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Gonzalo Lira On The Identity Of The False Religion Behind The Mask Of Economic "Science"

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Submitted by Gonzalo Lira

“Our God Is Money”: Economics Isn’t a Dismal Science—It’s an Ersatz Religion

Are you an Austrian?” I was asked recently, in the polite tones reserved for asking if I were, say, Jewish or Muslim or Christian.

I’d been asked the question while discussing macro-economic policy in the United States—
 
—actually, “discussing” doesn’t quite capture what I’d been doing:
 
I’d been lambasting the Neo-Keynesian drivel of spend!-spend!-spend!, which I deplore—“They’re like drunk sailors with the national credit-card—trawling for good blow and cheap whores in a Tijuana back alley!”—
 
—while at the same time ridiculing the Monetarists’ obsession with money supply—“Money-supply fetishists are just like foot fetishists—only twice as creepy, and only half as reasonable!”—
 
—all the while insisting that in this Global Depression, savings had to be the priority—austerity the only policy prescription that made any kind of sense.
 
Are you an Austrian?” came the question.
 
“I'm an agnostic,” I answered flippantly—but then instantly realized that my answer went to the heart of the problem with economics.
 
It’s no great insight to say that economics—the so-called “dismal science”—has had a dismal track-record in terms of predicting macro-economic events over the last forty-odd years.
 
And as for the last couple of years? Sheesh—a monkey throwing darts would have done a better job of predicting how the macro-economic picture would play out.

Very few people have been asking why this is so. Very few people have been asking why economics has failed so spectacularly at predicting the Global Financial Crisis, and very few people have asked why economics cannot seem to solve the Global Depression we are currently experiencing.
 
This is an important question—especially if we are collectively putting so much of our faith in economists and their dismal science, as the sherpas who will lead us out of this current mess that we’re in, and back up to the mountain top.
 
First of all, what is economics?
 
The dictionary definition is, economics concerns itself with the study of the production, consumption and transfer of wealth—everything from accounting to finance to macro-economics.
 
Now, I have no truck with micro-economics, generally speaking; accounting and finance. All good to me, within certain limitations. When I speak here of economics, I’m referring to macro-economics.
 
What does economics do, as a discipline?
 
The answer is obvious: Economics tries to predict the future.
 
Lots of sciences try to predict the future—and they succeed, too, without much controversy.
 
For instance, physics and chemistry claim that, if gasoline is mixed with air inside an enclosed cylinder, and then ignited, the force will drive a piston which will drive a crankshaft which will drive a car.
 
Lo and behold, several hundred million cars drive around the planet, amply fulfilling physics’ and chemistry’s predictions. Score for them.
 
But what about economics?
 
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.
 
In fact, economics definitively showed itself to be a failed science much earlier: Back in 1998, the spectacular failure of Long Term Capital Management showed them up to be fools.
 
LTCM—run by legendary trader John Meriwether—was a hedge-fund that used “scientific” trading methods developed by Myron Scholes, Robert Merton and Fischer Black, who invented options pricing. In fact, Scholes and Merton won the Nobel Prize in economics for their work—in fact, Scholes and Merton worked at LTCM, applying their “scientific” methods to LTCM’s trading strategies.
 
Talk about the best and the brightest! Meriwether opened his shop in 1994 with these two Big Brains running the engine room, along with a host of other Big-Brains-in-Training—and what happened?
 
In less than four years, Long Term Capital Management blew up. A “once in a billion years event” happened in less than four years—which means that either LTCM was the unluckiest outfit in the world . . . or maybe economics and finance isn’t a science.
 
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.
 
Circumstances being equal, water will freeze at 0°C, and will boil at 100°C—every time, time after time, no matter what.
 
But people? You can never predict when they’ll freeze you out, or boil over in rage.
 
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.
 
So if economics isn’t a science, then what is it?
 
Well: What human activity pretends to higher knowledge of a super-human power that controls human lives and destinies? What human enterprise tries to convince other human beings that they—and only they—know what will happen next? What group of human beings claim that their secret knowledge uniquely allows them to know what will happen—and so therefore, you must listen to all that they say, and never ever question their commands, decrees or pronouncements, no matter how foolish?
 
Easy: Priests. Priests in the service of a religion.
 
Ancient Mayan priests used their knowledge of the stars and the planets to not merely predict the future—they used that knowledge to control the populace, and therefore get their own way.
 
That is exactly what economics has been doing, as of late: Claiming knowledge of the future, and claiming unique access to a higher truth—unavailable to the ordinary man and woman—so as to get the populace to do their bidding.
 
Just like religions, economics uses esoteric knowledge and language to discriminate between its acolytes and the unlearnéd, the elect and the unwashed.
 
Just like religions, economics builds sophisticated-seeming theoretical structures, that seem to explain reality.

They don’t, of course: The mathematical models economist spend all their time building are simply not up to the task of faithfully reproducing the macro-economic reality, and thereby predicting it.
 
Why? Because there are so many variables that human invention simply cannot cover them all. Human invention cannot predict all the moves in a game of chess—and chess only has six classes of pieces moving on a mere 64 squares.
 
Imagine something like a world’s economy: How many classes of pieces? How many squares? How many moves? How many variables?
 
Heavens!
 
Yet economics—ridiculously—claims it has models which can predict the future—but what’s even more ridiculous, there are many who believe them.
 
Just like all successful religions, economics is very good at convincing people that it is the One True Path to Wisdom—and not just unsophisticated or uneducated people: Actually, as all good con-men know, the easiest people to fool are sophisticated, intelligent, educated people. It’s precisely their sophistication, intelligence and education which makes them arrogant, makes them think they can’t be fooled: They think they’re too smart to be fooled.
 
So of course, they’re fooled most of all.
 
Just like all religions, economics is used to explain away the actions of its more powerful adherents, and to protect the interests of its most powerful patrons.
 
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.
 
In fact, the financial sector today would be healthier, if the Too Big To Fail banks had been allowed to fail, and then restructured along Sweden ‘92 lines.
 
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—
 
—which is unsurprising: Establishment religions are not in place to change a society, but to maintain a society. Establishment religions benefit those in power by maintaining the status quo—their job is to make sure the populace never questions the status quo, no matter how wide the gap between the stated principles on the one hand, and what is actually done on the other.
 
The fact that the TBTF banks were not allowed to fail—and instead were bailed out to the detriment of the economy as a whole, but to the benefit of a small, well-positioned minority—goes to show what the establishment religion of economics is used for: To shore up the interests of those in power, to the detriment of the society as a whole.
 
Not only that, the Religion of Economics is used to explain away blatantly hypocritical measures as part of The Grand Design.
 
“It’s a bad solution, but what are we gonna do? Let the banks fail? That will bring about a market collapse! The end of the free market! So we gotta hold our noses and get it over with.”: How many, many times did we all hear economists say this, about saving the TBTF banks? That it was systemically necessary to save the banks.
 
Are those the words of someone who truly believes in the “creative destruction” that is supposed to be such an integral part of the free markets?
 
No: They’re the words of a priest of the establishment religion, protecting the interests of his masters.
 
Just like all powerful religions, economics has different sects and denominations.
 
Marxism used to be a creditable example: It was one more cult in the menagerie of economics. But this particular sect was discredited by the collapse of the Soviet Union and the Warsaw Pact nations. The gross and blatant failure of Marxism made it impossible to argue that it was a viable macro-economic policy option—so its fiercest followers were driven underground. (But they’re still out there, by the way: Like Gnostic Christians, waiting for their chance to come back out.)
 
Marxism is an obvious example of economics-as-religion—but I would argue that all schools of macro-economic thinking are no different from Marxism. The reason is because, like Marxism, all the schools of macro-economic thinking come at their subject from an a priori perspective.
 
Thus, 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.
 
This dismissal is where the various schools of economic thought get in trouble: That which they dismiss is usually the brick wall they find themselves crashing into.
 
Neo-Keynesians are arguing spend!-spend!-spend! on stimulus and whatnot, up to and including war as a possible solution to the fall in GDP. The more insane among this crowd, like Paul Krugman, argue that the Obama stimulus package was not enough—it had to be bigger.
 
Neo-Keynesians don’t realize that no stimulus will ever be big enough—but if they have their druthers, they’ll bankrupt a nation.
 
Monetarists, like Ben Bernanke and his Lollipop Gang at the Federal Reserve, argue that increasing the money supply will create inflation—which will mean the economy is getting back on track.
 
Monetarists don’t realize that they’re committing several logical flaws, principal among them being the post hoc ergo propter hoc logical fallacy, with regards to inflation. If they have their druthers, they’ll drive the nation into hyperinflation.
 
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.
 
Just like all religions, the various sects and denominations confer membership to its believers. They invite you to belong.
 
Notice how economists of a particular school rarely question the fundamental orthodoxies of their sect. Sure, little spats here and there over minor, peripheral issues within their denomination. But about the big pillars of their order? Nary a quibble, nary a peep, nary a doubt.
 
In fact, debate within the various churches is so small-bore and trivial, that you quickly realize that the quibbles aren’t about economics: The quibbles are jockeying for position within the school of economic thought. Like peacocks, showing off their useless plummage? Like that.
 
The one thing all the sects of the Religion of Economics all agree upon is growth: All agree that an economy must grow every year—year after year—no excuses—no matter what.
 
This is where economics fails most of all.
 
Of course, perpetual growth is ridiculous: Nothing can grow every year without fail. Nothing should be forced to grow year after year. Trees need to be pruned, growth consolidated.
 
Nevertheless, the current leadership of the American, European and Asian economies are all under the delusion of the same orthodoxy—growth!-growth!-growth!
 
