Waterloo’s Larry Smith and his disciples: the Good, the Bad, and the Ugly

I wish I had some sort of backhanded entry into the Larry Smith phenomenon, but here I am without any tangent to get started on. After all it’s been a long time since I last showed up for his class.

I’m afraid that ramming into the topic cold-turkey in reverse might stir up my already strong ambivalence toward him to a point that I find myself unable to write a single intelligible sentence. Indeed writing about Larry Smith in any other fashion but drooling babbling adoration is a task of epic proportions and I’m afraid I am already way in over my head. However, this influential figure deserves to be followed and analyzed in the annals of his greatness by someone who wouldn’t get lost inside.

…If not now, then when? If not I, then who?

No better pictures online? What a shame...For those of you who didn’t attend my school (University of Waterloo), suffice it to say, Larry Smith is the second coming as far as whoever has taken his class is concerned. Genuine boss of charisma. Students love him. I loved him too, but I’m talking about an evangelical glow in the eyes of his worshipers.

He’s got his own sinister Politburo, roaming with zealous spies planted throughout the Fortune 500, tipping him off about the latest and greatest plots to subvert markets around the world. His courses of intro economics are a legend, probably the most likely experience for any two random Waterlooians to have in common. Every other sentence coming out of his mouth is a classic quote belonging on the wall. But what is Larry Smith’s universal appeal? What does his magic really consist of?

Two different types of people are magnetically attracted to him for different reasons, and sometimes within the same person two conflicting character traits compete for the perk-up effects of his rhetoric. For those on the margin, which of these two inner drives ends up prevailing by the time their ride in Larry’s ideological tornado is over will probably mark a turning point in their lives.

And the funny thing is I suspect Larry has no idea about the full extent of his power. Oh I know he knows he’s damn influential, but I don’t think he really understands what he does to people.

The Good: Larry’s appeal to the free spirit in all of us

This is the part I bet Larry is most aware of. It’s the reason he loves recruiting snot faced frosh into his class. He picks these comfortably confused kids, indoctrinated from their years in high school, most of whom have probably already picked a major but probably for the wrong reasons, and whose intimidation by what’s all out there has cornered them into their current pathetic expectations about life. Oh my God! He WAS young once!

Larry Smith just loves bursting these kids’ haze bubble. He teaches his students that life is a friendly experience for reasoning people, and the world is an exciting and intelligible place that you can make sense of! He makes you sense it in your gut that the real world can be figured out, that you are responsible for your life.

That’s all he teaches, really. He makes you see that you don’t have to be a follower to get by, that nothing is beyond the reach of your abilities if you employ your reason and imagination, and, well, growing a pair of balls wouldn’t hurt either.

And there, suddenly nothing seems mystical about value creation. For many students that’s the first spark of the spirit of entrepreneurship right there. He’s a spectacular motivational speaker.

For those of you who find this cliché or trivial commonsense, I’d like to smack you off your pedestal so you can come down and smell the coffee: The half-baked pseudo intellectuals with a license to spread cynical and self-victimizing bullshit are the norm at universities; no-nonsense professors trying to instill a dignifying sense of life in their students are the exception. In that regard Larry has little to no competition that I know of at Waterloo. Many of his alumni make the best out of his teachings and go on to start successful multi-million-dollar enterprises: hard core entrepreneurs.

The Bad: Larry’s appeal to the little authoritarian in most of us

Now you all know this is what I’m dying to get to. After every class Larry attracts around him a little crowd of zealots who stay and talk for at least another hour about all sorts of things. Well, most of the time it’s Larry talking, and I can’t say he seems to mind the sound of his own voice.

I used to go up to listen to him too, but I usually kept my mouth shut because there was a weird vibe to that little crowd: They were all so uncritically enamored with Smith that a lot of things coming out of their mouths were just excuses to flatter him in some way, and there was something embarrassing to that.

So I felt uncomfortable engaging him in front of everyone, assuming that at least on a subconscious level, he would have expected me to pay lip service in one way or another. As much as I admired the man, I could not bring myself to have a conversation where I didn’t feel an equal.

In a way it was good though, because I focused all my attention in observing Larry’s interaction with the others instead of worrying about sounding smart. I was more comfortable talking with the zealots on the side, and I befriended a bright Serbian guy and a hysterical Taiwanese girl among others. The girl would scream at the top of her lungs that people are sheep who don’t know what they want or what’s good for them and need the government to protect and guide them. It was funny, she quoted the results of the Penn & Teller Dihydrogen Monoxide hoax, which was actually a scathing attack on environmentalists, leftists, and the type of people who generally are the first to think we need the nanny state to keep the citizenry in check.

In the “Penn & Teller” example, a fake activist asks random hippies at a hysterical environmentalist crap-fest to sign a petition to ban Dihydrogen Monoxide (H2O) and they sign in droves without even asking what it is. She saw this segment as the perfect example of how people are idiots who need a paternal government to get by in life.

Here she was, shouting this at my face, as I was trying to tell her that all her example showed was that people are quick to make idiotic policy decisions involving banning something, regulating something, or basically telling others what to do. The irony of using this example was certainly lost to her, but that was really the point of the hoax.

Policy decisions often have very considerable yet unforeseeable micro effects which are hard to discern because they get spread out across many sections of the market. Henry Hazlitt explained how we must consider the true opportunity cost of any government policy on the marketplace and society. (I preferred to talk markets; she liked ‘society’ better so I kept alternating between the two)

Typically, there is no immediate feedback loop to provide a reality-check for the ‘legislator’: deliberations are made from his office desk, often in the company of interest group lobbyists. In time, the negative effects are incrementally diffused across society, often while the public has forgotten the initial law, and the legislator is on to the next pet project. Unable to factor in the true costs of knee-jerk prescriptions to purported market problems, “corrective” market interventions are often just as bad.

So I was trying to explain her that her argument boomeranged because it showed only just how stupid people can be at making universal decisions for everyone else, i.e. being authoritarian cocks. The market has shown time and again that people are not such stupid sheep whenever it comes to budgeting for their own lives. I challenged her to repeat the experiment, only this time she should try to sell people some Dihydrogen Monoxide; then I’d be curious of the findings she’d report back: how many shelled out their cash, and how many and what kind of questions were asked.

Larry was standing a few feet away and heard some of the commotion. He said professors will usually promote levelheaded discussions, but he actually liked it better when people screamed and swore at each-other. I don’t know if he was being sarcastic. I’ve got to say, she was the one doing all the swearing, and jeez, for conversing with me, that’s noteworthy.

But I mean, these were most of the people who gloated over Larry Smith’s charisma, this is the kind of people he’d throw a bone at once in a while. They weren’t all as annoying as this girl, but there was a definite underlying pattern in their thoughts. When in doubt whether any of them belonged to this category, my test was to confront them with the flaming ones: if they were not annoyed at any significant level by the flamers’ bullshit, then they were all in it together as far as I was concerned.

