The Power of Beliefs?

   Economists have long recognized the role played by beliefs in determining good and bad outcomes. Just before the last elections, the Spanish Government was accused of being slow in acknowledging the signals of the deep crisis for election purposes. I am, however, convinced that on top of political reasons, the Government delayed the acknowledgement of the crisis because the president Zapatero and his economic team are strong believers on the power of beliefs. Governments as well as other major economic agents have, to some extent, the ability to affect beliefs about the economy. Negative perspectives about the economy may lead to lower investment and lower economic activity.
   Last friday, a private foundation, not politically oriented, launched a campaign called "Esto solo lo arreglamos entre todos" (estosololoarreglamosentretodos.org) aimed at helping "solve" the crisis. The campaign is supported by 18 of the largest Spanish firms and its budget amounts to 4 million Euros. Among its objectives is to improve the image of Spain abroad. This is another example of the idea that beliefs may well turn things around.
   For economists, it would be interesting to know how much will this propaganda contribute to the recovery and whether it is cost-effective.