The American economic leadership in particular is a slave to this economic orthodoxy. But as I argued in The Short-Sightedness You Get From Staring At A Single Number, deliberately and systematically turning all your macro-economic efforts towards inflating the Gross Domestic Product inevitably leads to distortions in the overall economy.
 
Growth, in and of itself, is not a metric of anything—and it can easily be perverted. Much of the debt accrued by the U.S. Federal government over the last 30 years—and the last ten in particular—was used to goose the economy to levels of growth that were unsustainable, and which have led to the situation we currently find ourselves in.
 
And what is the situation we currently find ourselves in?
 
The United States government and the American people spend more money than they bring in. They have been doing this for going on 40 years—and now the bill has finally come due.
 
That’s America’s problem—it’s really not more complicated than that.
 
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.
 
Rather, I’m a pragmatist: At this time, the best thing to do in order to maintain long-term social stability is to cut spending, raise taxes, close the budget deficit, and have negative growth for three or four years.
 
In other words, stop trying to avoid the Global Depression, and fully dive into it. Avoid Japan’s fate of Lost Decades. Let the markets really do their creative destruction. Let the debt overhang be wiped out via bankruptcies. Let the chips fall where they may—let the whole unstable house of cards crash to the ground—just get it over with, once and for all.
 
Of course, this will never happen. The orthodoxies of economics won’t allow it.
 
So instead, we’re going to get a combination of Neo-Keynesian and Monetarist solutions, to the problem the United States has.
 
This will bring hyperinflation by December 2011; severe social disruption starting in Q3 of 2011 and accelerating through Q4, before really exploding in Q2 of 2012; the dissolution of the European Union by December of 2012; and very likely—insane as it might now sound—a de facto dictatorship in the United States.
 
But hey, I’m probably wrong. After all, I’m a heretic, in the eyes of this particular religion. In fact, I hear Brad DeLong wants to burn me at the stake.

 

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Tue, 10/26/2010 - 18:07 | 678878 President Palin
President Palin's picture

"... the dissolution of the European Union by December of 2012; and very likely—insane as it might now sound—a de facto dictatorship in the United States."

 

Hmmmm.... 2012... wonder who will be elected president in November 2012?  ;-)

Tue, 10/26/2010 - 18:46 | 678985 walküre
walküre's picture

Complete and utter bull.

The EU will not be dissolved in the short term. If anything, the EU will expand and more countries will adopt the Euro in the foreseeable future.

Who cares which ass will get elected to occupy 1600 Penn Ave for the next term Presidency?

The show will continue, new hand selected and carefully groomed actors but the story is the same.

 

Tue, 10/26/2010 - 19:32 | 679085 thermroc
thermroc's picture

So no changes at all? We just continue as is, indefinitely?

You're deluded my friend.

Tue, 10/26/2010 - 20:21 | 679181 Herd Redirectio...
Herd Redirection Committee's picture

Right now 'Experts' are our Gods, whether they are experts on economics, politics, religion...

That will change, as the people lose 'faith'.

IMO, everything (economic policy, gov't intervention, etc.) should be determined according to trial and error.  But first we have to reset the system.  

http://psychonews.site90.net

Exposing the oligarchy one psycho at a time.

Tue, 10/26/2010 - 21:22 | 679319 Everyman
Everyman's picture

Exposing the oligarchy one psycho at a time.

 

Now THAT is a quote!

 

+10000000

Tue, 10/26/2010 - 23:42 | 679651 hbjork1
hbjork1's picture

I agree with walkure>

The story does not have to "be the same".  Having had the opportunity to watch the American body politic through WWII and the decades since I think the populace is starting to "sober up" in terms of their expectations.  The grief isn't over yet and I am seeing some little signs that the inflation that will offend a lot of people, including me, is starting.  There will be demonstrations and political rancor but the public is beginning to be interested in what kind of people they are electing.  We will be more tired, even exhausted by the combination of deflation of income and inflation of costs and increase in random theft.  But, IMO the "movie star" model in politics will go out and the conservative ethical model will become more popular.  Those dramatically seeking attention will gradually give it up as they discover that no one is paying attention to that anymore. 

Yep, it will take 2 or 3 years.  A lot of honest people will have been somewhat cheated but the population will eventually support ethical governance.  For those who don't understand "ethical governence" that means penalties for fraud at all levels, including public office.  And there will be no real revolution because, when all is said and done, we do have a representative government even though it is a large land mass with big differences in climate and approaches to living.  Approach to exhaustion will be the pacifier.  Except for Canada, there will be no place that the middle American can go and be reasonably at home.

Folks who want perspective on the push toward WWII should read "Paris 1919"(Six Months that Changed the World) by Margaret MacMillian.  Not a hard read but a heafty book with detailed accounts of the people and events.  It details how the various deciders got to where they were and some indication of how the alignments of WWII were established 20 years later. 

Best I can do.  Time to park my keyboard and watch to see how it all turns out. 

 

 

Wed, 10/27/2010 - 09:55 | 680293 chopper read
chopper read's picture

great to hear your perspective.

Wed, 10/27/2010 - 04:43 | 679914 Pondmaster
Pondmaster's picture

Didn't you hear ?The Mayan calender is off on its alledged predictions. Besides who would listen to a bunch of child sacrificers . Now as to our Economic system . They are sacrificing everyone not in their "class". The unwashed if you will . Yes Wall St and the Banks and the Fed are acolytes of the one world religion . Money and Power . What did Saruman in the Lord of the Rings ask the UriKiah Orc ? "Whom do you serve?"  Mr Lira you are SPOT ON about this being a religion .  Have you read about Babylon in the Bible book Revelations ? That is where the real conclusions to your points are. 

Tue, 10/26/2010 - 20:16 | 679174 Rahm
Rahm's picture

President Palin, can I be your Chief of Staff?

Wed, 10/27/2010 - 01:11 | 679786 Problem Is
Problem Is's picture

Lil' Rahm-Tard Has a Woody!
You mean: "President McMILF can I be your chief staff?"

staff : noun \'staf\ : a long stick or rod (see: Johnson).

Wed, 10/27/2010 - 04:33 | 679913 Moonrajah
Moonrajah's picture

Didn't you hear? Under Palin most current posts will be cancelled and new ones will be created:

Chief of Stuff (Treasury)

Chief of Huff (Propaganda)

Chief of Puff (Military)

Chief of Muff (Free Porn for sheeple)

Chief of Duh (Attorney General)

Wed, 10/27/2010 - 08:39 | 680111 trav7777
trav7777's picture

you are just threatened by powerful women

Thu, 10/28/2010 - 01:27 | 682541 Moonrajah
Moonrajah's picture

Intelligent women? Maybe.

Palin? I feel like I'm in a fucking slapstick for retards.

Tue, 10/26/2010 - 23:30 | 679632 Walter_Sobchak
Walter_Sobchak's picture

how bout cut spending, cut taxes, end the fed, outlaw lobbying?

Tue, 10/26/2010 - 23:49 | 679669 Oh regional Indian
Oh regional Indian's picture

Actually even you may be surprised at who.

Also a new word (it was new to me) and one that near threw me off my chair when I first saw it...

Palingenesis:

academic political theoristRoger Griffin refers to fascism as "palingenetic ultranationalism". The best examples of this can be found with both Fascist Italy and Nazi Germany - Italy looking to establish a palingenetic line between the 20th century regime under Benito Mussolini as being the second incarnation of the Roman Empire, while Adolf Hitler's regime was seen as being the third palingenetic incarnation - beginning first with theHoly Roman Empire ("First Reich") then with Bismarck's German Empire ("Second Reich") and then resulting in Nazi Germany ("Third Reich").

 

Cannot make this stuff up, eh?

Now who will be the Veep? Let's save that for another day!

ORI

http://aadivaahan.wordpress.com

Wed, 10/27/2010 - 02:18 | 679847 Coldfire
Coldfire's picture

Kinda like Mooselini 2012.

Wed, 10/27/2010 - 13:24 | 680911 Cathartes Aura
Cathartes Aura's picture

Palingenesis - love the concepts behind this word. . .

great find ORI!

Tue, 10/26/2010 - 18:13 | 678893 Diamond Jim
Diamond Jim's picture

It is no science as the results are never reproduceable, ie. no one can take the same data and expect to get exactly the same result. People and markets are always in flux. They can predict, computer simulate (with biased data and models) and hypothesize....but then again so do climate "scientists".....

Tue, 10/26/2010 - 18:55 | 679011 mikla
mikla's picture

Agreed that it is not a science, but disagree that they can "predict" and "computer simulate".

I'm not trying to be cute:  Economists are not smart enough to predict, nor to computer simulate.  They aren't even smart enough to do it in a "fake" manner.  (Steven Keen seems to be the lone exception, as he was an engineer before he turned economist, and remains disgusted at his own field.)

Quite literally, economists are murderers, morons, and mental midgets.

Again, I'm not trying to be cute:  They really *are* idiots.  They really *do* murder millions.  Just listen to Krugman, and feel your brain cells whithering away.

http://www.zerohedge.com/article/long-periods-drought-%E2%80%A6-followed-high-winds

Tue, 10/26/2010 - 20:03 | 679148 Herd Redirectio...
Herd Redirection Committee's picture

I think he was using irony, because he was referring to ClimateGate, the climate 'scientists' who were fudging data in order to provide the results they were looking for.

The real question is whether the oligarchy is dumb, or whether they benefit from the boom-crash economy.  The economists have been telling the ruling elite what they want to hear. 

http://psychonews.site90.net

Discussing the biggest issues, the oligarchy, currency wars, fraud, and Foreclosuregate.

Wed, 10/27/2010 - 08:38 | 680107 mikla
mikla's picture

I think he was using irony, because he was referring to ClimateGate, the climate 'scientists' who were fudging data in order to provide the results they were looking for.

