ICYMI, this week serious questions were raised about a controversial and influential paper by Harvard economists Carmen Reinhart and Kenneth Rogoff that purported to show -- or at least has been taken to show -- that when a country's national debt reaches about 90% of GDP, that debt acts as a significant drag on growth. On April 15, Thomas Herndon, Michael Ash and Robert Polin published a paper alleging that Reinhart and Rogoff's paper contained, along with various methodological errors, a coding error in an Excel spread sheet. In response, Reinhart and Rogoff acknowledge the error, but defend their methodology and maintain that the error does not materially affect their conclusions. They also claim that they never stated categorically that higher debt caused lower growth. It's that question of how a politically freighted point is communicated and received that interests me here.
On his blog, Paul Krugman cried "casuistry" on that last point:
And the everyone hyping Reinhart-Rogoff very much included Reinhart and Rogoff themselves. Matt O’Brien has the goods. It’s true that their papers never said outright that the relationship was causal, but they weren’t anywhere near that scrupulous in op-eds and other media presentations. And the truth is that the papers may not have stated causation flatly, but it was clearly insinuated. By trying to claim now that they never meant to imply such a thing, R-R are falling down seriously in the menschhood test.
Today, Krugman, austerity's most stalwart enemy, devoted a whole column to the kerfuffle. And while I'm happy to see him hammer away at the foundations of the case for austerity, I must say that he replicates the alleged rhetorical error. That is, he gets cutesy with causality. The whole essay is set up to convey a conclusion that he somewhat airily dismisses in the final sentence.
The opening paragraph poses a pretty grandiose premise:
In this age of information, math errors can lead to disaster. NASA’s Mars Orbiter crashed because engineers forgot to convert to metric measurements; JPMorgan Chase’s “London Whale” venture went bad in part because modelers divided by a sum instead of an average. So, did an Excel coding error destroy the economies of the Western world?Of course it did, anyone familiar with Krugman's abiding passions of the past four years is likely to conclude. Supporting evidence is swiftly brought to bear:
In fact, Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.The paper provided crucial ideological cover:
What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed. Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.So it appears that errant economics drove Europe and to a lesser extent the U.S. over a fiscal cliff. There's just one problem: Krugman is not really prepared to claim that ideology drives policy. So he somewhat equivocally fesses up in the conclusion:
So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and onFair enough, you might say. Krugman answers his opening question in the negative! Briefly, 750 words later, yes. To me, that gets maybe a D+ on the menschhood test. First impressions trump last, and bold print trumps small print, and Krugman presumably has at least veto power over the latter -- that is, the headline:
The Excel Depression
There is no question mark there. Which leaves a question mark about the intended takeaway.