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> In a paper, 'Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,' Thomas Herndon, Michael Ash, and Robert Pollin of

> In a 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 criticise a 2010 paper by Harvard economists Carmen Reinhart and Kenneth Rogoff, 'Growth in a Time of Debt.' They find three main issues: 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." This one is kinda buried in the list. This is what motivated the harsh austerity measures in Greece. So an entire country was punished because of a bug in a spreadsheet. http://theconversation.com/the-reinhart-rogoff-error-or-how-not-to-excel-at-economics-13646 http://theconversation.com/the-reinhart-rogoff-error-or-how-... https://prospect.org/culture/books/the-crash-of-austerity-economics/ https://prospect.org/culture/books/the-crash-of-austerity-ec... https://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion https://www.theguardian.com/business/ng-interactive/2015/apr... https://www.thestranger.com/slog/archives/2013/04/17/how-microsoft-excel-tanked-the-global-economy https://www.thestranger.com/slog/archives/2013/04/17/how-mic... http://www.cc.com/video-clips/dcyvro/the-colbert-report-austerity-s-spreadsheet-error http://www.cc.com/video-clips/dcyvro/the-colbert-report-aust... interview with herndon http://www.cc.com/video-clips/kbgnf0/the-colbert-report-austerity-s-spreadsheet-error---thomas-herndon http://www.cc.com/video-clips/kbgnf0/the-colbert-report-aust...

jaclaz 7y ago
> So an entire country was punished because of a bug in a spreadsheet. Not really, the Authors of the spreadsheet made one or more errors, AND they did not double check results, NOR any of the top-level economists criticized the results. In other words an entire country was (severely) punished because of a wrong theory (based on erroneous data) that all the establishment accepted because it came from Harvard.
- brazzledazzle 7y ago
  Sounds a lot like the theory was accepted without being verified because it stated what they (the ones pushing for austerity) wanted it to say. Not disagreeing with your list but maybe it's worth adding the politicians/decision makers involved to it.
  - jaclaz 7y ago
    Sure, by "establishment" I intended the politicians too. Still the main responsability sits on the economists and their peers. I mean, not that I want in any way to absolve the politicians, mind you, but what can they do - not being economists or more generally technically experts in this or that field - if not choosing the theories from people qualified by notorious universities? In my experience what matters in this is reputation (and network), which in itself is not "bad" in an absolute sense, but I see a lot of sloppy or downright "wrong" works (even if rarely with such severe consequences) coming from these people lately. It seems to me like there are not (or not enough) critical reviews/checkings/etc. in some (scientific or pseudo-scientific) circles.
  - joe_the_user 7y ago
    The broad theory is that austerity is necessary for growth - it's a serious theory even if I think it turned out to be wrong with terrible human consequences. The Reinhart and Rogoff paper was more like factoid of a theory - no complicated model, just a dubious claim that trips off the tongue - "Studies have shown that when debt reach X level, growth tanks" The thing about this is when the shoddy quality of the study became obvious, people could act that was what drove all the horrible things coming under austerity, as if these weren't the consensus of a large group, study-or-not-study.
mech1234 7y ago
Proper response to this: https://www.ft.com/content/01fc06b8-fb6e-3e36-acb0-a1f8b47a7271 https://www.ft.com/content/01fc06b8-fb6e-3e36-acb0-a1f8b47a7... It remains true that high debt ratios hamper growth.
- Ma8ee 7y ago
  No. Your link is behind a paywall, but I followed the debate during they years, and their results are quite thoroughly debunked.
  - zoonosis 7y ago
    The article addresses the issues raised by OP. You don't need to read the paywalled article since it just summarizes the statement by Reinhart & Rogoff which is available here [1]. Here is an archive of the actual article if you would prefer to read that [2]. [1] https://scholar.harvard.edu/files/rogoff/files/response_to_herndon_ash_and_pollin.pdf https://scholar.harvard.edu/files/rogoff/files/response_to_h... [2] https://archive.md/2daXH https://archive.md/2daXH
    - Ma8ee 7y ago
      So before the corrections the growth was -0.1 percent for debt levels over 90 percent. After their corrections the growth was 2.2 percent. And then they try to pretend that that doesn’t really change the main conclusion of their paper, which was that high debt levels destroy growth.
jessaustin 7y ago
It doesn't look good for Reinhart and Rogoff, but if it hadn't been their paper it would have been something else. The political will existed in Europe to subject Greece to extreme measures; it was going to happen. If Germany hadn't found this scapegoat they would have found some other one. And people claim to wonder why Greece is friendly with China...
Mvandenbergh 7y ago
>This one is kinda buried in the list. This is what motivated the harsh austerity measures in Greece. So an entire country was punished because of a bug in a spreadsheet. That isn't true. This paper indicated that moderately high levels of public debt constrained economic growth. As you have pointed out, the paper was riddled with errors and the evidence that moderately high levels of public debt slow economic growth isn't really there. What happened in Greece is quite different. Lenders lost confidence in the Greek government's ability to repay their debt. Partially because there was re-statement of public debt that increased the debt level by 11% overnight. What the Greek government did after that to get out from under this was to cut spending (austerity). Economists have always been sceptical that this would work since during a recession is the very worst time to cut spending since it reduces cumulative demand at a time when it is already down. Indeed it did not work as we all know, but Eurozone lenders were not willing to allow a partial default which is what should have happened and being in the Euro means that there is no possibility for a devaluation.
- hef19898 7y ago
  Well, basically the EU forced harsh measures on Greece so Greece could get money from the EU to repay debts to banks and other institutional investors. Investors didn't loose anything (over simplifying here), the EU got it's money back and Greece, along with Greeks, paid the bill. Would have been easier to just wire the money over to the investors directly and leave the Greeks alone. Investors understood the rescue of Greece exactly like that anyway if you ask me. But maybe the EU had to maintain the public impression of austerity. Or rather the Germans.
- bobcostas55 7y ago
  Greece consistently ran huge deficits during the crisis. They had a huge debt write-off in 2012 and still ended up with 180% debt/gdp, that doesn't happen if your spending policy is austere. https://3gp11q1ujq964apmpt3s9cda-wpengine.netdna-ssl.com/wp-content/uploads/2017/07/Greek-Government-Budget-Deficit_2.png https://3gp11q1ujq964apmpt3s9cda-wpengine.netdna-ssl.com/wp-...
  - pjc50 7y ago
rscho 7y ago
Well, realistically many people are dying from spreadsheet incompetence (also named "clinical research") every day, so...
zoonosis 7y ago
Austerity is effective when it is achieved by cutting spending. The cases where it hasn't worked were because the spending cuts were accompanied with tax increases [1]. This shouldn't be a surprise because tax increases tend to decrease GDP [2]. [1] A. Alesina, C. A. Favero, and F. Giavazzi, Austerity: when it works and when it doesnt. Princeton (New Jersey): Princeton University Press, 2019. [2] C. D. Romer and D. H. Romer, “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,” American Economic Review, vol. 100, no. 3, pp. 763–801, 2010.