Ok.  My response is still that at least the people pretending to do "climate studies" actually have the good sense to fabricate plausible results, even if they have to hide their falsified data.  Economists are too stupid to do even that.

The real question is whether the oligarchy is dumb, or whether they benefit from the boom-crash economy.

They are mere snake oil salesmen.  The provide nothing, through deceit and fraud, in exchange for a paycheck.  They are comprised of (1) true idiots, and (2) mercenaries willing to rationalize any concept to curry favour from the central planners.

Wed, 10/27/2010 - 10:29 | 680375 Citxmech
Citxmech's picture

According to Popper, science seeks the [small-t] pragmatic "truth" by posing questions in a falsifiable manner and disseminating the results for public scrutiny - thus a well-formulated hypothesis that yields the predicted results will be accepted by the scientific community...  until it doesn't.  Inconsistent hypotheses will be reconciled by continued attempts at falsification of the incompatible hypotheses until consistency is achieved.  A hypothesis that consistently yields good results will be elevated to "theory" status.  Re-evaluation of theories are scientific revolutions.  The big-T truth is, of course, never attained - but we get further from ignorance as the process continues.

Under Popper's paradigm, macro probably fits into the "pseudo-science" category with things like psychology, where complex inter-related dynamic systems are attempted to be understood by unfalsifiable gross oversimplifications.

 

 

Tue, 10/26/2010 - 18:15 | 678898 Dismal Scientist
Dismal Scientist's picture

Thanks, GL. The 'pragmatic' approach you label yourself with will resonate with many people, I suspect. Unfortunately not the TPTB though, or their political puppets. There's no mileage for them in such solutions.

Meanwhile, lets enjoy the hair splitting from the various factions in response to your post.

Tue, 10/26/2010 - 18:43 | 678973 Sean7k
Sean7k's picture

I will start. Austrians do not advocate cutting spending, raising taxes, balance the budget. Austrians advocate minimum government or no government. No Taxes and no budget. If you will have a budget, it will be approved and paid by taxes the people have agreed to pay. They are against ALL intervention in free markets with the protection of private property the only legal commandment. 

They do not attempt to predict the future, because human action makes it a meaningless exercise. Further, Austrian economics is only truly valid in a free market and we have never had one and probably never will.

Austrians believe the greatest liberty exists when the individual is sovereign. 

This makes Austrian economics, in my mind, both a panacea and a plague. For the elites would never allow its' introduction and the elites have always been able to maintain rule.

Tue, 10/26/2010 - 18:47 | 678990 jm
jm's picture

Austrian economics is only truly valid in a free market and we have never had one and probably never will.

 

So it's fucking worthless, right?

Tue, 10/26/2010 - 18:52 | 679002 walküre
walküre's picture

In "theory" your conclusions are completely correct. However practically, to concede your point wouldn't have a whole lot of upside to sell to the market.

In other words: People want to be lied to.

Keynes and his whole gang of Wiener Schnitzel economists figured this out.

Tue, 10/26/2010 - 18:58 | 679019 jm
jm's picture

Here's a policy prescription:

Ben needs to be the "anti-Ben".  For once, be exactly the opposite of the douschelord he is.  He would short-squeeze all the deserving for a change.

"Chicken salad on rye!"

http://www.youtube.com/watch?v=cKUvKE3bQlY

 

Tue, 10/26/2010 - 19:46 | 679111 Gordon Freeman
Gordon Freeman's picture

"and a cup of tea!" LOL

Tue, 10/26/2010 - 18:53 | 679007 Sean7k
Sean7k's picture

Within the current restraints of the system, yes, except for the purpose of providing an alternative viewpoint. Which allows us to see just how criminal monetarism is.

Tue, 10/26/2010 - 19:05 | 679031 jm
jm's picture

Then work out logical conclusions given current constraint of the system. To talk about how things should be when there is no realistic chance in hell of ever getting there from here leaves one more than a little baked.  Accept there are things that cannot be changed by you, concern yourself with things you can impact by your own effort, try to understand those things well, find mispricings, leave emotion out of it as best you can.

Or stand on the streetcorner passing out Austrian economics pamphlets to stoners.

 

 

Tue, 10/26/2010 - 19:12 | 679044 Sean7k
Sean7k's picture

If you read my other posts, you will see exactly what my "logical" conclusions are and how to implement them. All guided by Austrian theory. I want to see the system destroyed- you want to live within it- good luck with that. I have a fall back position that mitigates the worst parts of monetarism- do you?

Any idea what your avatar really means? I just see a lot of Yin.

 

Tue, 10/26/2010 - 19:22 | 679068 jm
jm's picture

You and I both have to live within it.  There's no alternative. There is no grand revolution coming to the rescue that puts all the bad guys on the bottom (or jail) and ushers in a golden age of freedom and non-bullshit.  You should work for evolution.

Real revolutions leave everyone worse off, poorer, and most likely mourning the loss of loved ones.  And then a new set of skimmers takes over on top.

Russian peasants were all-in on killing the kulaks with a sickle.  A couple of years later Stalin was killing them with a hammer. 

Tue, 10/26/2010 - 20:27 | 679196 zaknick
zaknick's picture

I think you're wrong. There is no way these scumbags can get away with this murderous madness they call our reality. They've hollowed out the American economy (the true basis of their own power) handing out so-called free trade agreements which were just bribes in exchange for bankster interests in unfathomable wealth overseas (not in China's case where they finally obtained what they always wanted: slave laborers).

I also fail to see how most folks come out poorer after a revolution with the inequality rates of today. Do you not understand that the wealth production capability of this nation was stolen? Financial garbage was the biggest export by far in the US. A revolution that squeezes the oligarch's interests opens up economic opportunity for entrepreneurs which is 1. a job and wealth creator, 2.the way nature meant it to be until these bankster supported bandits took over the economy as if it was their own little plantation and we their slaves.

It is untrue that after major changes a new prosperous for all economy cannot emerge from the ashes of the curse of the present system, especially with the talent on tap in America and the gutting of decrepit monopolies and policies that stink of fascism.

Tue, 10/26/2010 - 21:01 | 679280 jm
jm's picture

Sure, I could be wrong. But venom and anger about how things are doesn't make a brighter future. 

You talk about "murderous madness"... injustice, sure.  It has happened everyday since humans lived.  But to talk of murderous madness is so rhetorically out of proportion that it is an injustice to people that have actually been killed and tortured and murdered.  There is real murderous madness in this world, but not here.  Let's both hope murderous madness never really happens here. 

You and I have every right to be angry about how awful things are, but it can't absolve everyone of responsibility.  I'm not going to try and assign blame, because everyone had a part in making this shit sandwich... everyone take a bite.  Shared sacrifice and time.

I'm all for innovation and entreprenuership.  But I'll let return on capital decide how nature decides on things.

Bankster bandits taking over.  People with money bribe politicians.  This is how it has always been and always will be.  Revolutions just make a new set of people that bribe a new set of politicians.  After the herd gets thinned out, of course.

No doubt that prosperity is possible here.  But when you talk about "emerging from ashes", that's an obstacle to it.  You unleash that and there's nothing but pain and trouble.  It is easy to trivialize this.  At everyone's peril.

Peace.

Tue, 10/26/2010 - 21:17 | 679309 zaknick
zaknick's picture

There are literally millions of innocent people and children around the world and right here in the goood ole US of A who would disagree with you negation of murderous insanity.

As to everything else you said, I would rather be free than a slave to other men and their games. Dylan said something like, "you play with my world like it's your own little toy". That to me is un-freaking-acceptable. Capisce? Most of the misery in this world is man-made. I'll worry about the next bunch of fascists when the time comes, for now I'll concentrate of opposing them any way I can which is why I spout off so much around here.

Franklin, Jefferson, Lincoln, Garfield, JFK all knew and warned us of the dangers we face today. I have known peace and prosperity and I know it can exist no matter what you say.

Peace

 

 

Tue, 10/26/2010 - 23:43 | 679652 Walter_Sobchak
Walter_Sobchak's picture

jm you are a defeatist. zaknick you are an idealist.  Civilization is fascism.

Wed, 10/27/2010 - 06:39 | 679942 jm
jm's picture

 

 

There is nothing defeatist in accepting the truth and pursuing one's own individual interests as best as possible.  Civilization is not fascism.  It does get hijacked by ideology and bed-time stories gone oh-so-freaking-wrong.  F. Hayek would be spinning in his grave reading some of these posts.

Tue, 10/26/2010 - 21:51 | 679379 tmosley
tmosley's picture

Not really.  Contrary to what the above poster said, Austrian economics can and routinely is used to predict the consequences of government actions.

Read "Human Action" and you will see.  If that is too dense for you, read "How an Economy Grows and Why It Crashes" to get the basic idea.

What the above poster SHOULD have said is that the ideal system proposed by Austrians would be a free market, and that anything short of that isn't really an "Austrian economy".  It's like saying because there is no such thing as a truly free market, then free market economics is worthless.  That doesn't really make much sense.

Tue, 10/26/2010 - 22:56 | 679573 Sean7k
Sean7k's picture

What I meant is: in light of a post that attempts to measure the accuracy of economic theories, it is important to recognize a theory's limitations when appraised in an economy that is not a full expression of the theory. 

You may use parts of it, but it's predictability is compromised. I hope that makes more sense.

Wed, 10/27/2010 - 03:52 | 679895 hugolp
hugolp's picture

But this is part of hard science as well. This is part of everything.

Tue, 10/26/2010 - 19:29 | 679061 B9K9
B9K9's picture

My father, the long time MIC intelligence operative, taught me the most important rule:

He who complains has already lost.

Some may notice that my posts never promote any ideals, nor complain about how things actually are, or deplore that the pace of change is too slow, etc.

