Tuesday, February 11, 2014

Why Is Macroeconomics So Hard? Argentina Edition

There is a lecture embedded in this blog entitled “Why Is Macroeconomics So Hard?” Put that into the search box at the right, and you can come up with about 8 pages of links on the topic.

One of the ideas that comes up repeatedly is the willingness of people with little macroeconomics background to claim certainty about the issues.

Keep in mind that there’s nothing wrong with having opinions. What’s unusual about macroeconomics is the willingness of people to bloviate their uninformed opinions.

A rather amazing example of this came up this past week in Argentina.

Argentina’s government is “fighting” inflation. I have fighting in quotes because the government’s policies (lack of credibility about keeping spending in line with their ability to raise tax revenue) is probably the source of the inflation. Argentina’s version of fighting inflation is to blame decision-makers for choosing to change their prices. Their current method is inflammatory posters featuring the pictures of those decision-makers. I wonder how far off they are from a lynching.

Now, here’s the money quote:

On Friday, though, [President] Kirchner’s cabinet chief, Jorge Capitanich, slammed economists for blaming the government’s economics policies for rising inflation. He equated economists with hired mercenaries representing private-sector interests looking to destabilize the economy.

“I know all of them,” Mr. Capitanich said. “They are all undercover agents. Argentinians should know that independent, objective economists don’t exist. I want to say emphatically that when unscrupulous businessmen raise prices it has absolutely nothing to do with macroeconomic variables.”

In part, this is in response to the IMF which has refused to accept the Argentinian government’s estimates of inflation because they are not credible when compared to evidence on the ground.

Read the article entitled “Argentina War On Inflation Gets Personal” in the February 8th issue of The Wall Street Journal.

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