The memo that got Luis Salas named vice-president in charge of the economy is front-page news on Aporrea today. Though published as an op-ed piece, the little screed looks very much like an application essay for the post of Master of the anti-Economy in the next cabinet reshuffle.

It seems Maduro loved it: in parts, his cadena yesterday echoed its bizarre rhetoric almost verbatim. It’s easy to see why: it has just the right mix of paper-thin autocrítica and furious denunciation of nefarious scapegoats. It’s the kind of pap aggressively economically illiterate leftist extremists fall for every. Single. Time. You can just about intuit Maduro’s hard-on as he pictured the author of this masterpiece spearheading his economic huida hacia adelante.

In its own, insane way, Salas’s memo is a must read.

The lengths it goes to try give some intellectual grounding to its galactic ‘join-the-dots’ theorizing are hilarious. The document, dotted with quotes from Proust and sophomoric illustrations of Game Theory puzzles, only really hits its stride in the sixth paragraph (before which, dear anthropologist, you can find epistemological digressions on why Good and Bad should be typed ‘Good’ and ‘Bad’ or downright cursilerías on why love is more beautiful than hope) when Salas starts talking about the role expectations play in the economy. Brace yourselves, for this is the backbone and only tenet of his proposal.

Expectations, he says, can be irrational. According to his theory, one can only form expectations through empirical hindsight (the sun will rise tomorrow because it rose today, etc) or the prognostication of the future based on available information (you know, what us economists call rational expectations and spend most of our time analyzing). But for Salas, this second route is much less rigorous and uncertain. It’s this second method he has a problem with, and it’s on the back of this beef that he wants to launch a grand project to tame our current inflation and unemployment by dismantling the science of Economics altogether.

Lest you think he’s out of touch with recent discussions in economics, he starts with a dissection of 2002 Economic Nobel laureate Daniel Kahneman, of Prospect Theory and Thinking Fast and Slow fame. No recent student of Economics can have missed his seminal Behavioral Economic insight that classical expected utility theory is flawed because, as the man himself says, us Homo sapiens, unlike the idealized Homo Economicus, “underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty… (which) contributes to risk aversion when in choices involving sure gains and to risk seeking in choices involving sure loses”.

O.K., Salas, so now you’ve found América in a glass of milk and slayed Homo Economicus thirty years too late.  Yes, sometimes our expectations can be irrational. granted, also, it matters how questions are framed (are we losing everything or gambling to win it all?). But where is this going? How do you propose to reshape Prospect Theory into a solution to the economic quagmire we’re in?! Your memo is almost ending for God’s sake!

Turns out our economy is in free-fall because, wait for it, the country as a whole is making irrational decisions based on irrational expectations. To the devil loss aversion and game theory (which is, after all, as far as the scope of Prospect Theory can lead us to) here we have a new Theory of Value and Growth by the magical concoction of the Pseudo-Economic War and Daniel Kahneman in a memo!

Turns out if only people realized an apple is really worth 1k bolívares nowadays and not 2k as they are incorrectly lead to believe by imperial brainwashers, then the apple would truly be worth 1k bolívares.

Yes! Inflation is a flawed expectation! GDP contraction is a flawed expectation! Lack of toilet paper is a…wait a minute. No, lack of toilet paper is because of the Guerra Económica – almost forgot.

What this amounts to in practice is a Speculation Theory of Inflation Based on Prospect Theory (with some Proust thrown into the mix). Funnily enough, his insight into the chavista delusion is that el pueblo is innocently speculating away too because they are lead to falsely expect the price of things will rise. Meaning that the plan of action, the ‘reseteo’, is to reinforce a psychological campaign to convince al pueblo that the price of things isn’t going to go up anymore while enforcing existing controls more strictly.

Out of control fiscal deficits? Unobstructed Central Bank debt monetization? These things are bourgeois subterfuges, obvs. Myths and manipulations spouted in the cause of rank class exploitation. I mean, por favor.

The economic plan of 2016 will be nothing other than the attempt to resell the economic plan of 2014-2015 more effectively. The trouble isn’t just that Maduro is unable to grasp even the bare-bones basics of economics, it’s that he has no clue how to tell a marginally competent economist from a complete charlatan. So he’s now found his very own Lysenko and in the process become the Caribbean twin of one of Dostoevsky’s most poignant and ridiculous characters. Digging a hole underground while refashioning a loudspeaker, his only logic is to do with marketing what he could not do with the markets.

Caracas Chronicles is 100% reader-supported. Support independent Venezuelan journalism by making a donation.
Previous articleVenezuela tops world inflation
Next articleFrom Joke to Reality in Ten Days
M.A. in Economics from the University of Edinburgh. Madrid based. Wealth management, roots in banking and microfinance. Voracious reader of Classics, specially the Russians, and History. Caraqueño and Caraquista, inescapably a lover of Salsa, wheat talk and Rum. Fascinated by South America's indigestion of modernity, owes his political understanding mostly to Octavio Paz, Ivan Karamazov and dad.


