Reality versus propaganda in the formation of beliefs about privatization

Argentina privatized most public utilities during the 1990s but re-nationalized the main water company in 2006. We study beliefs about the benefits of the privatization of water services measured immediately after the 2006 nationalization. Negative opinions about privatization prevail. We find that “reality” can change beliefs: people who had first-hand experience observing the investments made by the privatized company have a better opinion of water privatization (relative to other privatizations) than people who did not gain access to water. The effect, while statistically significant, seems small adding only 0.8 points on a 1–10 scale. Moreover, the effect of priming subjects with government propaganda against privatization has an effect that almost offsets the effect of gaining water. However, our evidence suggests that the presence of firm investments makes beliefs about the benefits of privatization less susceptible to be affected by propaganda.

► Can an agent persuade others of a particular point of view using “propaganda”? ► And what are the effects of “reality” on the formation of beliefs? ► In this paper we find that reality change beliefs. ► Moreover, priming subjects with propaganda almost offsets the effect of “reality”. ► Our evidence suggests that “reality” makes beliefs less susceptible to propaganda.