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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsKrugman: Holy Coding Error, Batman!
Last edited Tue Apr 16, 2013, 07:03 PM - Edit history (5)
Short version: Two of the most cited pillars of the empirical case for deficit panic turn out to have reached their conclusions only through programing errors and improper data categorization.
Personal observation: A study that supports conventional wisdom tends not to be questioned very hard, even when wrong. I expect that these two papers, central to the 'serious' case for austerity, will continue to be cited, despite their non-reproducible results, because their proponents need them to be right. They are the fig-leaf for what is really ideology not inquiry, and no matter how full of holes the leaf gets it still looks better than going naked.
Paul Krugman
April 16, 2013, 1:38 pm
The intellectual edifice of austerity economics rests largely on two academic papers that were seized on by policy makers, without ever having been properly vetted, because they said what the Very Serious People wanted to hear. One was Alesina/Ardagna on the macroeconomic effects of austerity, which immediately became exhibit A for those who wanted to believe in expansionary austerity. Unfortunately, even aside from the papers failure to distinguish between episodes in which monetary policy was available and those in which it wasnt, it turned out that their approach to measuring austerity was all wrong; when the IMF used a measure that tracked actual policy, it turned out that contractionary policy was contractionary.
The other paper, which has had immense influence largely because in the VSP world it is taken to have established a definitive result was Reinhart/Rogoff on the negative effects of debt on growth. Very quickly, everyone knew that terrible things happen when debt passes 90 percent of GDP.
Some of us never bought it, arguing that the observed correlation between debt and growth probably reflected reverse causation. But even I never dreamed that a large part of the alleged result might reflect nothing more profound than bad arithmetic.
But it seems that this is just what happened. Mike Konczal has a good summary of a review by Herndon, Ash, and Pollin. According to the review paper, R-R mysteriously excluded data on some high-debt countries with decent growth immediately after World War II, which would have greatly weakened their result; they used an eccentric weighting scheme in which a single year of bad growth in one high-debt country counts as much as multiple years of good growth in another high-debt country; and they dropped a whole bunch of additional data through a simple coding error....
http://www.nextnewdeal.net/rortybomb/researchers-finally-replicated-reinhart-rogoff-and-there-are-serious-problems
http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf
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http://krugman.blogs.nytimes.com/2013/04/16/holy-coding-error-batman/
Benton D Struckcheon
(2,347 posts)cthulu2016
(10,960 posts)Dragonfli
(10,622 posts)I have noticed we have many serious people on both sides of the aisle here that are consumed with grand bargains and balancing the budget, usually by a combination of cuts (largely from "entitlements" and government services) and tax increases (usually offered as .25 in revenue to each 1 in cuts)
Their obsession with budget reduction and austerity has blinded them to the need for job creation and the growth from spending by the newly employed that will increase demand in the process.
By re-employing people, even if we have to increase the deficit by using government spending to create jobs, this will increase spending from the much broader base of working class people that spend most of what they have and are large enough in number to drastically increase demand.
The extreme wealthy that are demanding budget reduction are not great spenders, outside of bribes, they are great hoarders that take huge sums of money out of the country. It is flawed thinking to enforce austerity during a recession and will likely cause a deeper recession and contraction of growth.
Is all this wrong thinking at the top of both parties the result of two flawed papers? Does anyone know?
Egalitarian Thug
(12,448 posts)fits their profoundly sad world view.
In this respect they are like the "those who wanted to believe in expansionary austerity" that Dr. Krugman mentions. Worse however, is that they don't even have the excuse of pushing an agenda that is going to end up putting huge piles of money into their own accounts, as do those pushing the agenda from within the financial industry. They are just mean-spirited and a little slow.
cthulu2016
(10,960 posts)The Rogoff paper is cited on DU sometimes in discussions of the nature and magnitude of the deficit problem.