I have often been asked about my libertarian epiphany and I never had a good answer. I don’t remember a specific moment. It span more across days, or actually weeks, like a slow but confident chain reaction in my brain. The first node on the chain was this particular sense I got from getting to know some of these Larry Smith zealots.

How do I say this? They just sounded so stupid! Many of them were bright kids too but there was something off about them, and I couldn’t put my finger on it. After talking candidly for a bit, something would always get on my nerves, a deep antipathy that made my lips curl up.

It was their arrogance stemming from utter lack of epistemological consideration for the prescriptive bullshit they’d spew out. Their deliberations were so cheap because they never ever considered the possibility of… Being wrong! …and the human and moral cost of that possibility. Neither did they seem to ask themselves “How do I know for sure?” The people at the bottom were fine to experiment with and apply their half-baked ideas to.

They were all signing blank petitions on Dihydrogen-Monoxidic-equivalent economic matters with total disregard for the principles of human action. In this context they were all very similarly minded, however strongly they happened to disagree on concrete matters. And at one point or another during any serious conversation most of them exhibited this distinct though subtle (sometimes not even much so) contempt for ‘people’.

I didn’t want to be one of them —that much I intuitively decided. And such people shouldn’t be the ones making decisions for everyone. I began analyzing what made them that way. I have concluded that it’s principally sheer megalomania expressed as irrational subjectivity and intellectual arrogance. I wrote an entire essay as an appetizer to this post, where I explain in detail my thoughts on the authoritarian personality. At the end of the day, people lacking even the basic sensitivities of the vigilant unpretentious mind can be found sitting on top of their own self-generated smug clouds, making outlandish deliberations with an unjustified sense of authority and appearing like utter dicks to those who do posses such sensitivities.

Intuition can be a shortcut to reason, and at the time I only loosely sensed that there was something malignantly arrogant about a lot of these Larry Smith zealots. But my formation in economics was not sufficiently robust for me to confidently rebut many propositions being thrown around which I felt were full of shit. The class was ECON 101 after all.

However I did get all stirred up because the supremacist traces of thought in the zealots’ discussions must have been inconspicuous to a noble and untainted intellect such as Larry’s. To me he was an unknowing victim. I wasn’t comfortable being in the middle of it so I stopped staying after class.

The Ugly: Maybe they are a perfect match?

About a year and a lot of econ-literature later, I returned once more to introduce my friend Saad to the joys of Larry’s inspirational rhetoric as well as to get a Larry-fix for myself, for which I had grown nostalgic.

I was in a constant state of déjà vu throughout his lectures: being an exceptional stand-up performer, Larry can effortlessly deliver a memorized speech and make it sound like he’s coming up with every line on the spot. I remembered everything from the year before, but I was absolutely shocked and overwhelmed by how much between the lines I had completely missed the first time around! The subliminal messages Larry was sending through the ether were disturbing to say the least.

In an illustration of inelastic demand Larry reveals his advocacy of the thug-state: he thinks it’s preposterous that George W. Bush does not intervene to cap the profits of pharmaceutical companies. Nonintervention in this market must be the result of the crony pharmaceutical lobbies bribing legislators into betraying their constituents’ interests. The state can and should approach the industry and be like:

Yo, bang-up job inventing and manufacturing this cool drug that’s saving people’s lives, but I’ve got citizens who can’t afford it at the market price. That’s unacceptable! I understand you’ve been making some serious monopoly profits here with your fancy little patent exploiting the inelastic demand for your good, so it’ time for us to negotiate some reasonable profits for you. We’ll get together and talk about it… What? You don’t like the sound of it? Dude, I’ve got legal monopoly over the use of force, I can jail your ass! Nah, I don’t need to do that, I can just revoke your patent so everyone else can manufacture your drug.

Stunned, I raised my hand and asked if it wouldn’t perhaps be more effective and less arbitrary to just make patents expire sooner, so the public at large would be deprived of the generic drugs for a shorter period of time, or maybe just subsidize the bottom income bracket thus making drugs affordable for all without brutalizing the market. He bit the bait, disinterestedly replying that those were all fine alternatives.

He couldn’t have meant it! Being an economics PHD, Larry must know the purpose and effects of patents. He must be aware of the colossal investment involved in R&D: entire teams of the best chemists, molecular biologists, technicians, and computer scientists that money can buy, expensive computer technologies for simulations, state-of-the-art logistics for large-scale experiments and their countless replications, legal costs, the risk of harming research participants, the risk of reaching a dead-end, the risk of sudden obsolescence from a new competitive drug entering the market, the years of accumulating interest on debt and no revenues waiting for the FDA to finally approve the product. And that’s just the tip of the iceberg!

We are talking about great but calculated costs and risks, which pharmaceutical companies decide to undergo based on the prediction that they will be able to sell their new drug at a markup for 20 years, or until whenever the patent is supposed to expire. Until they recuperate their colossal fixed costs through monopoly margins they won’t even see any profits, regardless of how cheap it is to actually manufacture the drug.

So would they invest billions of dollars if they knew they could keep their monopoly for only 6 months, or even 5 years? It obviously disrupts the incentive structure, so no, Larry, shortening the patent’s life would not be a long-term solution. Not if you want there to remain such a thing as a private pharmaceutical industry that will continuously take investment risks and put those drugs on the market for the government to have anything to regulate at all.

I am sure Larry knows all this, and he would either like to eventually nationalize the pharmaceutical industry to complement his beloved universal health-care, or (and this is even more sinister), he likes predatory discretionary state policies. I’d put my money on the latter: the state making rules of thumb, issuing patents and guaranteeing their enforcement, but reserving itself the right to break its own rules once in a while to ‘promote the public good’; a policy that ignores the extraordinary costs from the resulting stifling of innovation and investment…

Discretionary Thugerry

This evokes the image of the cheetah waiting in the bushes for the antelopes to come prancing around in herds; they will run for their lives once they see the cheetah is for real, and one of them is going to get it. But the cheetah knows they will be at it again tomorrow, each feeling that the chances of being the one out of the entire herd to get clawed in the ass are small.

After all, discretionary thuggery is how central banks roll! I would argue that there’s plenty wrong with the government at large taking after central banks but that’s not even the point. What disturbs me is how liberally (deliberately?) Larry slips such controversial tidbits under the table. Blemishes of legal and moral considerations are airbrushed into irrelevance so that Larry’s conceited solution can pretend to be self-evident and logically necessary. Perhaps it is acceptable for an economist to deliberate in a moral and legal vacuum, but how can he keep a straight face giving his students a piece of mind while conveniently neglecting to mention the very economic dynamics of incentives which his ‘solution’ would blast off?

He won’t tell students that companies wouldn’t keep investing in proprietary material if they knew the government would steal their hard-earned intellectual assets, so such a ‘solution’ cannot work in the long run. These are subtle economic issues ECON-101 students wouldn’t need to be bothered with if Larry could manage to refrain from presenting his personal master plans for humankind in class, but since he chooses to indulge them, he has an ethical obligation to fully inform his students of the common side-effects of his prescriptions.

