On Reinhart and Rogoff
As Nob deftly noted, there was big news on Tuesday as an influential 2010 study by professors Carmen Reinhart and Kenneth Rogoff was found, to put it lightly, to be deeply flawed. The paper’s conclusions were well received by the austerity camp — Paul Ryan, David Brooks, Joe Scarborough, Erskine Bowles, Alan Simpson — for finding a high GDP-to-debt ratio was associated with (not the cause of, its authors inconsistentlymaintained) low growth rates. The magic number was 90 percent; pass that, the paper implied, and your economy was toast.
First, Reinhart and Rogoff excluded the post-war years for certain countries that enjoyed robust economic growth despite debt levels well over 90 percent. They also chose a skewed method of weighting the data: for example, New Zealand’s single year of terrible growth while over the 90 percent threshold wound up counting just as much as Britain’s 19 years of healthy growth. And they even incorrectly input at least one Excel spreadsheet formula, wrongly excluding several countries form their calculations.
I couldn’t help but notice that all of these wrong signs were pointing in the same direction (to-the-right, to-the-right), so I asked Spross what he made of Reinhart and Rogoff and how conscious they might be of the way their paper’s been turned into a political shibboleth. But in way fewer words because, y’know, Twitter. His response:
I guess I’m cynical because it’s hard for me to see the authors as such passive bystanders in this sudden farce. Again, if their mistakes were more varied, if some pointed toward Keynes while others toward Hayek, it’d be easier to imagine they were too intoxicated by the attention and praise to caution restraint.
As it looks to me now, the two of them made some very questionable decisions; and then they allowed themselves to be made the fig leaves for an austerity movement whose fundamental goals — cutting social services (and, in Europe, raising taxes) and breaking unions — were determined long, long before either professor made their first Excel fuck-up.