ABSTRACT
1. The Krugman-Macedo paper is a very interesting interpretation of some economic consequences of the Portuguese revolution. The authors deliberately choose to focus on a (very) small set of crucial variables and relationships and suceed in presenting a paper which is clear and (perhaps) simple but not simplistic. Their attempt to quantify a few of their most important concepts is valuable, even though--or perhaps because--their statistical basis is at best very shaky. They quite clearly point out some of the bitter trade-offs faced by the successive economic authorities, namely between unemployment, falling real wages and balance of payments deficits. Their paper is real, in the sense that they pay little more than lip service to any monetary developments or inflation, and short run in the sense that they leave growth considerations out of the picture. 2. Several criticisms could be raised as far as the general approach of the paper is concerned. When attention is focused on a very small number of concepts and/or relationships there is an obvious gain in clarity of exposition. The essential aspects of the diagnostic and eventual (implicit?) policy alternatives stand out much better. Yet, such an approach “involves a simplification, and may give a somewhat misleading transparency to events,” as the authors themselves recognize. Others might have chosen to focus on different variables and/or relationships, or perhaps some new ones. For example, more could (and has been) made out of the international recession of 1974–75 to explain Portugal’s difficulties.