The student who knows nothing of economics just sits in class taking notes with the filter of criticism completely turned off, absorbing like a sponge everything coming out of the trusty instructor’s mouth. It’s upsetting to hear Larry feeding his students so many subjective prescriptions, rarely if ever hinting at the difference between fact, mainstream economic theory, and pure “Larrysmithonomics”. He polishes his value judgments with iridescent charisma until the unwitting student sees only a gem whose value and splendor are self-evident and indisputable.

Does Larry know his effect on students? If so, it’s reproachable that he instrumentalizes his influence to indoctrinate and deceive them. I am not talking about just a few odd cases, since objectivity can temporarily betray any of us. Unfortunately Larry Smith’s indulgences in pompous subjectivity are systematic. Below are just a few eyebrow-raising instances.

In his seemingly innocent recap of the industrial revolution, I caught an innuendo of the overtired Marxist theme of ‘alienation’. Although the medieval farmer lived in destitution, his sense of ‘self’ and perceived place in the world was cohesive. How romantic, but then automatized mass-scale manufacturing turned him into a brain-dead appendix of the machinery he was to operate. This notion helped Erich Fromm sell books but I don’t see how it belongs in an introductory course on economics.

In a subsequent turn of thought Larry contemplates the possibility of custom-programmable robotization replacing mass-manufacturing in the near future. His forecast is that of a classic technophobe: machines will put people out of work, this next wave of automatization will be for real, and so on and so forth. Once we have programmable robots doing customized work craftsmanship will go extinct. There will be no room for unskilled labor so only highly creative intellectual work will have any market value; the same old Marxist argument repackaged for the 21st century.

He was using this prospect as a warning that we better be prepared to use our heads very hard in our careers, which is of course good advice. However the alternative to fully using our intellects is unlikely to be starvation, like he proposes!

If anything, robotization will bring down the real cost of production in all sectors, affording abundance especially to the poor. Unskilled labor will shift to tasks involving basic cognitive operations in new industries Larry Smith or I cannot even fathom at the present day.

Man as a nano-engineered machine, which he technically is, cannot be exhaustively replicated in his full spectrum of faculties by any conceivable man-made robot. Abilities like ours come bundled with a consciousness. The duplication of our neural-network is impossible even with futuristic nano-technology.

Human reproduction as prescribed by our DNA and as implemented by coitus, is the most efficient way of generating beings with human abilities. The fully-and-creatively-using-intellect elite will certainly find innovative ways of making plain people useful: feeding, sheltering, and providing social interaction for unskilled workers will always be more cost-effective than fully replacing them by robots.

What else… Larry loves using the hint of externalities as a pretext for nationalizing industries. If fire departments worked for profit then no one would bother putting out fires in uninsured buildings which would quickly spread across insured buildings, and everybody would fry. So fire services must be owned by the state.

A bit radical, don’t you think, since a similar argument for car-insurance only dictates that insurance be mandatory, at most, not that the state must provide it. Fire departments don’t need to be state owned and operated. Simply making subscription to fire service compulsory would do: let the market actually provide it.

But even this conclusion is too radical, because the imminent possibility of fires spreading across uninsured to insured apartments in one building would be sufficient incentive for the owner to contractually mandate fire service for all tenants. Conversely, the insured tenants and buyers of individual apartments would themselves put pressure for such contracts to be extended to everyone in the building. Neighbors can treat the few remaining uninsured buildings pretty straightforwardly: they can put the fire out to prevent it from spreading to their own property, cover the immediate fire-service expenses if need be, and then demand the court to freeze the uninsured’s assets to pay through the nose for the effort and expenses they had to incur on his behalf.

Externalities find no room to emerge when third parties at risk can flex their transactional muscles to guard themselves from the eventuality. The market knows how to close such gaps all by itself. Of course externalities do exist but not in the liberal range Larry describes them to students: a lot of his examples are only plausible if property rights of third parties are not respected or enforced by law, which render his arguments straw-man attacks against free enterprise.

It’s manipulative to not provide any context on what kind of society he places his examples. If he’s talking about anarchy, then of course, almost everything is an externality in the war of all against all. But under free enterprise externalities can potentially occur only in cases where property rights are hard to define. So if he wants to keep it straight, Larry would have to shave off a lot of his examples in which state intervention doesn’t have to go any further than enforcing contracts and protecting private property.

But all of this is small potatoes compared to his ‘boo-hoo’ exposé of the supposed economic evils of collusion, natural monopolies, and predatory pricing. Antitrust legislation is championed by ‘progressive’ capitalists who see competition as a tame game which no one should lose, and therefore no one should win. It’s just an excuse for big government to orchestrate a grotesque rat-race in the big-business world for its own gain. If your prices are lower than your competitors’ then they’re predatory, if they’re the same as your competitors then you are colluding, and if you can afford to charge higher prices you must be conspiring to establish a monopoly. Damned if you do, damned if you don’t!

Give me a break! The little farts who can be bled to death by the big guys deserve to go under. ‘Predatory pricing’ would be ineffective if the small competitor’s product/service was truly superior: investors would back his venture through the times of pressure until the incumbents realized they could not forever operate at a loss. The little guy would eventually succeed in tearing himself a hole in the market.

Collusion only invites newcomers. Sharks smell the blood and bite themselves a piece. There is no such thing as long-run abnormal profits for a cartel, unless of course, it owes its existence to government license.

A natural monopoly is a living testimony of great technological efficiency in a niche market: Either the upfront fixed cost (usually of buying excess capacity) is so high that the seemingly everlasting profits barely cover the initial investment if taken in perpetuity with the interest rate of capital factored in, or the monopoly is temporary and will eventually crack under competition. Some ‘monopolies’ are great because they provide a common platform in areas where a good standard is more efficient than a multitude of competing poorly-integrated differentiated products. One example is the standard keyboard design. Another one is Windows being the central node of the market for operating-systems.

…Which brings me to Larry’s scathing attack on Microsoft for being such a big bully. A lot has already been said about it and yet more remains to be said. I would wrap up my position more or less like this. Ultimately Netscape didn’t make it because its browser was crap and incompatible with Windows. It was Netscape’s responsibility to go out of its way and adapt its product to Windows, not the other way around. Look at the market for browsers today. With Microsoft off its back, where is Netscape now? And most importantly where are Microsoft’s coercive superpowers now that Firefox is taking over the internet? There has been nothing but continuous innovation online since this debate started over ten years ago.

Microsoft was very deliberate in its attempt to take over the web browser market, yet no one was ever forced to purchase Windows. What right does the state have to dictate how Microsoft should bundle its products, and how is it economically sound to prevent it from offering consumers Internet Explorer for free? Oh but it would hurt Netscape: same argument for protectionist tariffs. One thing you can’t say is that they benefit the consumer.