Nope, they're usually just straight observations about how things actually work, with a little bit of monetary mechanics thrown in to support certain conclusions.

Life is really quite simple: we are born, grow & develop, decline & die. During our peak growth & development stage(s), we must compete for scarce resources in order to support the offspring that typically result from successful mating strategies. Evolutionary pressures have resulted in the manifestation of certain behaviors centered around organizational power.

Societies & cultures are simply amalgamations of individuals, so they tend to mirror and replicate individual behavior. The quest for power consolidation is a key foundational element of government. Since most people are ill equipped to survive this type of environment, the strong always rise to the top.

However, and this is a huge however, as noted above, these self-same societies, cultures & governments are also subject to the immutable laws of nature: they are born, grow & develop, then enter a period of decline and die.

What does this mean to us? Simple - don't bother complaining. Just let nature takes its course. If a society/culture/government is presently in a growth & development stage (ie at its peak power), it is a waste of time/energy to complain or attempt to effect meaningful change. OTOH, if it is entering the decay/death cycle, one need not do anything other than perhaps give a gentle 'push'.

The USA, as it is presently constructed, is in terminal decline. The Fed cannot fight the math - they needed some incredible new growth component to bury the last decade of fraud. Sadly, at least for them, it is not forthcoming. The MIC is not going to take-one-for-the-team by accepting blame for two more lost wars. Anyone with the slightest heightened sense of awareness can tell that the marriage of convenience between the Fed & MIC (that is, $USD backed by military control of ME oil AND military control of ME oil backed by the $USD) is not going to end well.

Rather than endlessly engage in parlor room debates regarding various economic theories, it might profit one to think about the larger scale cycle(s) that are playing out in real time. From the ashes a new form of organization will arise - will you make it through the bottleneck and/or benefit from the new paradigm?

I suggest this is what people should be contemplating and planning.

Tue, 10/26/2010 - 19:34 | 679089 Sean7k
Sean7k's picture

+++++

Tue, 10/26/2010 - 22:05 | 679173 DavidPierre
DavidPierre's picture

"...it might profit one to think about the larger scale cycle(s) that are playing out in real time."

.....................................................................................

April 20, 2004

Gold $397.40 - Silver $6.92

The Rothschild Exit

Rothschilds withdraw from the gold markets.

Consider that the House of Rothschild has been rich for centuries.

Consider that they are born rich, grow up rich and die rich.

They consider themselves to be members of some type of aristocracy. Grubbing for money is certainly not their style and they would not stoop to the level of overt illegal criminal conduct and expose themselves.
The shortages for delivery that exist in silver and gold (these are legal contracts to deliver, after all).... have reached the point where a careful cartel participant may feel the LEGAL line of fraud is about to be crossed.

How can you make a promise to deliver what you don't have? Of course, if you don't expect anyone to ask for delivery, than the risk is slight. But that is not where we are now.

Their attorneys told them to save their skins and completely cut their ties to the scam.

The Rothschilds haven't stayed rich for so long by making of themselves big fat targets for avenging lawyers. Whatever the real story is, this is a sign of the strain the cartel is under today.
....................................................................

Rothschilds knew way back when what was coming down the pike.

 

via lemetropolecafe

Tue, 10/26/2010 - 20:38 | 679215 zaknick
zaknick's picture

That's what I mean, this corruption of the natural scheme of things cannot hold. You can either have a healthy economy or an empire but not both. Thank God!

Always did enjoy reading your comments.

Tue, 10/26/2010 - 20:39 | 679218 philgramm
philgramm's picture

B9K9,

This is one of the more profound posts I have read here on ZH.  There are very smart readers on this site but I often sense the immense frustration that the readers (myself included) feel with the current paradigm.  It seems the smart thing to do is try to prepare for the inevitable collapse in this boom/bust cycle and to try to live as true to oneself as possible without being a pawn.  Oh.......and try to have a laugh or two along the way (I can always count on ZH readers to provide my daily dose of yucks)

Wed, 10/27/2010 - 03:26 | 679877 AnAnonymous
AnAnonymous's picture

I will start.

 

 

Abrahamic religions have this in common: they are the only true religion at the exclusion of others.

Thanks to your efforts, it appears austrian followers share the same convictions.

Wed, 10/27/2010 - 05:41 | 679922 Dr. Acula
Dr. Acula's picture

"This makes Austrian economics, in my mind, both a panacea and a plague. For the elites would never allow its' introduction"

You misunderstand the nature of Austrian economics. AE is wertfrei (value-free) and can advocate neither low taxes nor high taxes. It is not a bunch of opinions, but rather a body of apodictic truths. It cannot be "introduced" any more than "1+1=2" can be introduced.

Tue, 10/26/2010 - 18:20 | 678899 Cognitive Dissonance
Cognitive Dissonance's picture

It matters not whether your followers have benefited from your preaching. It matters only that your disciples do as they are taught and continue to weave their wool and deceive their sheep.

As long as the economic shock and awe troops aka economists, money managers and financial product salesmen continue to support the masters of the universe, the followers will continue to get coal in their statements and be told it's divine diamonds in the rough.

Tue, 10/26/2010 - 18:31 | 678941 zaknick
zaknick's picture

Exactly. Like psychiatrists and psychologists (maybe not all) are just drug peddlers making up quackery as they go along with big pharma's part of the fascist plan. It really is criminal to push pills on somebody who's unwell emotionally for 30 years doing God knows what to them (the FDA sold out long ago) and never "fixing" the issue.

 

I could go on and on about so much corruption in the society but why bother... if you don't know by now, you're one of the sheep headed for slaughter.

Tue, 10/26/2010 - 18:44 | 678975 Sabremesh
Sabremesh's picture

You are missing the point. It doesn't matter if he has mischaracterised Austrian economics - it is still a dogma. Economics is the charlatanry of our age, and future generations will look back at us with the same contempt for believing in it that we currently hold for earlier civilizations who swore by astrology and divination by entrails.

Tue, 10/26/2010 - 19:11 | 679022 Cognitive Dissonance
Cognitive Dissonance's picture

You are missing the point. It doesn't matter if he has mischaracterised Austrian economics - it is still a dogma.

Ummmm,

Did you by some chance hit the wrong "reply" button? Because I said nothing about Austrian economics and was commenting directly to the author about the main theme of his article, a False Religion Behind The Mask Of Economic Science.

Tue, 10/26/2010 - 21:42 | 679347 Escapeclaws
Escapeclaws's picture

"Economics is the charlatanry of our age"

What about psychology and psychiatry (psychology with drugs)? Those guys do all their research on captive populations in mental hospitals. Pray you never end up in one. Remember lobotomy and shock therapy? That's their version of physicists using supercolliders to study elementary particles. Of course we all know that physics can't hold a candle to psychiatry or economics when it comes to rigorous analysis. Now they forcefeed patients risperidon like french farmers force feeding geese to make fois gras. The patients develop so many secondary symptoms that the psychiatrists tell the families that the twisted bodies and projected tongues are the result of their debilitating mental disease which the industrial strength drugs are designed to combat. Sounds like what Bernanke is doing to the economy by force feeding ZIRP and QE. And like psychiatrists, the Fed is accountable to noone.

Tue, 10/26/2010 - 23:59 | 679676 Walter_Sobchak
Walter_Sobchak's picture

Chantix made me go fucking batshit insane.  Heard stories of people murdering people on the stuff and beating their wives and committing suicide.  Just keep smoking instead.

Wed, 10/27/2010 - 12:22 | 680734 trav7777
trav7777's picture

pyschiatry?  Another Tribe "science."

Tue, 10/26/2010 - 19:45 | 678902 NotApplicable
NotApplicable's picture

Wow, you really should study Austrian Economics before you attempt to discredit it, as all you've done is mis-characterized it.

I've never before heard that one of the tenets of Austrian Economics is raising of taxes! And macro-economics are now Austrian too? Have you never heard of Human Action?

I could go on, but I bet other posters are going to do a much better job of critiquing this incoherence. What a waste.

Edit: I messed up when I stated macro above. Whenever I see it, my mind translates it to aggregates, those magical quantities that allow the cranks their mathematic manipulation strategies, which is definitely not part of AE. Macro exists in AE as an effect to be studied, not as a cause to be promoted by action.

Tue, 10/26/2010 - 18:19 | 678906 michael.suede
michael.suede's picture

WOW he is TOTALLY WRONG

This:

"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. "

Is total baloney.

If he is going to bash Austrian economics, he should at least take the time to bother learning what it says.

Further, Austrian economics is a praxeological study of human action - it has nothing to do with modeling the behavior of markets and everything to do with describing how humans act.  It is a philosophical school rather than a mathematical school of science.

The Austrians say that ANY government intervention in the markets is bad - period.  Including taxes. 

He's wrong on all points concerning Austrian economics.

 

Tue, 10/26/2010 - 18:42 | 678970 MiguelitoRaton
MiguelitoRaton's picture

I was going to say the same thing. Austrians, contrary to his little too cute by half "story" (yes he is a movie guy who tells stories that often demand suspension of disbelief), say that the bust must follow the boom and to attempt to delay it as we have for decades, through cheap credit, only leads to the dramatically larger bust...no loss of GDP my ass!

Tue, 10/26/2010 - 18:58 | 679000 Catullus
Catullus's picture

Absolutely agree. I couldn't have junked this article harder if I tried. Hey lira, your article is a trashy, terribly argued rehash of hayek's pretense of knowledge speech. Get a fucking clue, loser.

You picked a cute allegory of economics to religion and the neo-cool agnosticism led you to reject all those claiming to be economists. You're a nihilist of the human idiocy movement content on throwing out all reason to not be labeled into what you believe is a belief system. Uneducated. Unreasoned. Non cited drivel.

