Well, well, some of the "talking points" used by our "Very Serious People" (VSP's) when it comes to decrying the deficit are based on a paper by Rogoff and Reinhart. This is PROOF, PROOF I TELL YOU!!! that we are DOOMED, DOOMED I TELL YOU!!!, unless we eliminate the safety net, destroy the middle class, institute IMMEDIATE AUSTERITY, and ------ all for your own good, I tell you!!!
Anyway, this oft quoted paper has "glaring errors", found by a grad student while he was using the information to write a paper.
Of course the VSP's say the fact of this glaring error means NOTHING!!
So, as is often the case, the VSP's and their media toadies are FULL OF SHIT!
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http://news.yahoo.com/student-took-eminent-economists-debt-issue-won-095347790--business.html
NEW YORK (Reuters) - When Thomas Herndon, a student at the University of Massachusetts Amherst's
doctoral program in economics, spotted possible errors made by two
eminent Harvard economists in an influential research paper, he called
his girlfriend over for a second look.
As they poured over the spreadsheets Herndon had requested from Harvard's Carmen Reinhart and Kenneth Rogoff, which formed the basis for a widely quoted 2010 study, they spotted what they believed were glaring errors.
"I almost didn't believe my eyes when I saw just the
basic spreadsheet error," said Herndon, 28. "I was like, am I just
looking at this wrong? There has to be some other explanation. So I
asked my girlfriend, 'Am I seeing this wrong?'"
His girlfriend, Kyla Walters, replied: "I don't think so Thomas."
In the world of economic luminaries, it doesn't get
much bigger than Reinhart and Rogoff, whose work has had enormous
influence in one of the biggest economic policy debates of the age.
Both have served at the International Monetary Fund.
Reinhart was a chief economist at investment bank Bear Stearns in the
1980s, while Rogoff worked at the Federal Reserve, passing through Yale
and MIT before landing at Harvard.
Their study, which found economic growth slows
dramatically when a government's debt exceeds 90 percent of a country's
annual economic output, has been cited by policymakers around the world
as justification for slashing spending.
Former U.S. vice presidential candidate Paul Ryan, a
Republican congressman from Wisconsin, is one influential politician who
has cited the report to justify a budget slashing agenda.
Using the two professors' data, Herndon found that
instead of a dramatic fall in growth, the decline was much milder,
slowing to about 2.2 percent, instead of the slump to minus 0.1 percent
that Reinhart and Rogoff predicted.
Things tend to move at a glacial pace in the world of
academic research papers, but within 24 hours Herndon and his two
teachers, who co-authored the report, Michael Ash and Robert Pollin,
found themselves swept up in a global debate.
Herndon's paper began life as a replication exercise
for a term paper in a graduate econometrics class. He expected to
replicate Reinhart and Rogoff's results, then challenge the idea that
high public debt caused growth to slow.
But he never got that far. Repeated failures to
replicate the results roused his interest. Pollin and Ash encouraged him
to pursue it after he convinced them he was onto something.
"At first, I didn't believe him. I thought, 'OK he's a
student, he's got to be wrong. These are eminent economists and he's a
graduate student,'" Pollin said. "So we pushed him and pushed him and
pushed him, and after about a month of pushing him I said, 'Goddamn it,
he's right.'"
Herndon approached Reinhart and Rogoff earlier this
year for the spreadsheets they used in their paper. The two professors
provided them at the start of April, unlocking the mysteries of the data
that had stumped Herndon.
Herndon said only 15 of the 20 countries in the report
had been used in the average. He also said Reinhart and Rogoff used only
one year of data for New Zealand, 1951, when growth was minus 7.6
percent, significantly skewing the results.
Reinhart and Rogoff have admitted to a "coding error"
in the spreadsheet that meant some countries were omitted from their
calculations. But the economists denied they selectively omitted data or
that they used a questionable methodology.
For Ash, the findings mean the claim that high public debt causes growth to stall no longer holds water.
"Their central thesis has been substantially weakened," he said.
Reinhart and Rogoff, however, say their conclusion that
there is a correlation between high debt and slow growth still holds.
"It is sobering that such an error slipped into one of
our papers despite our best efforts to be consistently careful," they
said in a joint statement. "We do not, however, believe this regrettable
slip affects in any significant way the central message of the paper or
that in our subsequent work."
Now that Herndon has ably crossed swords with some of
the most eminent figures in his field, he is thinking about expanding
his work into a Ph.D. thesis.