In a world with no legal antitrust considerations, try to imagine if Microsoft could yet get away with blocking Google, its greatest competitor, off of Internet Explorer or Windows altogether. Ask yourself if consumers would stand for it. Only shitty products and companies need antitrust protection, but to hear Larry exuberantly airbrushing the bumps and holes of his argument you wouldn’t have a clue.

Canadian Healthcare

He fervently supports Canada’s nationalized health-care system, but I think he talks about it only after class, which is forgivable. The economic preposterousness of backing universal health-care is perhaps not so forgivable to an economics professor. If groceries were nationalized, I’d consider it animal cruelty to not feed my cat caviar every night. Likewise, making health care ‘free’ effectively fuels the demand for it to a point where shortages are inevitable, hence the 12-hour average waiting period at Canadian hospitals. The entire industry degenerates into slack incompetence from lack of internal competition, with an extensive range of specialized services ceasing to be provided at all since they are vital to only small fractions of the population. Of course the bulk of the population would be best served by directing those funds toward more generic treatments. Universal health-care is so democratic, isn’t it? Without any alternatives to mass-scale generic health-care, no wonder so many Canadians have to travel to the U.S for proper, timely, specialized medical care every year.

Nonetheless Larry vaguely brings up this gigantic high-cost structure inherent in private health-insurance which would be crushed to a pulp if only the industry were nationalized. He couldn’t possibly be talking about the asphyxiating regulations that forbid private providers from differentiating their coverage rates according to risk, or force them in some states to include absurdities such as hair-transplant surgery in their coverage plans. Nor couldn’t he be talking about the legal cartel of pharmacies. It must be some other kind of intrinsic high-cost structure which has got nothing to do with idiotic government regulations but which is just so convoluted and puzzling that Larry doesn’t care to elaborate on what it actually is.

But perhaps the most outrageous statement Larry Smith has ever uttered, in class or otherwise, perhaps in his entire life, is that… … … Lack of foresight into the usefulness of electronic databases for central-planning applications, held the soviets back from investing into the IT sector, and because of this bad investment decision, they were unable to manage their central-planning databases once their complexity started growing out of proportion, and this was consequently responsible for the collapse of communism in the USSR.

hint?I don’t even care to comment on the stupidity of such a theory, except that seeing a politico-economic problem and its alleged forgone solution as a technical issue, is the classic mark of an authoritarian (see my essay). Being a granddaughter of communism myself and having some personal idea of what it means, it’s distasteful to hear my economics professor present such a ‘theory’ in class. For him to even entertain such a thought seriously enough to voice it is unjustifiable. Food for crazy thought… Who knows, maybe it will stick with a few, —most likely some of the little authoritarians who drool all over him after class—and it will be up to the pointy headed software engineers among them to bring Neo-Communism into the Web 2.0 era. I’m sure it will work out much better this next time around, with slick electronic databases and all.

I have partially confronted Larry about some of this, his explanation being that his hero is Adam Smith, who was a social revolutionary. Lame… Perhaps Adam Smith was his economic-childhood hero but he found himself much more resoundingly in Keynes as a grown-up. His charismatic authoritarianism must have been yearning for an ideological shelter and Keynes’ theme of the interventionist hero perpetually saving the Capitalist day from itself was right up his alley.

I still respect Larry in many ways, but I am deeply disenchanted. His skill at making everything he says sound like common sense can be a sweet stroke to the ego for those who like the tone of what they hear. Little authoritarians adore Larry Smith because he makes them feel smart and important for having all sorts of master plans of their own for humankind, his arrogant charm validating their arrogant stupidity. They want to be just like him, prescribing solutions to everyone with effortless charisma and being listened to with awe and respect.

Identifying with him makes them feel superior to those who challenge their dogmatic ‘solutions’ to world problems. They close their eyes and abandon themselves in this larger-than-life figure’s river of allure, and when that river eventually discharges in their own ocean of complacency they see only its majestic delta of intellectual aftertaste. With Larry’s holy image as a continuous source of inspiration and facilitation in their daily attempts to prescribe humankind what’s best for it, they emerge as a born-again authoritarians.

I understand now how this student walked up to Larry after class and asked with a laid-back smirk on his face: “Then why doesn’t the US government intervene? I mean, we can all absolutely see that capping pharmaceuticals’ profits is the way to go. It’s so obvious. How come they don’t see it?” Of course, everything you want to prescribe becomes oh so blatantly obvious, even though he himself didn’t see it as such until Larry Smith told him and the rest of the class that it was. I replied that the U.S constitution doesn’t allow for that kind of intervention because it was founded on libertarian ideals that are irreconcilable with one politician’s or another economist’s whim. In return Larry claimed that most constitutional scholars would disagree with me. Sure Larry, whatever.

The good in what Larry Smith has to teach is very straightforward and easy to grasp, but it is also commonly accessible to everyone who has set some time apart for reading in university. The subversive, controversial and misleading ideas he also teaches are equally easy to absorb but very hard for most students to discern for what they are.

Both the closet entrepreneur and the closet authoritarian in all of us are receptive to Larry’s magic: He is a catalytic force to be reckoned with. What’s the bottom line? I remain unconvinced one way or another whether he ultimately does more harm than good. Perhaps a more important question is: Does he subvert students on purpose or are his slips from objectivity largely subconscious? I don’t know, but I suspect that he is not aware of the full extent of his deceptiveness. It would be constructive to hear Larry’s own thoughts on the matter. We have heard great things about the entrepreneurs he has cultivated, but I dare not even imagine what kind of people his authoritarian disciples grow up to be. I know of only two:

One of them is the boring and pedantic Prof. Van de Waal who seems to have sprained an ankle in the dark basement of Plato’s Cave of Ideas. He stares at the shadows on the wall with dilated pupils, mentally masturbating at the patterns of utility curves as they vary across utility functions. He passively exercises his authoritarian streak by punishing students who try to think outside the box and who dare divert from his formulaic lecture notes ever-so-slightly. Only his way of solving what essentially are mathematical problems is legitimate. He clings to irrelevant rules, making an issue out of petty things for lack of creativity and decisiveness in devising an actual master plan for the world at large.

The other one is the malignant and deranged Prof. Picard who has desperately and embarrassingly turned his persona into a disturbing Larry Smith clown: he steals Larry Smith’s quotes, ideas, mannerisms, and lecturing approach. This man is evil, with a keloidal chip on his shoulder, having embarked on a sloppy career in economics for the sick sake of being closer to Larry, and now seeking professorship for the pure sadistic joy of harassing students. If you dare challenge him intellectually he will go after your average. And he’s not repressed or passive-aggressive about it either: his vindictiveness is so premeditated that he will openly confide in his officemate that he intends to do everything in his power to destroy you. All he really wants is to be loved like Larry Smith but it never works: the genuine allure, the beautifully-sculpted intellectual muscles, and the quirky sense of humor are simply lacking. Being loveless brings Picard down, and his impotent emotional response is to sublimate frustration into cruelty toward students.