Tue, 10/26/2010 - 19:00 | 679023 NotApplicable
NotApplicable's picture

Now, there's no need to resort to name-calling at this time. I'll give him the benefit of doubt that he was writing from ignorance, and not intentionally misleading his audience (ala Krugman).

After all, there are many people with degrees in economics that know little or nothing about AE. I know that I never once heard of it in my time in college. I heard nothing but Keynesian Kool-Aid drinkers, with textbooks written by Fed governors.

Tue, 10/26/2010 - 19:05 | 679032 Catullus
Catullus's picture

Fair enough. I went off.

I've heard the pragmatist line before though. It's the siren song of the unprincipled

Tue, 10/26/2010 - 18:53 | 679005 NotApplicable
NotApplicable's picture

Perhaps he gets his information on AE from the disinfo think-tank that calls itself Cato?

One other point to make to Mr. Lira, the word you should've chosen in answer to the question posed to you (as evidenced by this article) was atheist, not agnostic. You had me confused for a bit, trying to figure out how agnosticism fit in, but it didn't take long to see your argument was really atheistic in nature, not believing in the legitimacy of the monetarists and other manipulators.

Which really made me laugh, as that is the essence of AE (in comparison to the mathematical schools of economics). Especially when reading Rothbard.

Tue, 10/26/2010 - 18:58 | 679020 MiguelitoRaton
MiguelitoRaton's picture

I believe he was correct using the term "agnostic" as in "don't know", because he doesn't know shit. But yes, based upon his description he should claim to be an athiest.

Tue, 10/26/2010 - 19:08 | 679012 MiguelitoRaton
MiguelitoRaton's picture

One more thing, as to your "raise taxes", yeah right, give more money to the government because they spend it so well on our behalf. Here's are two ideas: (1) get to a balanced budget (if we borrow 42 cents on every dollar we spend, then simple, cut the budget 42%); THEN and only after those permanent cuts (balanced budget), raise taxes BUT you must apply 2X the add'l taxes raised to paying off the budget. Yes that means to raise an additional $1 in taxes, the government must match that with $1 in spending cuts above and beyond the balanced budget. Spread the money around? Sorry Obama, spread the pain around and let's dig our way out of this...so long unsustainable entitlements.

Wed, 10/27/2010 - 12:27 | 680751 trav7777
trav7777's picture

I've tried to emphasize over and over again that this will not mathematically work with our monetary system.

Our monetary system REQUIRES - not wants, desires, or would prefer - REQUIRES growth in credit to make the math work, or else the monetary system itself implodes and then there is no money.

The government cannot cut its spending and go "austerity."

I mean, think about that anyhow...do we really want to auction off all of our roads and parking meters and bridges and infrastructure to others?

The flaw in the system we have is that we required growth in perpetuity and WE, US, right here, right now, are passing through the epoch where growth STOPS.  All systems based on growth are imperiled.  Simple as that.

Private credit growth is in reverse; therefore the government has stepped up to carry the torch for the monetary system, which our economy must serve.

Tue, 10/26/2010 - 19:15 | 679049 MiguelitoRaton
MiguelitoRaton's picture

Ludwig Von Mises (Austrian School): "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final total catastrophe of the currency involved."

There you have it from the man himself...no decline in GDP...oops.

Wed, 10/27/2010 - 03:29 | 679879 AnAnonymous
AnAnonymous's picture

There is no means of avoiding the final collapse of a boom brought about by credit expansion.

 

Actually, there is no means of avoiding the final collapse of a boom brought about by expansion.

Known, checked for ages. Adding credit before expansion changes nothing to expansion as a phenomenum.

Wed, 10/27/2010 - 01:40 | 679819 A Nanny Moose
A Nanny Moose's picture

+1

Wed, 10/27/2010 - 03:49 | 679893 AnAnonymous
AnAnonymous's picture

Is total baloney.

If he is going to bash Austrian economics, he should at least take the time to bother learning what it says.

 

Funny, funny. Most of the comments section confirms economics as a religion.

Lets focuse a bit on religions.

One common tactics is to tell that people have first to study their religion before being critical of it. Of course.

A disbeliever/misbeliever/unbeliever/other believer start to learn the religion. In the end, it turns itself into a toddler as his knowledge will be validated by the new authority.

Guy learns the religion for 20 years. He comes back but his knowledge is deemed not accurate enough. More over, you need a certain life experience to understand.

So what? Let your kids learn the religion. But later, it appears that your kids are not born in the religion. You need to be born in the religion etc...

In the end, the guy family is found to be converted.

It is more an abrahamic religion thing to be fair on other religions.

This said, economics worshippers use the same tactics.

Hidden conversion.

Austrian schools of economics is not less a religion than any other school of economics. Their praexology is the deus ex machina per excellence. 

This said, religions do not prevail one over the other by terms of facts but matter of opportunity.

The roman empire wealth was accumulated under other auspices than Christianity. Christianity was established in Europe by a state decision, no matter what the Christians like to claim on separation between religion and government.

It is a matter of opportunity. And the Austrian school of economics might the next  trendy economics religion.

Not because it is truer. But because the opportunity is right there. 

Tue, 10/26/2010 - 18:21 | 678914 delacroix
delacroix's picture

altitude, will affect the temperature, at which water will boil, every time.

Tue, 10/26/2010 - 19:01 | 679024 NotApplicable
NotApplicable's picture

STP, FTW!

Tue, 10/26/2010 - 18:28 | 678931 The Alarmist
The Alarmist's picture

It's a social science. One could say the same, I suppose, of witch-doctory. Both are respected in the context of their culture, and even if they might seem primitive and ineffective from an dispassionate, disinterested point of view, the at least offer a semblance of respectable theatre that allows the masses to elevate the practitioners to an exulted status.

Tue, 10/26/2010 - 18:37 | 678950 midtowng
midtowng's picture

Great article, but one problem: communism != marxism.

  When the Soviet Union fell it discredit communism. The thing is that communims isn't marxism.

Tue, 10/26/2010 - 20:45 | 679235 zaknick
zaknick's picture

What??

Tue, 10/26/2010 - 18:39 | 678960 Stevm30
Stevm30's picture

Perfect example of the deserved disrespect the entire field of economics has received due to poor execution by its practicitioners.

Nevertheless, it is dangerous, and sloppy, to declare "it's all the same!"

As if none of the "schools" are right...

Tue, 10/26/2010 - 18:48 | 678981 Species8472
Species8472's picture

Take a ruler, place it over a pencil on your desk, like a see-saw. Here is what an economist knows, and to the uninformed it might be useful. If you put a coin on one end of the ruler and press on the other end the coin will go up, let go and the coin will go down.

But here is what I want to know, when will someone come along and smack the end of the ruler hard, sending the coin flying across the room, and just as important, where will the coin land.

Tue, 10/26/2010 - 18:47 | 678982 godfader
godfader's picture

Maybe economics is just a dismal science, but making headline grabbing and hysterical predictions out of thin air such as "This will bring hyperinflation by December 2011; severe social disruption starting in Q3 of 2011 and accelerating through Q4, before really exploding in Q2 of 2012; the dissolution of the European Union by December of 2012; and very likely—insane as it might now sound—a de facto dictatorship in the United States." etc. etc. is not only dismal but it is rather delusional.

Economics - for a large part - is a science. Making predictions without any framework to back them up is not science. It's gibberish.

Tue, 10/26/2010 - 19:55 | 679133 Gordon Freeman
Gordon Freeman's picture

Spoken like a true economist...pax vobiscum

Tue, 10/26/2010 - 23:36 | 679637 ebworthen
ebworthen's picture

The quantifiable known history of humanity teaches us that the shit will hit the fan and lots and lots of people will die when the boom/bust, population growth/extinction cycle comes full circle.

Reference a petri dish of bacteria or fungi.

Wed, 10/27/2010 - 00:10 | 679696 Walter_Sobchak
Walter_Sobchak's picture

we're entering a world of pain, world of pain.

Tue, 10/26/2010 - 18:46 | 678984 zen0
zen0's picture

All monetary policies encounter the difficulty that the effects of any measures taken . . . can neither be foreseen in advance, nor their nature and magnitude be determined even after they have already occurred." -

Ludwig Von Mises,  The Theory of Money and Credit

Tue, 10/26/2010 - 18:58 | 678993 zloty owadow
zloty owadow's picture

Easily observable fact: Economics is not a science simply because each branch of genuine science takes great pains to accurately measure anything which is studied. Many scientists have spent their lives creating better and more accurate rulers, so that other scientists can measure more accurately. This is a key part of science.

Economic "scientists" on the other hand insist on making their rulers (viz. currencies) more and more rubbery and inaccurate. Their research reports then create more problems in measurement process by adjusting hedonic oscillators, extrapolating extispicetic functions, and encouraging coprophagic denial factors until the printing of such nonsense is simply a bad joke.

Imagine asking a physicist: "How fast is speed of light?" and his reply is:

"What year? In 1920, it was 300,000 kilometers per second, but in 2010 it is 3,295,500 kilometers per second!"

You would immediately think "He is bogus, he is a joker!" All the time we are talking about, from 1920 to 2010, the speed has not changed, but the ruler has stretched...quite a lot. This is the picture of an economist. The bad joke is, we all take them seriously and allow them to talk as if they are also learned people who have something to say which may help us and our civilization. In fact the situation is much worse than this humourous reductio ad absurdum because it is done on purpose. Economics is not a branch of science, it is a branch of thievery which makes necrophilia look like a wholesome career.

Tue, 10/26/2010 - 19:02 | 679026 Sean7k
Sean7k's picture

Unfortunately, they always think the present ruler is perfectly right. Science is an exercise in evolution of theory. Talk about rubbery. That is when they aren't selling their souls for another grant or patent payment while making up data. 