jaclaz 7y ago

> So an entire country was punished because of a bug in a spreadsheet. Not really, the Authors of the spreadsheet made one or more errors, AND they did not double check results, NOR any of the top-level economists criticized the results. In other words an entire country was (severely) punished because of a wrong theory (based on erroneous data) that all the establishment accepted because it came from Harvard.

brazzledazzle 7y ago
Sounds a lot like the theory was accepted without being verified because it stated what they (the ones pushing for austerity) wanted it to say. Not disagreeing with your list but maybe it's worth adding the politicians/decision makers involved to it.
- jaclaz 7y ago
  Sure, by "establishment" I intended the politicians too. Still the main responsability sits on the economists and their peers. I mean, not that I want in any way to absolve the politicians, mind you, but what can they do - not being economists or more generally technically experts in this or that field - if not choosing the theories from people qualified by notorious universities? In my experience what matters in this is reputation (and network), which in itself is not "bad" in an absolute sense, but I see a lot of sloppy or downright "wrong" works (even if rarely with such severe consequences) coming from these people lately. It seems to me like there are not (or not enough) critical reviews/checkings/etc. in some (scientific or pseudo-scientific) circles.
- joe_the_user 7y ago
  The broad theory is that austerity is necessary for growth - it's a serious theory even if I think it turned out to be wrong with terrible human consequences. The Reinhart and Rogoff paper was more like factoid of a theory - no complicated model, just a dubious claim that trips off the tongue - "Studies have shown that when debt reach X level, growth tanks" The thing about this is when the shoddy quality of the study became obvious, people could act that was what drove all the horrible things coming under austerity, as if these weren't the consensus of a large group, study-or-not-study.

mech1234 7y ago

Proper response to this: https://www.ft.com/content/01fc06b8-fb6e-3e36-acb0-a1f8b47a7271 https://www.ft.com/content/01fc06b8-fb6e-3e36-acb0-a1f8b47a7... It remains true that high debt ratios hamper growth.