These are examples of failures: pseudo-intellectual douche-bags who couldn’t make a decent living in the real world outside the bubble of a university environment. Who knows what the star pupils will achieve…

Author: Kejda

Born: Tirana, Albania Residing: New York, NY University of Waterloo, Economics '08

33 thoughts on “Waterloo’s Larry Smith and his disciples: the Good, the Bad, and the Ugly”

  1. Interesting article! Well-written too. I wonder what Larry thinks of it? He’d definitely have some funny comments.

  2. The thing about Larry Smith is, he’s so entertaining that people tend to abandon their critical faculties and just accept whatever he chucks at him. I was even guilty of this myself, to an extent, when I took his class eons ago. Students show up in DC 1351 having spent the week listening to monotoned profs droning on about formulae, and this funny, excited little man runs up and down the aisle, arms flailing, telling you stuff that’s happening in the world RIGHT NOW! So yeah, he is probably the best public speaker I’ve ever seen in a classroom setting. But he’s a Keynesian welfare statist head to toe, but he never says so explicitly…

  3. Theres a lot of different views on Larry out there and you bring up some very good points, but before you go on tangent after tangent dissecting his implied theories perhaps you should consider their purpose. Larry often starts an argument in class as if it was obvious only to turn to the students and yell “of course not ladies and gentlemen”. His bonus assignments are focused on dissecting professionally written articles and finding the mistakes. He encourages students to think for themselves and be different, be weird, be geeky if thats who you are, but try to be the best at whatever youre doing. I think it would probably upset him to think that youre assuming he wants people to swallow his ideas without thought. Its a shame same people do.

    I think the biggest benefit to going to Larrys lectures is the insiration he brings. Its why hes able to get through to members of every faculty. As far as Im concerned its the best characteristic a professor can have and very few do, making Larry so unique and appealing.

  4. Inspired, you are right about the benefits of Larry’s lectures, as I have described them very similarly to the way you did on the section “The Good: Larry’s appeal to the free spirit in all of us”

    However, I am sure that the cases I picked to analyze were not instructive exercises to be concluded with “of course not, ladies and gentlemen!” He does genuinely encourage you to think for yourself, but most of his disciples end up like the cat that will follow the finger but not look at the moon it’s pointing to. But even what he is pointing to, in most important cases, are deeply subversive ideas.

    Nationalized health-care, antitrust legislation, etc. Every case I described I am very certain he is serious about. In any case, I am still waiting for Larry’s own input. I sent him the link to this post, but don’t know if he’s gotten to it yet.

  5. Having been a student of Larry’s, and the fact that this article is one of the top search results for “Larry Smith Waterloo”, I feel compelled to defend him.

    Is Larry Smith trying to indoctrinate you? You bet. Does he claim otherwise? Not at all. Does he not go on rants about “the herd”, compelling you to think for yourself? He sure does. Is he an anti-business leftist out to steal patents and nationalise the entire economy? Hard to argue that, given his passionate appeals to the entrepreneur in us all. Some random quotes that come to mind from lectures I attended:

    “[I]t should not surprise you, as i am a _Keynesian Economist_”
    “Our hero, Lord Keynes”
    “(with respect to the market’s ability to correct itself) In the long run, we are all dead”

    If someone accepts Larry Smith’s ideology without critically thinking about it themselves, they are at fault, period. Stupid people are found at all ends of the political and economic spectrum, from marxists to libertarians.

    Did Milton Friedman not have his own group of ideologues? Do you think an education at the University of Chicago would be any less slanted in the opposite direction? If anything, I commend and respect Larry Smith for his bravery in trying to teach a brand of economic ideology that is stark contrast to the direction most of the world is heading in, whether we like it or not.

  6. I don’t and can’t compare him to a hypothetical hot shot from any other university I haven’t attended. Did Milton Friedman or Ludwig Von Mises have their respective circles of ideologues? Certainly. Anyone assertive and articulate enough inevitably attracts a herd, whether that’s what s/he is looking for or not.

    What one makes of this herd, is what’s worthy of critical analysis. Nowhere does Larry Smith ever provide disclaimers that a lot of the views he presents are controversial and not universally accepted in mainstream economics.

    Yes, our hero, Lord Keynes!

    Keynes was all for entrepreneurship, but entrepreneurs to him were little more than beasts of burden to be exploited by the statist puppet masters of the economy. His economics is bullshit: nothing but unsustainable middle ground between communist central planning and free enterprise.

    That sophistry about in the long run us being all dead is also bullshit, not to mention, greatly disrespectful to the happiness of posterity.

    I have noted Larry’s virtues myself; they are quite impressive. But people need to see the dark side also.

  7. “a lot of the views he presents are controversial and not universally accepted in mainstream economics”

    You don’t seem yet to understand that economics is an inherently ideological and politically charged science. Many things are debatable and difficult to quantify, in contrast to, say, the hard sciences. No one is impartial. From Ayn Rand to Naomi Klein, from Marx to Friedman, everyone is teaching and speaking on concepts from their ideological base. If you find Smith’s lectures so conflicting with your beliefs, it’s possible that you’re at the wrong school, and probably in the wrong country.

    Case in point:

    Look at the corresponding chart for the US primaries; you’ll notice that even the definition of “right” and “left” is entirely relative to the country. Stephen Harper would probably be considered a centrist or even left-leaning democrat in the US.

    Also, Keynesian economics could hardly be considered “controversial”, it has been the cornerstone of western economic policy since the 1930s. The fact that you think otherwise shows just how far Friedman’s herd has come in pushing their agenda.

  8. And you don’t seem yet to understand that economics is not a science at all, let alone an “inherently ideologically and politically charged one”! (No branches of science can be inherently charged either politically or ideologically. That which is political and ideological ceases to be science) The scientific method can be applied in only the laboratory, an environment that affords standardizaable replications of any hypothesis-testing experiment. Economics is voodoo science as it only works through backward rationalization: i.e cooking the theory to fit the data in hindsight. Economics’ predictive value is scant at best.

    In as far as the empirical, however anecdotal, evidence from history goes, Keynes’ theories have been long proved to be bogus. Precisely because of this fluid and malleable nature of economic concepts which do not lend themselves easily (if at all) to the rigor of the scientific method, disclaimers should be even more prominent in an introductory course, where students may be going under the not-so-implausible assumption of what their distinguished and charismatic professor is spouting to stem from some sort of established scientific theory, or at least to be widely agreed-upon in the academic community of economists.

    Larry ought to be much more humble about the descriptive and predictive powers of his discipline, and he should try to instill that modesty in future economists: the world is a far more dangerous place because of idiots with economics degrees roaming the Earth while taking themselves and the quality of their pompous speculations too seriously.

    I not only find Smith’s lectures very conflicting with my beliefs, but I consider his predominately doctrinaire approach to teaching to infringe on basic tenets of academic honesty. I don’t think students would feel the same about paying tuition to hear this guy, Larry Smith’s, wild personal opinions on a variety of topics labeled as Economics.