There is nothing certain in a world of human invention. I learned that in 9th grade when my math teacher showed me an algebraic proof where one didn't equal one. Discovery is a process not a single moment in time. No one knows all the answers. All we can do is accumulate data. Of course, that doesn't sound nearly as glorious as "SCIENCE".

Tue, 10/26/2010 - 18:49 | 678994 walküre
walküre's picture

Gorgonzola, this story has nothing.

Give us another tale of an old couple that wouldn't qualify for HAMP.

I loved that story and have shared it with many.

Every day I feel like saying "Fuck it". More people join in, the better.

 

Tue, 10/26/2010 - 18:50 | 678995 Chito Campo
Chito Campo's picture

Quick, grab your tinfoil!  Why is just anything and everything posted with no filter?  I mean, come on.

Tue, 10/26/2010 - 19:01 | 679021 PragmaticIdealist
PragmaticIdealist's picture

Gonzalo do us all a favour and actually read some Austrian economics. Every sentence you wrote smacks of their theories. Of course Austrians understand that a recession will ensue in the absence of monetary/keynesian policies.

Also, Austrians would never really raise taxes when spending cuts could suffice.  Granted, Austrians do prefer taxes to monetary policy since at least the effects of taxes are visible to everyone and quantifiable.

Tue, 10/26/2010 - 19:09 | 679041 NotApplicable
NotApplicable's picture

When he started talking about humans being unquantifiable, I thought he was going to start quoting Mises. Instead, Lira lumps him in with the "monetary cranks" (a term Mises used).

I wonder if Lira reads these threads, or will he have to be informed on his own blog?

*sigh*

Oh well, time for a cold beer and some Hayek.

Tue, 10/26/2010 - 19:05 | 679034 Humpty Pundit
Humpty Pundit's picture

"This will bring hyperinflation by December 2011; severe social disruption starting in Q3 of 2011 and accelerating through Q4, before really exploding in Q2 of 2012; the dissolution of the European Union by December of 2012; and very likely—insane as it might now sound—a de facto dictatorship in the United States."

GL - good article - just one question - what is the basis for your prediction of the near future?

  

Tue, 10/26/2010 - 22:25 | 679455 merehuman
merehuman's picture

many of us have been wrong on the timing of coming events. Personally all Mr Lira says may come to pass much sooner. I say that because they have kept the market and dollar up with contrivances and extended the timing of the crash. Now everything is intensifying, the jig is up. I am betting before december we crash hard.

Tue, 10/26/2010 - 19:16 | 679051 Gonzalo Lira
Gonzalo Lira's picture

The Austrians having a cow over what I wrote pretty much proves my point, doesn't it? 

 

As to my predictions, I've already written extensively about hyper-i, et al., in my other blog posts. 

 

GL

Tue, 10/26/2010 - 19:22 | 679066 Sean7k
Sean7k's picture

That you will lie and hope to confound? That is intellectually dishonest and a cop out. I enjoy your posts, but you have been caught out and you're not honest enough to acknowledge it or defend yourself. At this moment in time- you are nothing but a poser.

Tue, 10/26/2010 - 20:49 | 679247 zaknick
zaknick's picture

You should have seen all the noise and multiple emails he sent out when somebody apparently plagiarized him!

 

ROFLMAO

Tue, 10/26/2010 - 19:28 | 679079 zen0
zen0's picture

It only proves you don't know what you are talking about in regard to the Austrian School. Just because some can point out the flaws in  your flippant journalistic characterisation  does not mean they are, in fact, in bovine labor.

Tue, 10/26/2010 - 20:01 | 679142 Scisco
Scisco's picture

Sorry but a few question and comment have come up about our thoughts on Austrian Economics. I will leave out the ones mention above.

1) Please cite an example where a respected AE called his study a science.
2) Can you list some of the AE fundamental orthodoxies that you disagree with? Is it the law of supply and demand? That people will act in their own interests that they seem best? That a third party cannot know what those interests are?
3) Please provide a citation where a respected AE argues "... that an economy must grow every year—year after year—no excuses—no matter what".
4) I submit that the following is pure AE thought "Let the markets really do their creative destruction. Let the debt overhang be wiped out via bankruptcies. Let the chips fall where they may—let the whole unstable house of cards crash to the ground—just get it over with, once and for all."
Which contradicts the following assertion "Of course, this will never happen. The orthodoxies of economics won’t allow it."

Tue, 10/26/2010 - 20:22 | 679184 Spitzer
Spitzer's picture

It only proves that you don't know very much about austrian economics.

 

Tue, 10/26/2010 - 21:23 | 679318 Disambiguation
Disambiguation's picture

Gonzalo,

 

I enjoyed your article and hope you continue. It is true that there were many posters who were quick to castigate your inaccurate description of the AE theory, but I do not believe that this goes very far in proving your point. Had you accurately described what you saw as a flaw in AEs and the same type of consternation resulted, your case would have been well supported. Your errors being corrected, however snarkily, are peacocks of a different feather....

Wed, 10/27/2010 - 00:32 | 679740 duder
duder's picture

It may prove that people can be 'religious' about defending their economic/political beliefs, but that does not prove that the theories are wrong.

In the case of Austrian Economics, people here are refuting your statements because you have proven with your article that you do not completely understand that which you are attempting to discredit. You are attacking a straw man instead of the actual thing. 

You lump AE in with other schools of economic thought when you say, "All agree that an economy must grow every year—year after year—no excuses—no matter what." You say that, "[Austrians] believe that cutting spending, raising taxes and closing the budget deficit will magically spur growth in GDP." 

This is wrong. 

AE does not say economies must have perpetual growth. AE's flagship theory, the austrian business cycle theory, states that economic contractions / busts / recessions should be allowed because they are the cure for the disease of credit expansion and the resulting boom / malinvestment and that interfering with that correction by printing money and Gov stimulus will only make the problem worse. AE would agree that "perpetual growth is ridiculous" and that economic contractions are okay - let the market be free to go up and down of its own accord.

An Austrian economist might say "Stop trying to avoid the Global Depression, and fully dive into it. Avoid Japan’s fate of Lost Decades. Let the markets really do their creative destruction. Let the debt overhang be wiped out via bankruptcies. Let the chips fall where they may—let the whole unstable house of cards crash to the ground—just get it over with, once and for all."

But wait... that was you.

And that's just a start - someone more learned than I will, I'm sure, explain further.

By the way, I have enjoyed your articles and I respect you for your courage to tell us who you are, say what you wanna say and put it out into the world. Seriously - that's more than most are willing to do.

Wed, 10/27/2010 - 01:59 | 679833 A Nanny Moose
A Nanny Moose's picture

No. Your point would have been better made had you accurately interpretted Austrian theory. Austrian Theory, may seem dogmatic, but hardly considers itself a science. One has to marvel at the fact that many of the people predicting this mess studied Austrian Econ, while the other priests were stymied.

 

Question the high priests omnipotence, and the sacrifices will begin, so that order is maintained.

Wed, 10/27/2010 - 04:02 | 679902 hugolp
hugolp's picture

You are good with marketing. You know that creating controversy you will gain views and get a lot of comments. That is why you built and strawman and threw it in.

I was actually reading your piece with interest because some of what you wrote previously was interesting. I consider myself an austrian, but I have strong disagreements with the praexological method and some other parts of the most standard austrian theory. But you know what? I disagree because I have read them and know what they talk about.

Your piece is crap. It was a deception since I was expecting a proper critique. I guess that does not attract so much audience, and that is your only objective. If you were really intelligent you would know that this will give you hits in the short run but will hurt you in the long run.

I hope you come to your senses, lose the uptight attitude and accept to debate about economics and social science methods some day. And yes, it wont probably give you as many hits and commnents as creating polemic.

Tue, 10/26/2010 - 19:21 | 679064 Something Wicke...
Something Wicked This Way Comes's picture

Never use cheap tinfoil. Using multiple sheets or increasing the thickness allows me to absorb many waves without losing the signal or giving a ping back.

Tue, 10/26/2010 - 20:51 | 679252 zaknick
zaknick's picture

2 funny

Wed, 10/27/2010 - 00:23 | 679719 ebworthen
ebworthen's picture

And if it's tinfoil made in Austria you won't get flamed as much.  

Be sure and walk down the middle of the street in zig-zags so the crows don't hit you -  and only say what the calculator and computer models tell you is quantifiable.

Tue, 10/26/2010 - 19:23 | 679067 ManitouMike
ManitouMike's picture

This Lira guy is a real kook. I wonder if Zero Hedge is going to post his content after 2012 comes without any of his predictions coming true. Seriously, the signal to noise ratio on this blog is getting a little high....

Tue, 10/26/2010 - 19:38 | 679096 Gonzalo Lira
Gonzalo Lira's picture

Krugman's fluffer, Brad DeLong, called me "batshit insane"—is "kook" the best you can do?

 

I'd expect a little more creativity from the ZH Austrian peanut gallery.

 

GL

Tue, 10/26/2010 - 20:19 | 679178 ManitouMike
ManitouMike's picture

Dude, did you even read the piece you wrote? You practically described yourself as a kook.

http://wordnetweb.princeton.edu/perl/webwn?s=kook

Tue, 10/26/2010 - 20:24 | 679188 MiguelitoRaton
MiguelitoRaton's picture

Instead of trite comments about the posters themselves or their style of commentary, maybe you could address the pointed comments/questions from the posters here. Your writings indicate that you know nothing of Austrian Economics. You are entitled to your own opinions, but not your own facts. Just man-up and admit that your assessment of Austrian Economics (AE) was factually incorrect. We would then have much more respect for you. You can bash AE, just do it with the facts.

Tue, 10/26/2010 - 20:30 | 679202 Spitzer
Spitzer's picture

He doesn't know that he is an Austrian.

