Cooking the Numbers

08.19.2009

The Argentine government is not the only one doing it, but it is one of the few seemingly caught in the act.  Apparently, the government is cooking the numbers to paint a better economic picture of Argentina and use it for political gains, and everyone (at least there) knows about it.

How serious are the allegations? Inflation, for example, is allegedly understated by a factor of 3.  And its not the first time this happened in Argentina.  See this Economist story from 2 years ago.

Understating inflation is often puzzling to me, especially when it is used as a means of retaining political power/touting one’s own success in managing the economy.  People don’t need to look at official economics statistics to sense changes in the price index – they know when the price of milk, bread, and other essential goods goes up.  They know it better and they trust their pocket more than any statistical analysis.

Lying about inflation seems to me a losing strategy, since it multiplies the anger over rising prices by the frustration of not getting the truth from the government.  So why do it in the first place?

And, since we are talking about Argentina, see what Felix Salmon of Reuters has to say about a recent survey by the ministry of tourism in Argentina on doing business in the country.