Saturday, August 22, 2015

Why Is Macro So Hard? What Passes for Expert Advice

How about a man who is taken seriously because of his economics credentials, who turns out to have made the whole thing up?

Yes, there may be a tendency for the American student do dismiss this big of news because it’s from Portugal.

But the big picture is that he said what people wanted to here … so they didn’t ask questions about whether he was qualified or not.

Mr Baptista da Silva's conversion into the latest must-interview figure on the media circuit began when he turned up last April at Lisbon's main philanthropic institution, the Academia do Bacalhau, with a large supply of business cards – which, it later turned out, bore false credentials – and an impressive-sounding dissertation entitled Growth, Inequality and Poverty. Looking Beyond Averages which, it also transpired, was "borrowed" from its writer, a World Bank employee, via the internet.

At the time, Mr Baptista da Silva also claimed to be a social economics professor at Milton College – a private university in Wisconsin, US, which actually closed in 1982 – and to be masterminding a UN research project into the effects of the recession on southern European countries. He even, some reports say, tried to pass himself off as a former adviser to Portugal's President, Joaio Sampaio, and the World Bank.

Blessed with such an impressive CV, Mr Baptista's subsequent criticisms of the Lisbon government's far-reaching austerity cuts, as well as dire warnings that the UN planned to take action against it, struck a deep chord with its financially beleaguered population.

According to the Spanish newspaper El PaĆ­s, his powerfully delivered comments at a debate at the International Club, a prestigious Lisbon cultural and social organisation last month, were greeted with thunderous applause and a part-standing ovation.

Now, here’s the part to pay attention to.

Portugal is one of the PIIGS: the Eurozone countries that got into really deep trouble in the Great Recession. Portugal followed directions from outside experts, instituted austerity programs, and is doing OK these days. Portugal is a poster child for what Greece should have done, but which it has gotten away with not doing … in 2010 … and again in 2012 … and a third time in 2015 … as the bailout money keeps rolling in.

This imposter did not take the pro-austerity side. Instead, he was taking the populist view, which I sometimes characterize as the spoiled teenager position, that Portugal is in trouble because it blew the last bag of money we gave it and so the only solution is to give it a new bag of money. Maybe even a nicer bag too.

I’m actually not necessarily against that position. Tough love is a difficult thing for anyone to pull off, or for recipients to accept. What I’m wholeheartedly against is people starting from the emotional position that they’re good, and therefore everyone else must be bad, and then gathering people through mood affiliation to hit the folks in the black hats up for more money.

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