What has GL ever said that would not make him an Austrian ?

Tue, 10/26/2010 - 20:54 | 679265 zaknick
zaknick's picture

When I ask where's the beef in relation to his scribbling, people actually junk me!

ZH is turning into a 3 ring circus with unoriginal, half-baked opinions instead of facts blasted at us. Cheapens the blog, imo.

 

Tue, 10/26/2010 - 20:27 | 679192 Spitzer
Spitzer's picture

You are an Austrian whether you like the name or not. Judging by your posts, you are hard ass Austrain.

There is almost nothing in any of your posts that would not make you an Austrain.

Why do you think you are not an Austrian ?

Tue, 10/26/2010 - 20:35 | 679209 MiguelitoRaton
MiguelitoRaton's picture

I couldn't agree more. Very amusing. Maybe if we just rename it "Gonzalo-ian" he'll be on board ;-)

Wed, 10/27/2010 - 00:20 | 679713 Walter_Sobchak
Walter_Sobchak's picture

Everything is a belief, a guess, even physics.  Science is a religion.  Vonnegut said we're all just guessing, no one knows anything.  Which is why I just try to abide, dude.

Wed, 10/27/2010 - 00:33 | 679735 ebworthen
ebworthen's picture

ManitouMike - Surely, when you wandered down this street with a clear sign that said:  "The Identity of the False Religion Behind the Mask of Economic 'Science' " - you didn't expect to find a Bank of America ATM or a glowing review of any kind of Economist did you?

Wed, 10/27/2010 - 03:12 | 679874 The Alarmist
The Alarmist's picture

It won't matter after 2012 ... didn't you hear that a large asteroid is going to take us out.  It must be, because the Mayans have foretold it. Now, where did I put my tin-foil?

Tue, 10/26/2010 - 19:23 | 679069 nuinut
nuinut's picture

Score for GL.

Tue, 10/26/2010 - 19:25 | 679072 divide_by_zero
divide_by_zero's picture

Reading this article and the comments reminded of that famous quote;

"The only function of economic forecasting is to make astrology look respectable." - John Kenneth Galbraith

Tue, 10/26/2010 - 19:25 | 679073 Something Wicke...
Something Wicked This Way Comes's picture

Gonzalo I was on board with you until those ridiculous predictions. Because you see, you are  doing precisely what your article criticizes.

You can predict an event will occur but you can never predict with precision when it will occur. I run into that dilemma quite frequently. Often I have been right- long after my puts have expired.

Tue, 10/26/2010 - 19:34 | 679090 Gonzalo Lira
Gonzalo Lira's picture

Re. your puts expiring: Sort of like, "The markets can stay irrational longer than you can stay solvent"? Good point. 

 

But no: I'll stand by my predictions, the rationale for which I've posted on my blog in some detail. Hyperinflation picking up no later than March, 2011 (≥5% annualized), then ≥10% by July 1, 2011, then going higher after that. The rest will follow as a natural result of the collapse of the dollar. 

 

Hey, what's the name of this place, "Zero Hedge"? I got a pair of brass balls and a big ol' cock ring wider than a silver dollar. I ain't gonna hedge just to play it safe. 

 

GL

Tue, 10/26/2010 - 20:39 | 679220 Spitzer
Spitzer's picture

Just because Austrian economics has a name, you automatically assume.

Austrians wish there was no name for this school of thought because people will assume what you have assumed.

Tue, 10/26/2010 - 20:59 | 679275 zaknick
zaknick's picture

Wow, uncouth too! Why wasn't the trash taken out !!!

Tue, 10/26/2010 - 23:53 | 679671 ebworthen
ebworthen's picture

The vociferous nature of the exchanges here and in other venues does not exactly argue for stability and a return to the mean.

Tue, 10/26/2010 - 19:29 | 679080 aarskever
aarskever's picture

A bit hit and miss in your sketch of the field and its problems.

First of all, yes, religion is just one type of behavior that is based on an ideological set of beliefs.

Yes, orthodox (and most other types of) economics is like religion, but for a different reason than you mention here. The point with most economics, and with neoliberal economics worst of all, is that it assumes that egotistical behavior will lead to optimum outcomes. That is, the 'invisible hand' of the market is actually a providential god that will magically make us behave in an altruistic fashion by behaving egotistically. How idiotic is that? As anyone who has heard of game theory knows, optimal outcomes - especially in prisoner's dilemmas - are reached through mutual cooperation, and not through mutual treachery. Yet neoliberals have been teaching business majors for 30 years now that people should never behave altruistically, as this would 'upset the market'.

And this is why economics today is religion: it assumes that the best outcomes are generated by unchecked self-interest. But even though everybody knows that life just isn't that easy, for some reason everyone has come to believe it. Certainly markets are hard to predict, and trying to control them is dangerous (See the Fed's current actions); but it hardly follows from these two statements that therefore we must not try to influence anything, because then and only then the 'best outcome' will make its grand entrance. That's not just an idiotic belief in the rationality or fairness of the market, it's grotesque. You don't help people by trying your hardest to screw them, in order to maximize your own pathetic profits, you hurt them. Yet hurting - in the newspeak of Neoliberals - is helping.

Wed, 10/27/2010 - 00:37 | 679748 Walter_Sobchak
Walter_Sobchak's picture

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." - JM Keynes

Wed, 10/27/2010 - 02:18 | 679845 aarskever
aarskever's picture

It's nice that Keynes recognized this, but I find it fairly sad (read: unscientific) that, in the 70 years since then, nobody has tried to figure out what could be behind that claim, as it isn't very specific on the mechanism. Instead, this seems to be accepted as the deepest 'insight' that one can come to about the world. But so long as economists aren't willing to accept that self-interest much more often leads to bad, rather than good, outcomes, and so long as they don't dump this belief in a benevolent deity that regulates human behavior, economics will remain an ideological science.

Wed, 10/27/2010 - 10:23 | 680357 Sean7k
Sean7k's picture

Capitalism in an environment of government regulation is an oxymoron. Free markets inhibit the actions of the "wickedest men". It is only when wicked men control the system of law through government, that the wickedest things can be accomplished. 

Keynes was a Fabian Socialist. It is important to recognize his agenda- one world government by an elite intelligensia. Once you see him for the fascist he was, perhaps his quotes will ring a little hollower.

Tue, 10/26/2010 - 19:32 | 679086 zen0
zen0's picture

I asked an economist for her phone number.

…She gave me an estimate.

A man was sent to Hell for his sins. As he was being processed, he passed a room where an economist he knew was having an intimate conversation with a beautiful woman.

"What a crummy deal!" The man complained. "I have to burn for all eternity and that economist spends it with that gorgeous woman."

An escorting demon jabs the man with his pitchfork and shouts, "Who are you to question that woman's punishment?"

"Everything that can be invented has been invented."

—Charles H. Duell, Commissioner, U.S. Office of Patents, 1899.

Tue, 10/26/2010 - 19:39 | 679099 Matt of all Trades
Matt of all Trades's picture

I couldn't even bear to read the whole thing. Reading 1/3 is bad enough. More garbage from a film director/video game designer. His piece on hyperinflation was bad enough. Economics is flawed? How do you build a society? It's the only way. Your beef should have been with monetary policy and who controls it. When have economists ever been good at predicting anything? They are backward looking by profession. They anaylze data for christ sakes. The only thing I can agree with is the chaos that lies ahead, but it is not in the form you decsribe. Finally, your hyperflation theory which is the funniest of all. Hyperinflation of purely commodities is not hyperinflation. Wages are not going anywhere and until they do it will just crush everyone in sight. That is when this artificial spike will come to end, when the real demand does not exist at current prices. Btw, love the chart of my penis head.How does ZH allow this guy to post on here? So many good articles and this donkey's flavor of the month article.

 

Ps. Can't wait until your post in Dec '11.I'm sure there will be excuses.

Tue, 10/26/2010 - 19:50 | 679123 Gonzalo Lira
Gonzalo Lira's picture

Re. your P.S.: If I'm wrong by Dec. '11, I'll say that I was wrong. 

 

See, I'm a man. I've got balls

 

You?

 

GL

Tue, 10/26/2010 - 21:05 | 679283 zaknick
zaknick's picture

But a small brain is what we're complaining about. See, that's why we're here. Any kuckle-dragging neandarthal cop has balls but we're not reading Guns and Ammo, are we? There is no way you could post so many well thought out writings dealing with complex issues such as these at your pace unless you worked on them full time (which you obviously don't). Unless you're not smart enough to figure that out.

Tue, 10/26/2010 - 21:39 | 679357 Imminent Crucible
Imminent Crucible's picture

Hey!  What's wrong with Guns & Ammo?

I guess you missed the swimsuit edition.

Tue, 10/26/2010 - 22:02 | 679405 zaknick
zaknick's picture

I actually bought the magazine for a time as a kid after watching too much GI Joe, I guess. Somebody here mentioned that GI Joe didn't like gold. Isn't that just freaking outrageous? Sick bassturds!

Tue, 10/26/2010 - 23:18 | 679611 ebworthen
ebworthen's picture

Oh dear, is this the "you don't have brains because you have an opinion" argument - or the "you don't have brains because you don't have a degree" argument - or both - or ?

Sounds like you are also veering into the "you have a gun so you are a Neanderthal" line, is that it?

Is all meaning based only in quantitative data?

Tue, 10/26/2010 - 21:55 | 679391 Spitzer
Spitzer's picture

You have Austrian balls and if your kids are anything like you, they will also have Austrian balls

Tue, 10/26/2010 - 23:54 | 679480 ebworthen
ebworthen's picture

Build a society with backwards looking economists?

And you are making fun of Mr. Lira poking fun at economists?

