Fiscal Policy in Latin America.

The foreign observer reaches a sharp but slippery peak of expertise after a few days in a country--then gradually slips off into a valley of confusion as he learns facts that do not fit into his first synthesis and unlearns prejudices that misled him at first. For some observers, there is a second peak of expertise--not so sharp but not necessarily less slippery--often after an interruption of field work cuts off for awhile the inflow of awkward new facts. I am writing this paper from such a second peak. A certain clarity results: but none of us should be surprised if major corrections turn out to be necessary. Looking specifically at the models popular in the area of fiscal policy, I feel that not only economists from industrial countries but also those from the underdeveloped countries themselves tend to overrate the applicability of Keynesian underemployment models, of Robertsonian forced-saving models, and of tax-incidence models which are loaded with implicit assumptions both of pure competition and of the perfect enforceability of tax legislation. Despite the general orthodoxy of my position on economics and on fiscal policy, I arrive at views on underdeveloped country fiscal policy which I feel will shock and annoy many of my colleagues, through the correction of the biases I sense in our choice, of models. There are two main sections of this paper. The fist diagnoses the fiscal problem--trying to use institutional information to guide the choice of analytical models. The second .is more in the nature of prescription--it focuses on problems of tax information and takes a rather pessimistic view of the prospects of moving at once to a. rationalization of fiscal policy in Latin America. [ABSTRACT FROM AUTHOR]