Ma8ee 7y ago
No. Your link is behind a paywall, but I followed the debate during they years, and their results are quite thoroughly debunked.
- zoonosis 7y ago
  The article addresses the issues raised by OP. You don't need to read the paywalled article since it just summarizes the statement by Reinhart & Rogoff which is available here [1]. Here is an archive of the actual article if you would prefer to read that [2]. [1] https://scholar.harvard.edu/files/rogoff/files/response_to_herndon_ash_and_pollin.pdf https://scholar.harvard.edu/files/rogoff/files/response_to_h... [2] https://archive.md/2daXH https://archive.md/2daXH
  - Ma8ee 7y ago
    So before the corrections the growth was -0.1 percent for debt levels over 90 percent. After their corrections the growth was 2.2 percent. And then they try to pretend that that doesn’t really change the main conclusion of their paper, which was that high debt levels destroy growth.

jessaustin 7y ago

It doesn't look good for Reinhart and Rogoff, but if it hadn't been their paper it would have been something else. The political will existed in Europe to subject Greece to extreme measures; it was going to happen. If Germany hadn't found this scapegoat they would have found some other one. And people claim to wonder why Greece is friendly with China...

Mvandenbergh 7y ago

>This one is kinda buried in the list. This is what motivated the harsh austerity measures in Greece. So an entire country was punished because of a bug in a spreadsheet. That isn't true. This paper indicated that moderately high levels of public debt constrained economic growth. As you have pointed out, the paper was riddled with errors and the evidence that moderately high levels of public debt slow economic growth isn't really there. What happened in Greece is quite different. Lenders lost confidence in the Greek government's ability to repay their debt. Partially because there was re-statement of public debt that increased the debt level by 11% overnight. What the Greek government did after that to get out from under this was to cut spending (austerity). Economists have always been sceptical that this would work since during a recession is the very worst time to cut spending since it reduces cumulative demand at a time when it is already down. Indeed it did not work as we all know, but Eurozone lenders were not willing to allow a partial default which is what should have happened and being in the Euro means that there is no possibility for a devaluation.

hef19898 7y ago
Well, basically the EU forced harsh measures on Greece so Greece could get money from the EU to repay debts to banks and other institutional investors. Investors didn't loose anything (over simplifying here), the EU got it's money back and Greece, along with Greeks, paid the bill. Would have been easier to just wire the money over to the investors directly and leave the Greeks alone. Investors understood the rescue of Greece exactly like that anyway if you ask me. But maybe the EU had to maintain the public impression of austerity. Or rather the Germans.
bobcostas55 7y ago
Greece consistently ran huge deficits during the crisis. They had a huge debt write-off in 2012 and still ended up with 180% debt/gdp, that doesn't happen if your spending policy is austere. https://3gp11q1ujq964apmpt3s9cda-wpengine.netdna-ssl.com/wp-content/uploads/2017/07/Greek-Government-Budget-Deficit_2.png https://3gp11q1ujq964apmpt3s9cda-wpengine.netdna-ssl.com/wp-...
- pjc50 7y ago

rscho 7y ago

Well, realistically many people are dying from spreadsheet incompetence (also named "clinical research") every day, so...

zoonosis 7y ago

Austerity is effective when it is achieved by cutting spending. The cases where it hasn't worked were because the spending cuts were accompanied with tax increases [1]. This shouldn't be a surprise because tax increases tend to decrease GDP [2]. [1] A. Alesina, C. A. Favero, and F. Giavazzi, Austerity: when it works and when it doesnt. Princeton (New Jersey): Princeton University Press, 2019. [2] C. D. Romer and D. H. Romer, “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,” American Economic Review, vol. 100, no. 3, pp. 763–801, 2010.