Wages will be the last thing to enter inflation (go up), if they were first it would be a sign of recovery.

What does the "pound of bacon/large delivery pizza" indicator tell us? 

Inflation.

Like Economists - Witch Doctors serve a purpose and make people feel better, but they don't necessarily throw a spear or plant a crop either.

Economists = Industrioserviceinfo Economy's Witch Doctors

Yes - a vital function - one of chanting, gesticulations, powders, and noise.

Tue, 10/26/2010 - 23:30 | 679630 calltoaccount
calltoaccount's picture

 "They anaylze data for christ sakes"


just like Mishkin analyzed Iceland for 120k?   a huge proportion in US on Fed payroll, or beneficiaries of corporate thinktank cash; they are coverup lipstick and makeup; hacks for hire.  

like truth-trashing mortgage pushers, credit raters, CDO CDS market manipulators and bribe-fueled fraud enablers of all stripes- they do it for the dough-- and because everybody else is doing it. 

Tue, 10/26/2010 - 19:43 | 679107 THE DORK OF CORK
THE DORK OF CORK's picture

Excellent article - the prince / priest dynamic is at the core of politico - economic developments since the dawn of civilisation.

The Priest control peoples minds while opportunistic princes who detect weakness in the control framework appeal to the masses for direct power.

The pond has been stagnant for some time, with the priestly algae blocking the light from reaching the ecosystem.

The system will die unless the pond is oxygenated.

The Austrian solution is absurd as very limited goverment would merely create a power vacuum that would be filled by Tamerlane like figures who will fill the chaos with violence and extreme malice.

A powerful goverment with limited powers is what is needed, not the weak goverment with unlimited powers of the present or a Austrian fantasyland of exponential contractual interconnections only and completly ignoring the responsibility of goverment to balance the power balance between various players before they gain a critical mass of unlimited consolidation of power.

 

Tue, 10/26/2010 - 22:19 | 679445 Gunther
Gunther's picture

Thx for the dose of reality.

 

Tue, 10/26/2010 - 19:43 | 679109 deadparrot
deadparrot's picture

Economics is a social science that uses some simple math and graphs to pretend it is a hard science. Frankly speaking, the broad assumptions that markets are efficient and market participants are rational are the functional equivalent of early "scientists" operating under the assumption that the earth is flat and is also the center of the universe.

Tue, 10/26/2010 - 20:25 | 679189 Variance Doc
Variance Doc's picture

Excellent analogy!

Tue, 10/26/2010 - 19:43 | 679110 Blindweb
Blindweb's picture

  I find all of Gonzalo Lira's articles to be informative and interesting reads, BUT after talking about how complex the world is and how hard it is to make economic predictions, he goes on to make very specific predictions. 

  I'll take my macropredictions from people like Jim Rickards, Chris Martenson, and John Michael Greers who really understand system complexity.

Tue, 10/26/2010 - 19:56 | 679134 whelchej
whelchej's picture

The Financial Times ran an editorial asking "What's to be done about the economists?"  I sent them the below suggestion:

I am writing regarding Gideon Rachman’s article “Sweep Economists off Their Throne”, September 7, 2010.  I heartily agree with the comment that “[economists’] claim to scientific rigor – buttressed by models and equations – must be treated much more skeptically.”  This result could be accomplished very easily if Parliament passed an “Economists’ Malpractice Act”, subjecting economists to malpractice claims for their negligent erroneous opinions, in the same way that, for example, medical doctors, lawyers, engineers, accountants, and architects are subject to liability.  Claims should be permitted by any person to whom an economist has directed a professional opinion with the apparent intent to influence the financial actions of that person.  An economist might easily avoid liability with an appropriate disclaimer, such as “Economists’ forecasts are wrong at least 50% of the time, and therefore no serious attention should be paid to the views I am about to express” or even “In evaluating my opinions, you should take into account that the opinions of a professional augur are likely to be equally valid.”

 

Since the negligent opinions of some economists have damaged so many in the recent financial crisis, economists should be subject to this liability, particularly when every remedy to our current economic crisis prescribed by economists to date has been more ineffective than the last, with obvious dreadful long-term consequences, similar to the remedies of bleeding and leeching prescribed by the medical doctors of 300 years ago.  In fact, when one considers that the two remedies of printing of larger and larger quantities of money, with the consequence of transferring purchasing power from increasingly impoverished citizens to their governments, and of protecting banks and their managements’ employment and perquisites at all costs while others are suffering, the comparison to bleeding and leeching is exactly apt.  When liability is imposed, then we will have meaningful progress in economics as a science, just we have had in the other occupations.  This simple change is more likely to prevent another financial crisis than any other measure to date.

 

In short, the economists are even more responsible for the current crisis than the credit rating agencies, on whom new responsibilities and liabilities have correctly been imposed, and new responsibilities and liabilities should be imposed on economists as well.

 

 

They didn't print it, of course.

Tue, 10/26/2010 - 20:22 | 679186 Variance Doc
Variance Doc's picture

I normally like reading Mr. Lira's articles, but this one does not have the quality of the previous posts.

First, there needs more fact checking. For example, he claims "...Myron Scholes, Robert Merton and Fischer Black...invented options pricing..." This is simply not true. Options and pricing have very long history BEFORE these guys came along; it just wasn't a unified approach. What these guys did was bring in models from mathematical physics - stochastic processes, and apply them to the options pricing problem. It is a beautiful application of math; their work does deserve the Nobel memorial prize! What this did was to establish a coherent way to CALCULATE a fair price, assuming some (unrealistic) market conditions, for European options.

Second, it claims people never can be predictable (modeled). This is not true either. Economics assumes equilibria exist and thus economists are able to use some basic mathematical models, masterbate with the math, sit back and marvel how smart they are. This is the state of the art in econ today. Not very impressive. Take away the assumptions behind the math, and the cookie crumbles - forecasts/preditions are way off, dogs and cats living together, printing money is the answer, etc.  What is needed is far more advanced math to model non-equilibrium settings and this is where the economist's brain fails. It is possible (I believe) to model people, we (non-economists) just have not invented the math yet.

The state of the art in econ today is very primitive, and that is why there are all these debates about deflation/inflation, Neo-classical vs. Neo-Keynesians vs. Austrians, etc, and no concrete answers.

Tue, 10/26/2010 - 22:53 | 679570 ebworthen
ebworthen's picture

Go apply mathematics to your significant other and see how far it gets you...

Wed, 10/27/2010 - 10:25 | 680364 Variance Doc
Variance Doc's picture

Do you comprehend what you read?

Tue, 10/26/2010 - 20:32 | 679201 alagon
alagon's picture

Austrians believe that we should abolish the Federal Reserve, return to the gold standard, and eliminate all forms of taxation.

They are the wisest economic cult, but they are wrong as well. Human action is not attracted to gold.

Tue, 10/26/2010 - 20:34 | 679205 zen0
zen0's picture

The map is not the territory

 

Robert De Niro character

Ronin, 1998

 

 

 

Tue, 10/26/2010 - 20:47 | 679240 MiguelitoRaton
MiguelitoRaton's picture

GL, as a movie guy, you might enjoy this comparison between Hayek and Keynes comparing AE and Keynesian Economics. http://www.youtube.com/watch?v=d0nERTFo-Sk It too points out your mischaracterization of Austrian Economics.

Tue, 10/26/2010 - 20:58 | 679244 Clancy
Clancy's picture

Every Zerohedger needs to read Jaques Ellul's The Technological Society.  He predicted these sorts of problems back in the 60's. 

And the problem isn't just with economics, it's a problem with the way the Western cultures see the world generally.

Strong pro-read.

 

http://www.amazon.com/Technological-Society-Jacques-Ellul/dp/0394703901

http://en.wikipedia.org/wiki/Jacques_Ellul

 

Put simply, he argues that a technological society requires more information to maintain than average people are able to learn or process.  The solution to which is "techniques" of information.  i.e., just enough theory to run the machines (or the economy) but not enough to truly comprehend the system.

Very similar to Taleb, only much broader in scope and a great deal more philosophical.

Wed, 10/27/2010 - 02:24 | 679850 piceridu
piceridu's picture

He had some great insight but he lost me after i read these nuggets:
"That is, being a Christian means pledging absolute allegiance to Christ, which makes other laws counter to the Law of God". And also didn't he say that all people from the beginning of time are saved by God, Jesus Christ, they are all recipients of his grace no matter what they have done.?
Sorry my Respecto Meter went off.

 

Wed, 10/27/2010 - 02:57 | 679246 Goldilocks
Goldilocks's picture

Our God Is Money”: Economics Isn’t a Dismal Science—It’s an Ersatz Religion

If you describe something as "ersatz", you dislike it because it is not genuine and is a poor imitation of something better.

Good effort Gonzalo, but if you were truly concerned about giving us some cure for this mess ... perhaps you might not be so preoccupied with economic gaming theory (stimulating the receptive to action), stereo-types & hasty generations (tea party, amongst other things).

The "catalyst" for an economy fix is ... gold & silver is money. <-- There, that's better.
 
(Socialist, unions & everyone else should) Demand payment in gold & silver, no taxes ... instant prosperity to the people that matter.

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.”

... sounds like an austerity measure to me. Perhaps you're austeritian.

More taxation without representation is just (more) bad news.

Tue, 10/26/2010 - 20:58 | 679274 kaiserhoff
kaiserhoff's picture

I need to hear this from a fucking I talian?  Go talk to the two thirds of the population in southern Italy who are on "disability".  Enough said.

Tue, 10/26/2010 - 21:51 | 679378 Imminent Crucible
Imminent Crucible's picture

The krauts are always complaining about the wops.  Sigh.

Nothing ever changes.

Do NOT follow this link or you will be banned from the site!