Austerity Based on A Screwup: Replicating Reinhart-Rogoff

[Benton D Struckcheon]

Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems.

In 2010, economists Carmen Reinhart and Kenneth Rogoff released a paper, "Growth in a Time of Debt." Their "main result is that...median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower." Countries with debt-to-GDP ratios above 90 percent have a slightly negative average growth rate, in fact.

This has been one of the most cited stats in the public debate during the Great Recession. Paul Ryan's Path to Prosperity budget states their study "found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth."...

In a new paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff," Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed Herndon et al. to see how how Reinhart and Rogoff's data was constructed...

Coding Error. As Herndon-Ash-Pollin puts it: "A coding error in the RR working spreadsheet entirely excludes five countries, Australia, Austria, Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in lines 30 to 44 instead of lines 30 to 49...This spreadsheet error...is responsible for a -0.3 percentage-point error in RR's published average real GDP growth in the highest public debt/GDP category." ...So what do Herndon-Ash-Pollin conclude? They find "the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as Reinhart-Rogoff claim."

More at the link. Basically, the whole austerity argument is based on screwy methodology and out-and-out error. Stupidly simple error at that.

EDIT: Rehn references Reinhart-Rogoff during debate on Greece: http://ec.europa.eu/commission_2010-2014/rehn/documents/cab20130213_en.pdf

[bullwinkle428]

1. Of course, proponents of austerity have no problem making that

"error" over and over again!

[cthulu2016]

2. The Rogoff numbers were weird

When results are counter to everything we would expect that doesn't mean the numbers are wrong. It does, however, mean that a rush to embrace the numbers is ideology, not reason.

[jeff47]

3. Sure, as long as you don't read the new paper where they explain how the numbers were wrong. (nt)

[hedda_foil]

4. A simple Excel formula error. Just like we've all made more than once. So easy.

But we didn't devastate our countries' social safety nets, destroy the middle class, and betray the trust of citizens in the social contract between them and their governments because we'd missed including a few columns or rows in an equation. How terribly convenient for our corporate rulers and billionaire overlords. Gee, I wonder who paid for their research? Do ya think we might find out?