(Thanks Omar Sarhan)
Largest Bluescreen of Death? Picadilly, Manchester on Saturday.
And take Reinhart-less with you.
Kenneth Rogoff and Carmen Reinhart’s influential study on the economics of austerity – which has provided statistical comfort to the ECB, Fine Gael/Labour coalition and Goldman Sachs – is apparently WRONG.
Three scholars at the University of Massachusetts have found that Rogoff and Reinhart made a number of blunders in their research including a Excel coding error, which has distorted some of their paper’s key findings.
Paul ‘Buzzkill’ Krugman explains:
“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.”
“Fix all that, say Herndon et al., and the result apparently melts away.”
“If true, this is embarrassing and worse for R-R. But the really guilty parties here are all the people who seized on a disputed research result, knowing nothing about the research, because it said what they wanted to hear.”
Previously:Why Ajai Chopra’s Sad-Eyed Friend Was So Sad