Major Economic Paper of Debt Fear Mongers Reinhart and Rogoff is Discredited

Using Their Own Work

One of the academic papers that the folks who cry havoc and let slip the dogs of the war on the government debt is a paper by Carmen Reinhart and Kenneth Rogoff.  It is titled "Growth in a Time of Debt." And their conclusion is that when debt hits 90% of GDP economic growth stops.  Most real economists have disputed this, and now thanks to a reader of this Forum we have this story on just how flawed the research is.

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

APR 16, 2013Mike Konczal

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.

They find that three main issues stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don't get their controversial result.

All of this reminds The Dismal Political Economist of listening to the defense of a controversial position by a noted academician who argued vehemently that his results were vindicated as long as one ignored those instances where they were not.

So Conservative economic policy and European Austerity programs are based on false analysis.  Wow, who would have thought it.  And how false is the analysis, well part of the mistake was an Excel coding error.

This error is needed to get the results they published, and it would go a long way to explaining why it has been impossible for others to replicate these results. If this error turns out to be an actual mistake Reinhart-Rogoff made, well, all I can hope is that future historians note that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in Excel.

Oh, that