira also fails to acknowledge, or perhaps isn't aware of, work done in greater detail about the relationship of a government and its subjects. There is no acknowledgement, for example, or awareness, of Murray Rothbard's Power and Market. In Power and Market, Rothbard discusses and categorizes intervention into three categories, autistic, binary, and triangular. He further specifically discusses subsidies, eminent domain, wage taxes, corporate taxes, capital gains taxes, property taxes, progressive taxes, the single tax, government ownership of anything, and all forms of government spending. In Bureaucracy, Ludwig von Mises discusses the subject from a slightly different angle:The difference between profit management and bureaucratic management, the philosophy of bureaucratism,  the bureaucrat as a voter, the bureaucratization of the mind, past failures,  economics versus planning and totalitarianism, and the plain citizen versus the professional propagandist of bureaucratization.

In short, be careful of any writer like Lira, who charges some writing is based on "faith" and then goes on to present a theory that is nothing but a butchered, poorly structured, version of a theory that has been around for decades, indeed, a theory that is recognized by almost all economists ( I can't think of any that don't). Further, be careful of any writer who charges that a school of economic thought is based on "faith", yet shows no indications that he is aware of any of the writing by that school of economists.

Bottom line the reckless, clueless, irresponsible writings of  Lira do not appear to be worth even one cent. I would be embarrassed to write the uninformed drivel he has written. I reject columns from others on a daily basis that are much more informed and carefully put together than the nonsense that Lira is putting out.

There's a lot of nonsense out there. It's starts with Paul Krugman and trickles down to the likes of Lira. Just notice, they never quote those they attack. They simply declare from on high their distorted view of the world. It's not argument, they put forth, it's unfounded  proclamations, not aimed for debate, but, one guesses, so they can be adored by those they can buffalo.


  1. It's official!

    Gonzalo Lira: not worth paying any attention to anymore.

    Man, that star was quick to burn out.

  2. It's a damn shame he keeps writing these nonsense-type things from time to time. I really liked his post on how the US never stopped fighting the cold war :

    But when it comes to economics, he seems pretty darnd clueless.

  3. Who is this guy and why would do we care what he thinks? I read his article and he seems to have reduced nearly all of the socioeconomic complexity out of his model to essentially support what he believes to be his conclusive proof. And to think, he solved this age old dilemma in less then two pages of words. Good God!

  4. HPX,

    My observation has generally been that a person who is clueless on economics inevitably tends to be clueless on just about everything else. Human action permeates all other subjects and disciplines. If you don't get it -- or are willfully and proudly ignorant, as in Lira's case -- chances are you'll make sense only occasionally, and by accident.

  5. Here's my response to your lies:


  6. Wenzel,

    So awesome, I see a legendary rivalry forming now that EPJ has been dubbed "supremely uncool". Them's is fightin' words! Internet manhood show offs are sure to generate massive new readership for both parties involved due to routine he-said she-said linking. In the end, both parties win because they gain more eyeballs (and hopefully with it, more ad revenue). It's kind of like how the government stirs shit up, pretends it is doing its best to avoid conflict and ultimately benefits greatly from said conflict by growing commensurately to take on the new threat.

    As for me, I believe fools are best ignored so this is the last I'll ever mention of the Great Gonzo.

    Good luck with this one!

  7. I posted a link to your post on Lira's site and it was taken down right away. He apparently is trying to put the shuck on the rubes.

  8. "I posted a link to your post on Lira's site and it was taken down right away. He apparently is trying to put the shuck on the rubes. "

    Then i guess my link to this post won't be up there for long either. LOL.

    You pretty much know how secure a man is in his arguments, by how much he can stand links or clear references to viewpoints that specifically address and contradict them.
    Control of the flow of information is the device of brainwashers and governments.

  9. I came here from GL's blog, so the link must be still there.

  10. Yeah, that GL piece was a doozy. The sad thing is that it is a horrible approximation of a theory that is bunk.

    Poor people don't vote, so it is mighty hard to figure out how they have any influence over elected officials.

    For people earning the median income, with four deductions, two of them children, social security takes a bigger bite out of the income than federal income tax. But people that make about $1,000,000 pay only 1/10 as much ss tax on a percentage basis. $2,000,000/yr earners only 1/20, etc.

    And sales tax is even more regressive. The tax on a pack a day smoker is the same dollar amount, whether you earn $10,000/yr or a billion. A Chevy driver and a Mercedes driver pay the exact same per gallon of gas in tax, 18 cents.

    The purpose of representative govt. is to redistribute wealth from the bottom 90% to the top 10%. It is working quite well, last time I looked.

    No one is mentioning that the so called Tea Party 'conservatives' have pledged to continue the current level of defense spending, which is at a level exceeding the rest of the world, combined. They are obviously not seriopus about balancing the budget. But they are taking care of the top 10%.

  11. I just had to open my big mouth :)

  12. What an awful lot of vitriol spewed on one page about one man and his opinions! It appears he must having something worthwhile and important to say, judging by his detractors.

  13. I agree, that star was quick to burn out.

    I thought he had some potential. If I'm not mistaken, some small slivers of his previous views seemed to be Austrian without him realizing it. Many people tried to coax him into reading more.

    Lately he does seem hell bent on trashing Austrians, reminds me of those Coordination Problem fellas in a way.

    Sadly, it doesn't appear as if he will take any time to read further the works produced by Austrian economist.

    I appreciate EPJ taking the time to clarify things a bit.

  14. Absolutely spot on. His arguments do not follow empirically let alone logically. We are told the US suddenly gained cheap credit in 1975 and the US is his one example that "proves" his theory. What a joke. Anyway my website for those interested, which hopefully has at least some insight into economics (as opposed to boosting my ego by abusing a myriad of great thinkers) is:
    And well done, keep up the good work!