    Don’t give me charts on the definitions of Left and Right. Those notions are nonsensical. There is no such there as a “left/right” dichotomy any more — it makes no sense as a political framework. People forget that “left-wing” and “right-wing” were invented as concepts out of thin air during the French Revolution, and that before 1789 there was no such thing as left-wing or right-wing, and that political ideologies could not be categorized on that spectrum.

    Canada is definitely the wrong country for me, and I have permanently moved to the US since the writing of this article. Economic concepts, however, are universal and should not be judged in the context of the political inclinations of the country in which they are spouted. So no, Larry gets no brownie points for the Leftist hues of his deliberations for the mere fact that he is deliberating from Canada, a country generally very sympathetic to Leftist bullshit.

    “Also, Keynesian economics could hardly be considered “controversial”, it has been the cornerstone of western economic policy since the 1930s. The fact that you think otherwise shows just how far Friedman’s herd has come in pushing their agenda.”

    Keynesian economics has only been the cornerstone of Western economic policy from the 1940s, not ’30s, and only up until the 1970s. The Keynesian school gained prominence amongst policy members not so much because of its economic merits, but because it accommodated the rising collectivist denominations of Western countries’ cultures; applied economics had to converge to the predominant philosophical climate. Keynesian economics is far more controversial than you seem to have an appreciation for and it’s losing ground every year.

    I take offense at your smug assumption that I am indoctrinated by Friedman’s “herd”. I have been a classical liberal long before I’d ever heard of Milton Friedman; my political leanings are based primarily on philosophy and only secondarily on the findings/positions of any school of economics.

    Even as the various schools go, I consider the Austrians to be far more compelling than the Monetarists in their defense of laissez-faire. Do not so safely assume that you can figure out where I am coming from with my positions. In any case, the “other side” has hammered their agenda down our throats pretty one-sidedly for decades. “Friedman’s herd” & co have, if anything, just balanced the agenda of the academia.

  9. Smith is benefiting those who attend his lectures: By exhibiting an alternative way of looking at the world, he challenges us to think on a higher level.

    Both his intentions and the content of his ideas are immaterial in a discussion about whether he is an agent for his students’ ultimate good.

  10. Interesting post. Currently taking my first serving of Econ102 with the _trusty professor_.

    I can spot some assertion of opinion in his speech, but as you said it is very smoothly put on. I guess I will turn the filter up a notch, good advice. Thanks for the heads up.

  11. Thanks for the comment, Artem.

    It is good to always have the critical filter up about anything you are taught in university (or elsewhere in life).

    But this goes double about anything under ‘liberal sciences’.

    Don’t get me wrong, Larry is very interesting and he inspired me to get into economics, but you will only gain from him if you analyze him critically, and ultimately, if you overcome him.

  12. I loved your piece on Larry. I felt exactly the same way as you did. I took his class the first year and was impressed and completely hooked to every word coming from his mouth. Then I found out that, although a brillant speaker, this guy knows very little about economics. (BTW he has a masters in economics from Waterloo and does not have a PhD). I understood more about economics when I took certain classes at Waterlooo. I think everyone who wants to learn about economics and not stay perpetually hooked to the crapiness that comes out of Larry’s mouth should take classes with Profs Burbidge, Lam and Wirjanto. They inspired me to go on to graduate school not because of their evangelical speeches but rather by teaching me economics. Larry is a good motivational speaker. He reminds me of those evangelical speakers on TV who can hypnotize you with a lot of BS.
    Youa re right, people should know the other side of Larry. He is a great speaker but not an economist. Has anyone tried to engage him on an intellectual debate? Has anyone looked at his CV? You would be surprised to see that he is an empty barrel, some would say a fraud.

    So who are the Econ profs from whom you learned the most. I think future generations of students should know who the good econ profs are.

  13. Hey Vic,

    Thanks for stopping by and commenting. This piece of mine on Larry Smith keeps on giving and giving.

    I wouldn’t go as far as to consider Larry a fraud, but I do find him overrated. At that stage (introductory Econ course) the depth and breadth of his knowledge of the subject do not matter almost at all compared to the inspiration and enthusiasm he as a professor can instill in his students. I decided to switch majors from Math to Economics after taking his course, so I have to thank him for the push he provided.

    The problem is that most people never overcome their first impact with Larry and absorb everything coming out of his mouth without any critical analysis. Good economics students ought to be able to discern the many instances of bad economics which Larry teaches or takes for granted. I have never substantially engaged him after class, but a lot of his interactions with other students regarding all sorts of relevant issues reeked of crypto-Socialist BS.

    I like your analogy with a televangelist though.

    My favorite econ profs at Waterloo include Lam and Birkett (but I admit that I might be biased since I love monetary policy and corporate finance). I didn’t have Wirjanto but for a week and a half when he was subbing for the regular prof in Quantitative Finance and he sounded awesome. He tried to make quant finance less about formulas, proofs, and statistics, and more about intuitive and conceptual understanding; really made you see the trees for the forest. I appreciated that!

    Redekop deserves an honorary mention because of the superb quality of his notes (I never went to class though, neither did I need to).

    As far as Burbidge goes, we’ll have to agree to disagree. Sounded like a very nice guy, but I was bored to death in class and his explanations seemed to make sense only if you already knew the material. Perhaps I am biased again though, since I loathe theoretical micro.

    All in all, economics should be learned through self-teaching and not through the musings of any professor. Where do you go now to school?

  14. Hi Kejda,

    thanks for responding to my comment. Sorry for taking some time to respond. I was on holidays. I am in London at UCL doing a PhD in economics, in macro/money. I think more people should open their eyes when it comes to what is being taught in Larry smith courses. Why I say he is a fraud is because he once told me that he has a PhD from Western and that he used to be a Professor at the Ivey School of Business at Western. Turns out he does not have a PhD and was lecturer (as he is at Waterloo) at Western. Since then, I was very careful about what he said to me and once I aaked him a question about Rational Expectations and what it was. His answer was “oh it is like animal spirits” What a bunch of BS. In fact, the more you talk to you, the more you find out that he is a very bad economists who knows very little about modern economics. He thinks that Keynesian economics is the answer to all of our problems (god have mercy on us!). I am glad I went to Waterloo because I met some very good professors who are also very good scholars. I am still in touch with Wirjanto and Lam and still find some of their lecture notes useful. What are you up to these days? Take care


  15. Thanks for checking back, Vic!

    I had no idea that he has blatantly mis-advertised his qualifications like that! That’s very shocking…

    I could always tell he was presenting himself as far more knowledgeable than he really was (especially some of his analysis of Google’s business plan revealed that he had no idea how their adsense works) but if true, all these things you are telling me about him would really undermine any respect I still have for him.

    I also noticed he saw nearly everything through a Keynesian lens, but I wasn’t sure whether that was because he didn’t know anything else, or just preferred Keynes above all else.