Cleita
(75,480 posts)The Heritage Foundation. Whatever has mushroomed off into various news' sites, web sites, blogs and your Congressmen's committees seems to have this think tank as a source. However, I think the sources are even older, an ideology that appeals to some, that has been tried somewhere in the last hundred years, has been proven not to work or even be disastrous, yet seems to come back in various guises over and over again because some find it appealing particularly the 1%. The fact is if they practiced austerity in their personal finances, like they want our country to practice it, they would find themselves in a downward economic spiral because it's prosperity going down the drain.
FairWinds
(1,717 posts)Mr. Thug. Actually, academics who tell our corporate masters what they want to hear do quite nicely for themselves - feasting on lecturing gigs & grants, and cushy tenured jobs at Koch Univ.. And here is a prediction: there will be no consequences for R&R for what is obviously academic fraud.
Orrex
(63,172 posts)I look forward to reading your posts here on DU for many years to come.
CTyankee
(63,889 posts)serving up a bit of nonsense to "prove" Dr. Krugman "wrong" about the deficits and "our future." He cited no studies. It was just his "view." Joe used Sachs as "proof" that Krugman was out of the mainstream.
Krugman responded in a subsequent column. I think he was genuinely sorry to see what had just transpired with his friend, Jeffrey Sachs.
hifiguy
(33,688 posts)does to bullshit what Alexander the Great did to the Gordian Knot.
TekGryphon
(430 posts)Krugman was just summarizing their fantastic work into the flaws of R/R.
pnwmom
(108,955 posts)than would have been reached by the good researchers at U MASS.
cthulu2016
(10,960 posts)PennyK
(2,301 posts)The study that "proved" that fat in the diet causes heart disease was selective in which countries it used. And because of that we have a diabetic epidemic and heart disease and obesity.
drm604
(16,230 posts)I'm glad to see some serious questioning of the research that claims otherwise.
Intuition is not science and can certainly be wrong, but you can't discount it based on badly done science.
cthulu2016
(10,960 posts)The Conventional Wisdom is sometimes seeming common sense, and sometimes doggedly contrary.
A lot of conventional wisdom is stuff that thinks it 'outsmarts' what the rubes think. Like that welfare causes poverty. That is not impossible, but it has a "Man bites dog" quality to it, and it is appealing as upholding the status quo while also appealing in a self-appointed elite sense because it is a counter-intuitive "truth."
It's not easy to style ones self a rebel by thinking what everybody else thinks... but there are ways.
RufusTFirefly
(8,812 posts)rurallib
(62,379 posts)WillyT
(72,631 posts)Danascot
(4,690 posts)pointing out errors and stating facts will change cherished beliefs. Paul, I love ya but these are politicians and ideologues we're talking about, not scientists willing to change their theories based on new evidence.
As Naomi Klein eloquently points out, an impoverished populace is so much easier to control and exploit.
DallasNE
(7,402 posts)Who would have thought. This reminds me of an earlier holy grail of conservative economic theory, the Laffer Curve. But not to worry, the Republicans will keep finding a new holy grail to market at the definitive test of economic theory only to have it too fail.
I took one class in economic theory and was stumped by why they all had their own "eccentric weighting scheme". Without this the theory doesn't work yet nobody could explain how they arrived at that exact value. In other words I could understand the math but not the science and you need both. Maybe that is why I ended up going with an IT career instead.
1-Old-Man
(2,667 posts)The entire Ryan budget is based on a flawed idea that is disproved by this short paper. Every Democrat should be aware of this and it should be getting play by folks like Rachel Maddow so it can be put into a short and sweet form that anyone can understand. Basically Ryan and the Pundits have been saying that high debt necessarily leads to low growth and they have a study to prove it. Problem is the study does not prove it, in fact the study is flawed in three ways. The flaws are fatal. The flaws are missing information, unjustified weighting, and gross calculation errors. This is the basis of Paul Ryan's ideology, of his 'budget' itself; flawed, all flawed.
blkmusclmachine
(16,149 posts).