  1. It’s even worse than that.

    The essay tries to sell us that the problem is not that the economy is heading south big time (mind you), but that the government has done such a poor job telling us that everything is peachy peachy. Therefore, as people has been unable to be convinced that things are really peachy peachy, el pueblo has opted to believe the lie that the economy is rapidly sinking like the Titanic.

    Pretty much like Schemel telling us about “caotizacion”… lgg.-

  2. Maduro can’t identify a charlatan because he’s a charlatan himself.

    On Salas: it’s impossible to pick his greatest hits. There are too many. Did you know that inflation doesn’t actually exist in the real world? Good to know!

    Or that there’s no such thing a non-controlled prices? See, ALL prices are ALWAYS controlled. The only thing that changes is who controls them. In capitalism, the bourgeois private sector controls prices. Under socialism, the State controls prices. Which is of course better. Free “market prices” don’t exist. Just bourgeois-set prices, and Benevolent State-set prices.

    • Como que no hay greatest hit? Por mucho la lumpia más piche que se ha fumado este carajo empieza en la página 53 de este bodrio:

      Resulta que el tipo SI TIENE una teoría de por qué los agregados monetarios covarian con los niveles de precios. Resulta que cuando los empresarios coñuesusmadres suben los precios a la gente no le alcanza, entonces tiene que ir al banco a pedir crédito pa poder pagar los precios más altos, y claro, el banco crea plata pa prestarles y, bueno, por eso es que sube el M2.

      Osea, la inflación causa la expansión monetaria, y no al revés…

      Holy mother of Christ…

      • Well, now that I think about it, maybe he already released his “Greatest Hits” album, with 22 tracks:

        Includes crowd favourites like “Inflation doesn’t exist in the real world” (Track #5), “Inflation is caused by selfishness” (#4), “Controlled prices are a false problem; they’re always controlled” (#6), “The Economic War is a real war” (#10), and the great stadium anthem “The capitalists want to trick us into behaving like capitalists” (#14).

      • A lo mejor es que en viene del futuro, de la Venezuela en la que vas al banco a pedir un crédito para pagar una Arepa porque en el bolsillo no te entran los 15 millones de bolos que hacen falta…

        Claro que con él al frente esa es la Venezuela de 2017 como muy tarde…

  3. It seems that we have an anti-modernist on deck. He denies facts either in some backward magic realism way or as a true postmodern all that is needed is to wish things into being, usually under the tutelage of some new age guru. Either a santero or an homeopatic doctor.

  4. Chaos. Destruction. Madness. It reminds one of Prince Andrei, on the ground, staring-up into the cloudless December sky of Austerlitz. On the cold ground, helpless. Men scurrying past him. The sound of hooves and voices in the distant. “Can this really be happening? Am I dying? We had the army to do it. (We had the oil) We had the arms. We were up all night translating orders from Russian into German, and then back again. Many of us slept through it. Come down off the Praetzen Heights and attack him hard on his right flank! He’ll never expect it.”

    Sorry, just having some fun with a Russian historian.

  5. LOL Maduro officially jumped the shark by putting this nutjob in charge of the ruins we call Venezuela economy.

    How something can be so sad, harmful and hilarious at the same time? LMAO

  6. This may be way out there, but as we speculate as to how a guy who writes like this and thinks like this got where he just did, does anyone else detect large gobs of half-digested Louis Althusser in Luis Salas’ application essay? I mean, did the guy suddenly decide one day to try to imitate someone with the same first name? Is that what this is about?

    This is either terrifying, or an elaborate joke written by Borges. I am not completely sure which.

  7. This essay reads like “Este año la economía venezolana no producirá ni pérdidas ni ganancias, sino todo lo contrario…” all over again…

    • They knew it from the beginning and no one paid attention…. Now face the consequences!

      Sometimes expecting the worse outcome is the only right way to predict anything coming from la peste roja

  8. Comparto su fascinación “by South America’s indigestion of modernity,” y en esta página puedo satisfacerla a gusto. Soy español y ya he empezado a leer antes las noticias de Venezuela que las de España. La diferencia es cada vez mayor. Aquí solo van a marear la perdiz hasta que convoquen nuevas elecciones y la economía sigue su curso, en Venezuela el gobierno se dedica a empujar cada vez con más fuerza para destruirlo todo. Es como tener delante un edificio en construcción en el que los trabajadores han parado un tiempo y otro al lado en el que estás viendo a otros trabajadores colocando cargas de dinamita mientras creen que siguen construyendo algo. Las demoliciones son siempre mucho más espectaculares. Esperemos que alguien pare todo esto antes.

    (dicho esto, sigo ahora riéndome con el adjetivo “conoesusmadres” que el señor Toro ha escrito un poco más arriba)

  9. So, it would appear that Salas’ proposal to fix the economy is to click the heels of his ruby slippers three times, while repeating in a heartfelt manner, “There is no place like Communism”.

  10. Although an extreme example, this type of rationale is not uncommon. When a movement, any movement, finds its policies producing failure, there will always be those who think their movement should change course, and those who insist that they have to enforce their existing polices even more forcefully, to the extent that the methods become more extreme, even totalitarian.