    I am finishing up my degree right now. Taking my last exams through distance education. I am also working on my Senior Honour Essay, which will be a very non traditional approach to monetary policy. If you’re interested, I could forward it to you when it’s finished.

    I love economics and I love math, but I have become increasingly convinced that they do not mix as well together as I’d like: i.e. mathematical models of economic phenomena are often so stunted that they’re practically useless for prediction purposes. … which is why I didn’t go the doctoral route in Economics.

    Since I live in Manhattan, it will be good for me to get into the investment banking industry here. I also want to go to law school and get an MBA/JD soon.

    So I’m more of a practical person. UCL is a good school. Don’t you find London outrageously expensive though? What do you plan to do after your PhD?

    Tace care,


  16. What is your problem? You don’t know a good professor when you meet one!
    And EXCUSE ME BUT university tuition is about receiving your PROF’s OPINIONS! Did u relli think it was different?? They should all encourage you to use your brain, not gobble it up like a fool – if that was what you were doing! And Larry does an EXCELLENT job at offering HIS VIEW and encouraging you to USE YOUR BRAIN.
    Sheesh. Stop it already! The “argument” as done the moment YOU started typing.

  17. I enjoyed the article – very good points. Almost 10 years ago I took Econ 101 with L. Smith and still remember those lectures as wildly entertaining. I would love to know what he is teaching now, during the financial crisis.

  18. I just attended Larry Smith’s talk hosted by the Double Degree Club (The description for the talk, which has been removed from the website since it’s now over, was: Renowned, Adjunct UW Economics professor and Financial Industry insider Larry Smith will discuss the nature of the Financial Industry after the Great Recession, and why the path to a lucrative career in it is fraught with peril unless you know the tricks of the game. He will bring forth his research in macroeconomic forecasting and entrepreneurship to deliver a special focus on careers in the financial sector, and how you can prosper in this industry. Professor Smith promises to challenge your preconceptions, force you to think, and to change the way you perceive a career in the financial industry. The topic of the talk is: Why the Future of the Financial Industry isn’t what you expect and why it will be both better and worse for your careers in it)

    Anyways, although this is the first Larry Smith talk I’ve ever been to (I’m in year 4 now), throughout this 1.5 hour presentation I can definitely see truth to the things you mentioned in your blog post.

    This is the summary of what he talked about:
    He basically dramatized the whole financial fiasco (for an agonizing hour) and said that, based on “pure brute logic”, the market will sooner or later weed out all the “intermediaries”, which he vaguely referred to as the people who connect lenders and borrowers, and also include the people who perform risk assessments. All those middlemen, he claims, are deliberately making things overcomplicated so that they can basically exploit their clients’ ignorance (CDOs come to mind). When the day the intermediaries are put back in their place so that people who could model risk CORRECTLY are the only ones earning big bucks, it will also be the time when there are great opportunities and there will be a lot more direct access between lenders and borrowers in the market. Of course in the middle of all this he kept on bashing those people who were getting fat paychecks and not doing their jobs right.

    Here’s my rant:
    The first hour was unbearable in that stifling RCH 301 room that was overpacked with people (there were people standing all around the walls and sitting on the steps), since what could have been a perhaps 20-minute wikipedia read was stretched to an unbearably uninformative diatribe (since I’m assuming any dimwit interested in finance, which this talk was obviously catered to, would know all of the basics). His argument was so general that it didn’t really amount to anything, and what I found really annoying was that the crowd just absorbed every little anecdote he threw out. Not to mention that his response to the question in the purpose of the talk was basically, as I paraphrase: Things might f up soon, so if you’re not smart/innovative you’re toast. Also, regarding the issue of removing intermediaries, which Larry hinted also included the exchanges, someone at the end of the talk asked him what he thought about the idea of “Google Broker.” Now, I found that extremely irritating. Yes, Google’s got a great search engine, but replacing the exchanges? Give me a break. Pretty much everything else after the search engine that Google “developed” were really just products from tech firms they bought out. Okay, aside from the fact that the guy was obviously a Google nut, the question itself – posed in front of an audience of over around 200, was clearly trying to fish for some petty praise from Larry (he responded that that was a neat idea but he doesn’t know how it’ll fare). I have a feeling that that guy is a Larry zealot you mentioned.

    Sorry for the rant, it’s 4am and I just felt like getting that 1.5 hour of bullshit out of my system. I’m glad I didn’t take any of my ECON 100 or 200-level courses with Larry and just stuck it out with those shitty lecturers (does Angela Trimarchi ring a bell?). At least skipping all those classes meant that I got a full course credit with only about 2 full days of work, not to mention a pretty decent mark too.

    By the way, I really like the way you write.

    1. Hey Mathie,

      Thanks for your comment. This post is over two years old yet keeps drawing comments now and then. Your picturesque descriptions of the vapid RCH room bring back long forgotten memories of university life!

      What Larry has been saying a propos the financial meltdown is par for the course. Indeed, the idiots need to be fired, their industries (risk management) be whittled down to size, and everything should be rearranged just as Larry dictates,… because, you know, he knows best and everyone should pay attention.

      Pff… there are more slip-shod diagnoses of and prescribed solutions to the financial crisis there are out there than there are disaffected economics/finance professors stricken by a God-complex.

      I wouldn’t trust Larry Smith to manage my portfolio, nor do I trust anyone he deems qualified and “smart” enough to model risk “CORRECTLY.” Most people don’t know two shits about what risk actually entails, wild uncertainty, fat-tail distributions, un-modelable chaos (check out the Black Swan or the (Mis)behavior of Markets for a taste of what I am talking about). And there is certainly no central authority of knowledge or expertise. Larry’s guess is as good as mine and as good as any of the idiots’ he deplores. If he favored free-enterprise, he would be free to gamble his money away as he wishes, and let others be free to do the same.

      Not doubting that there are overpaid pedants in the financial industry who don’t know what they are doing. They’re in fact a dime a dozen. But it’s easier to criticize others’ failures than it is to do better yourself. But when you don’t actually have to try, are shielded from failure and responsibility, and only blow smoke up the asses of gullible undergrads, what’s to shame you from claiming you could do better than anyone else?

      Angela Trimiarchi does ring a bell, not a very melodious one. Seriously, university is a joke, unless your major is engineering, law, medicine, or any of the professions. For everything else, more wisdom can be gleaned from leisurely reading by from classes that can be passed with honors from a weekend’s worth of cramming.

  19. Your article brought back fond memories of Waterloo and the classes that Larry taught. After taking Larry’s course ECON 102, Introduction to Macroeconomics, I was hooked and took every course that Larry taught at the time (early 1990s).

    Your article brings up some good points, but it is way too long and badly in need of an editor. And I feel that you are over analyzing Larry’s role and effect on people. I feel that Larry’s main goal is to introduce economic and entrepreneurship principles to young people in an entertaining way and get them thinking about how they can make a difference in world. Larry Smith has been doing a fabulous job of this for over 20 years.

