Posted on 04/17/2013 2:40:34 PM PDT by SeekAndFind
Austerity has become almost like a four-letter word in some circles. It’s used to describe policies meant to reduce government spending and debt that may be painful in the here and now -- measures such as cuts to social services, or that lead to job losses in the short-term. A key piece of empirical research policymakers have used to justify “austerity measures” has been a 2010 study by two Harvard economists, Carmen M. Reinhart and Kenneth Rogoff, about the downside of high debt.
Well now another set of academics at University of Massachusetts at Amherst have replicated the study. They discovered that thee Harvard professors made an Excel coding error in their research – one that mattered for the results, along with a few other issues. But before you say 'bring on the government spending gravy train,' let’s back up. What was the original study to begin with?
Reinhart and Rogoff found countries with government debt loads equivalent to or greater than 90 percent of economic output saw their median growth rates fall by 1%. Their average growth rates fell considerably more. In other words, high government debt was bad for economies.
(Excerpt) Read more at finance.yahoo.com ...
Reinhart and Rogoff in a written statement today admitted that the UMass researchers accurately point out a coding error that omits several countries from the averages they looked at (in other words, there really was an Excel error), however, they “do not believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work.” (The Daily Ticker also reached out to them for an interview.)
Reinart and Rogoff point out the UMass researchers also find lower growth associated with periods when debt is over 90%.
UMASS made Harvard look like amateurs. I always thought Harvard was overrated.
I thought that the government only deliberately omits unemployment data when a Democrat President is seeking re-election.
Yeah it was a pretty huge blunder. I work in Excel models daily and cannot believe they screwed it up that badly. It’s as bad as JPM using the wrong formula in their VaR model. We build validation checks into all of our models.
Their study showed that 90% debt level countries grow at an average of -0.1% when the model error eliminated show that they grow around 2.0%. That’s a big miss. Paul Ryan cited the 90% debt level data often.
During his career my Dad managed a number of Harvard and MIT grads in spite of never having attended college.he used to say "you can always tell a Harvard man,but you can't tell him much".
Next time use MSAccess...
If you believe that, I've got a Mars mission report describing how a spacecraft missed the planet entirely because of a units mistake in the navigation program that I can sell you... cheap.
The economic school of idiocracy that now advises our government believes that the economic decisions of 300 million individuals can be reduced to formulas in a spreadsheet. And when those formulas don't produce the expected result, the answer is to go looking for the rogue cell.
Microsoft should add a Help page that advises the ruling class that human behavior cannot be reduced to an Excel file.
“do not believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work.”
Sounds like Dan Rather, “The documents were fake, but the story is true”
Paul Ryan should simply respond as the Rats always do when their policies (e.g. Head Start, failed public schools, Stimulus spending) don’t work: “We just need MORE Austerity, until it eventually begins to work.”
The original paper does not “fail” if the rate of growth is lower for high debt countries than for those with fiscally responsible gov’ts.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.