In 2007, the government of Argentina fired Graciela Bevacqua and other statisticians who were collecting its price statistics and inflation estimates. Since that time, large and disturbing — even shocking — discrepancies have developed between the official inflation estimates (roughly 10% a year) and privately generated estimates announced by Bevacqua and others (roughly 25% a year).
Why would the Argentine government take such drastic action?
In late 2001, Argentina defaulted on its bonds, and it has refused to negotiate with its creditors. This has cut off the third-largest economy in Latin America from the international capital markets. To finance itself, the government has taken to seizing or nationalizing assets (national pension funds, reserves of the Central Bank, the Spanish oil company YPF) and printing money so the banks can buy the government's bonds. Because of a history of hyperinflation (and roller-coaster boom and bust), inflation is a sensitive domestic matter. In 2012, the economy slowed, and recent large demonstrations in Buenos Aires against inflation suggest that the Argentine people do not believe their government's inflation numbers.
On top of all that, Argentina has sold bonds whose value is tied to the rate of inflation. If it underestimates inflation, it owes less.
Rather than publishing and defending its methodology for measuring inflation, the Argentine government has chosen to attack the messengers. It has instituted serious administrative fines and criminal charges against Bevacqua and others. The official explanation is that the government was responding to wholesale fruit and vegetable vendors claiming that their sales had decreased, a decline in demand the government said was caused by publication of the private inflation estimates.
It is hard to understand how a change in the demand for fruits and vegetables could result in a charge against the statisticians. While the idea that announcements by private statisticians can move markets is flattering, it is much more likely that the actual increase in the prices of produce, reflected in the inflation rate, led to the decrease in demand.
The fines imposed on the statisticians are substantial, on the order of $100,000 to $150,000. They have yet to be adjudicated by a court. The criminal charges are even more serious. They are based on the proposition that announcing private inflation estimates endangered Argentine national security.
One trial based on this theory of liability, against Bevacqua and economist Nicolas Salvatore, resulted in an acquittal. It is not known whether that decision will be appealed. More criminal charges are pending.
The Argentine government has also instituted actions to destroy or intimidate the local media that might report on its actions. For example, the media giant Grupo Clarin has been threatened with the loss of its television licenses, reportedly because it has criticized government policies.
The government's apparent violations of the rights to freedom of speech and press could violate international treaties that are incorporated into its constitution.
More striking than the actions' potential illegality, however, is their sheer stupidity. Even given the government's inflationary economic policies, it could have ignored the private estimates, or it could have debated them on the merits.
Instead, by making martyrs of Bevacqua and her colleagues, Argentina draws attention to its intellectual bankruptcy. Combined with the financial bankruptcy that is sure to follow from its economic policies, there will be many more victims before this sad affair ends.
Joseph B. Kadane is an emeritus professor of statistics and social sciences at Carnegie Mellon University and chairman of the American Statistical Assn.'s Committee on Scientific Freedom and Human Rights.