    Probably just as important, of course, is the “Zimbabwe syndrome”. Once you have screwed up so monumentally, you cannot admit failure and get out of the way, because of the criminality and corruption that will be revealed: government cronies would lose their ill-gotten gains.

    Extreme Ideologues with greedy crooks as fellow travelers – that is now the Chavismo “movement”.

      • a simple plan:

        “The actual plan for Venezuela is actually very simple indeed. Simply abolish all economic regulation right now. Free the exchange rate, free prices, free production limits, rules, quotas. If not abolish then simply announce that everyone should ignore all regulation about the economy entirely for a couple of years.

        At the same time start to charge motorists the world price for gasoline (at present, despite the costs of producing the oil, then refining it, and ignoring all opportunity costs, the government doesn’t even bother to charge gas stations for deliveries). That alone will, within months, start to produce an income with which the government can be run. There will be a burst of hyperinflation when all of the market restrictions are lifted but that’s going to happen anyway.”

  11. Salas strikes me as a plagiarist. I distinctly remember reading that Aporrea note before.
    Oh, here it is:

    “You are here because you have failed in humility, in self-discipline. You would not make the act of submission which is the price of sanity. You preferred to be a lunatic, a minority of one. Only the disciplined mind can see reality, Winston. You believe that reality is something objective, external, existing in its own right. You also believe that the nature of reality is self-evident. When you delude yourself into thinking that you see something, you assume that everyone else sees the same thing as you. But I tell you, Winston, that reality is not external. Reality exists in the human mind, and nowhere else. Not in the individual mind, which can make mistakes, and in any case soon perishes: only in the mind of the Party, which is collective and immortal. Whatever the Party holds to be the truth, is truth. It is impossible to see reality except by looking through the eyes of the Party. That is the fact that you have got to relearn, Winston. It needs an act of self-destruction, an effort of the will. You must humble yourself before you can become sane.'”

          • Maria,

            “1984” is a “must read”. This and “Animal Farm” were both written by George Orwell. “Animal Farm” was was written as a parable; easily understandable and accessible. “1984” delves much deeper into the communist mindset and the human psyche of the regimes and populations that result from such perverse social experiments. “Brave New World” is a yet another future dystopia novel written by a different author, Aldous Huxley. It addresses changes to human society resulting from technology, and is not particularly relevant to the Venezuelan situation of today.

            Hope this helps.

          • Also John Lennon’s scholarly treatise on political economics “Imagine”. A component comes to mind, “Imagine there’s no country ….” The key of course is that there is no property, money is all a lie, and there is no robbing as there is nothing to rob. Truly, a world resting in peace.

            I feel quite certain there are many in Caracas who are not so credulous.

  12. Complete insanity. It’s truly hard to understand or comprehend that this person believes this, or is given ‘control’ of the economy.

    It’s hard to explain the level of insanity that is this regime to those in the Western world. It’s so bizarre they don’t believe most of it.

  13. General Raúl Isaías Baduel, in his swan song speech criticizing Chavez’s policies, said, “But there is something that we must not forget, that perhaps many times we overlook, that before wealth can be distributed, it must be created. You cannot distribute something that does not exist.”

    Baduel actually believed that some sort of benevolent state-led socialism was possible and functional. But for all his faults, Baduel at least understood that you can’t just wish goods and wealth into existence, and had the guts to say so. Of course, for his temerity in stating that, he was thrown in jail, where he languishes to this day.

    Salas, on the other hand, appears to have bought into the Magical Realism School of Economics.

    • A comment on the Dolar Today site runs to the effect that Salas was the only one they could find who was stupid enough to take the job.

  14. As always, I feel bad about calling any of these guys “socialist”. Or well, as the subtitle says, they are the dadaist branch of socialism; a bizarre self-contained “intellectual” (for low values of that) world where somehow the whole history of economy is wrong.

    If Venezuela is a cancer patient and a sane socialist would see how to find the way to pay for her treatment, they are the guys saying forget about that, in fact, forbid that, and lets mandate a round of hokuum “alternative” medicine because Big Pharma is capitalist and what really cures cancer is guanábana…

    • Yeah, let’s keep giving socialism the benefit of the doubt. “It’s not reeeeally socialism, it was just some other shit they decided to call socialism. All it takes to work is the right people.”

      • When you have a label as broad as “socialist” that can cover the distance between, say, Clement Attlee and Nicolás Maduro, the question is not “giving socialism a chance”; it is clear we are not talking about one system/solution/method, but a whole family of them.

        Including inbreed, mentally unstable, moronic branches of the family tree 😛

  15. […] さらに、新内閣の経済担当副大統領のルイス・サラスがハイパーインフレの危機に拍車をかけていることは疑いありません。この人、マジで、物の価格は需要と供給の関係で決まるのではないと思ってますから。インフレなど存在せず、実は資本主義者が儲けようと勝手に値段を吊り上げてるのだと本気で信じてますから。そして、それを本にまで書いちゃってますから!!! […]


Please enter your comment!
Please enter your name here