    1. Hey Lee,

      Yes, I know it’s verbose and full of unnecessary tangents — these days in fact I work as an editor, and believe me, I fully second your opinion that the piece needs editing. Not sure it’s worth my time after 4 years though.

      Larry is really good at motivating entrepreneurs, sure thing. But when it comes to the academic rigor of his economic analyses of everything, there’s much lacking — and much that is subjective but he spins as fact.

  20. Great article.

    My professor for Econ 101 was Lutz-Alexander Busch.


    I haven’t been back to see one of his lectures since learning a bit about Austrian economics, but I remember his lectures being packed with valuable insights based on human action.

    He talked about how the minimum wage causes unemployment, how rent controls create vacancies, and how GDP is a poor measure of prosperity (the example I remember him giving is that GDP would jump if every stay-at-home parent were paid by their spouse, but no new work would be done; only the government would benefit, through increased tax take).

    He’s also into beer and motorcycles, IIRC, so I assume he’s a decent chap 🙂

    My econ 102 experience was quite the opposite: an oriental woman whose name I don’t remember [1] droned on about C + I + G …. mmkay. All learning was by rote rather than reasoning. It became a game to see just how little work I could do and still pass the course.

    [1] Lau, perhaps? To her credit, she seemed to have memorised the name of every student … Yes, Eva Lau: http://economics.uwaterloo.ca/fac-Lau.html

  21. I think you guys are getting it all wrong.
    Sure, many of his arguments are far-fetched..but still, that’s cuz he’s doing an intro-level course!
    His way and methodology of teaching is such only because he wants people to look at economics in a different way than other people do it. He doesnt wanna make it boring!

    How true his arguments are is debatable..the point he wants to get across is basically the dynamics of the subject. Some of you who’ve commented here who’re doing their PhD and masters, who didn’t understand and appriciate that, well..I’m sorry for you guys.

    He is brave in what he talks about, and his thoughts support a certain view of economics.

    Students love him, and love his ways. Most of the people taking his classes are mathies, or for from engineering or from the sciences. And to get hundreds of people to love economics, is a big deal.

    Critics and loudmouths will be everywhere.

  22. “I am still waiting for Larry’s own input. I sent him the link to this post, but don’t know if he’s gotten to it yet.” He talked about it in class i’ll write it if I have time.

    Also anyone got advice for the bonus assignments? Where are past finals and notes?

  23. I really think you’re looking at Larry through a purist libertarian lens rather than what he actually is – a fairly mainstream left-leaning free market supporter. There’s not much that’s controversial in his lectures.

    I do agree many students are so enamoured with him that they don’t challenge him, or question his insights, and he can get it wrong — witness his dislike for social/communications technology for the past 13+ years, I remember 12 years ago in class he was ranting against this, and he continues to this day, yet companies like Facebook, Linkedin, Twitter, etc continue to rise.

    That said, he understands macroeconomics at its core a lot better than most professors — it’s about the world as it is, and the hard choices we can make to improve it, not some abstract ideal about the free market vs. statism.

    “Keynes was all for entrepreneurship, but entrepreneurs to him were little more than beasts of burden to be exploited by the statist puppet masters of the economy. His economics is bullshit: nothing but unsustainable middle ground between communist central planning and free enterprise.”

    You really, really don’t understand Keynes, if that’s what you think. His whole purpose was to explain how the economy works in the presence of money, as opposed to a barter economy. And that the effect of sticky prices and credit/debt and can lead to overall depressed demand and thus unemployment, which prior economic systems deemed to be impossible. Just look at the current financial crisis — the Hicks IS-LM model which was a formalization of Keynes has been the most reliable predictor of the liquidity trap conditions we are in globally.

    Larry trusts in Keynes because he has been the most accurate guide to our life and times for the past 70+ years. Yes, it has been modified and changed (i.e. Friedman monetarism) and abused (i.e. deficit spending even in boom times) over the years, but nothing in the field of economics comes close to policy guidance.

    “Externalities find no room to emerge when third parties at risk can flex their transactional muscles to guard themselves from the eventuality.”

    This is utter poppycock.

  24. I want to reiterate some of the previous comments – Larry’s strengths are in his passion for teaching the basics and getting first-year students interested and motivated. Your nitpicking on whether fire services should be government-owned or if it is subscription to fire services that should be mandatory shows how you’ve missed the point of his lectures. His response to your bone to pick about drug patents (“disinterestedly replying that those were all fine alternatives”) was completely appropriate and should have revealed to you the introductory nature of the class. There are good reasons why Larry doesn’t teach higher-level economics – maybe you think he’s not qualified enough, but the stronger reasons are comparative advantage and opportunity cost (which, by the way, are the basics of economics that he teaches so well).

  25. Kejda, it is nice that you have your point of view and stick to it but when you call other peoples economics and sophistry bullshit it passed the line of being offensive. When you attend his lecture, dissect parts of it, throw in “baits”, and then write an article partly criticizing him on it, you are totally missing what he is teaching. Larry Smith teaches you how to think critically and make your own judgments based upon what you observe. That is the reason why he doesn’t teach you terms and uses stories to relay his ideology. Personally, instead of concentrating on small details of whatever he is saying, I concentrated on the key messages that he tries to deliver within each lecture. For example, if Larry Smith said “an artist would have higher potential to make more money than an engineer, a sky diver would have a higher potential to start a successful business than an accountant, and you should pursue graduate studies in an area unrelated to your undergrad major to make lots of money”, he is not implying that this is necessarily true and based on statistics it may be even wrong, but what he is telling you is that in a fast-paced entrepreneurial environment, in order to be make a LOT of money, you have to diversify your set of skills, think radical, and take small educated risks.

    To be fair, if you really think that it is totally absurd “to just make patents expire sooner” or “subsidize the bottom income bracket thus making drugs affordable for all” then you are quite narrow minded. Yes, there is “colossal investment involved in R&D” and yes “the years of accumulating interest on debt and no revenues waiting for the FDA to finally approve the product”, but have you ever taken a step back to think about anything else? Lets talk about the patents, so you are implying that if the patents lifespan was shorten this would mean that would mean their “colossal investment involved in R&D” would not be justified? Firstly, you have no idea how much money these pharmaceutical companies make and reducing it by a certain degree might mean the senior executives cannot buy jets anymore but have to settle with a Bentley and in return more people can have access to affordable drugs sooner. Secondly, it also depends on how much they intend to reduce the lifespan by to determine if the “colossal investment” is still worth it, but you obviously did not take this into account.

    To be fair, how about we put you behind 400 students and have you lecture for 90 hours throughout 4 months and lets see if any students can dissect something you said. You are obviously entitled to your own opinions but when you want to write an article like this you should be less narrow-minded and consider a different perspective. Think about why Larry Smith would answer the question the way he did. Just because he does not agree with your point of view doesn’t mean he is wrong. There are many opinions in your article and responds that are written as if they are facts. Stop trying to sound like a smart-ass academic and learn to think more critically and less narrow-minded.

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