The original paper by Luis Oliveros and Domingo Sifontes

On the cost of the gasoline subsidy from SIC can be downloaded here – courtesy of GEHA and a scanner. (Don’t worry, the PDF is virus-free.) (No idea what this is about? Check out the controversy in the previous thread.)

To my mind, Juan’s criticism is right. Oliveros and Sifontes do a pretty good job breaking down the subsidy and explaining how Iran dealt with a similar situation…then follow it all up with a policy recommendation that’s not really grounded in their research, but rather on an arbitrary estimation of what “seems” politically feasible:

Nuestra propuesta inicial sería, en un primer momento, llevar el precio al costo de producción en un plazo no mayor de tres años. Adicionalmente, mientras se ejecuta esa primera reforma, debería darse una gran discusión nacional sobre bajo qué parametros se debería fijar el precio en el futuro.

There are a couple of problems with that. First of all, why three years? Why not one, or four, or seven? It’s a purely seat-of-the-pants judgment.

The bigger problem is that if you announce that your policy, “initially, at first” is to bring the price of gas into line with production costs, you’re priming people to think that that’s a “fair” price, and once you’ve finished doing that, you’ve addressed the problem.

You are, in other words, contributing to the confusion that gave rise to Tovar’s mangled article in the first place, and establishing the wrong metric in the public’s heads. Cuz I can just imagine the outrage in 2015, “bueno, ya nos dijeron que habían subido la gasolina a su costo, y ahora encima quieren subirla diez veces más!!”

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