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Twisted Tale of Bad Math and Hubris: Global Austerity Based on a Spreadsheet Error

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By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet.

Somebody has some 'splaining to do! Please savor the following twisted tale of bad math, academic folly and pundit hubris.

Since 2010, the names of Carmen Reinhart and Kenneth Rogoff have become famous in politic and economic circles. These two economists, of the University of Maryland and Harvard respectively, wrote a paper, “Growth in the Time of Debt” that has been used by everyone from Paul Ryan to Olli Rehn of the European Commission to justify harmful austerity policies. The authors purported to show that once a country's gross debt to GDP ratio crosses the threshold of 90 percent, economic growth slows dramatically. Debt, in other words, seemed very scary and bad.

Their historical data appeared impressive, as did their credentials. Policy-makers and journalists cited the paper to convince the public that instead of focusing on the jobs crisis that was hampering recovery, we should instead focus on deficits. The deficit hawks jumped up and down with excitement.

But something didn’t smell right.

Progressive economists I knew were shocked at what appeared to be the shoddiness of the research and the absurdity of the conclusions. In their paper “A World Upside Down? Deficit Fantasies in the Great Recession,” Thomas Ferguson and Robert Johnson observed that R&R had truncated their sample of British data in a way that skewed their conclusions, eliminating more than a century of data in which British debt loads exploded but economic growth raced ahead (see pages 11-13). The always savvy Marshall Auerback called them out in a blog for New Deal 2.0, which I edited at the time, criticizing the relevance of the cases they had used to justify their conclusions.

But plenty of pundits took their suspect arguments as gospel. The editorial board of the Washington Post declared that "debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth." The economists cited were Reinhart and Rogoff, whom the WP passed off as speaking for the entire field. A new Washington consensus was born, and the public was hammered with the idea that cutting jobs, stripping away vital public services and letting infrastructure crumble was a good was to get the economy going.  Most any ordinary person on the street would probably intuit that this made no sense, but there was this Academic Research By Esteemed Persons, so the argument was over.

Enter Thomas Herndon, Michael Ash and Robert Pollin of University of Massachusetts, Amherst, the heroes of this story. These three researchers kept trying to replicate the Reinhart-Rogoff results and couldn’t do it. So they asked R&R to give them their data spreadsheet, which allowed them to see how the data was put together. They found a whole host of problems, including selective exclusion of years of high debt and average growth, a problematic method of weighing countries, and this jaw-dropper: a coding error in the Excel spreadsheet that excludes high-debt and average-growth countries.

Herndon, Ash, and Pollin write: "A coding error in the RR working spreadsheet entirely excludes five countries, Australia, Austria, Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in lines 30 to 44 instead of lines 30 to 49…This spreadsheet error…is responsible for a -0.3 percentage-point error in RR's published average real GDP growth in the highest public debt/GDP category."

A coding error! Reinhart and Rogoff had been so sloppy in their work that they had not bothered to check their own spreadsheet.

When you fix R&R's problematic methodology and coding errors, you get a very different result that – guess what? – does not support austerity and shows that countries can most certainly cross the phony debt-to-GDP “threshold” and grow.

In their newly released paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff” Herndon, Ash and Pollin show that "when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0:1 percent as published in Reinhart and Rogo ff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower."

Herndon, Ash, and Pollin have set off a firestorm, with those who long suspected that R&R's work was crap shouting hallelujah and defenders scrambling to figure out a way to support deficit hysteria despite the body blow to their theory.

Bottom line: The foundation of the entire global push for austerity and debt reduction in the last several years has been based on a screwup in an Excel spreadsheet and poorly constructed data.

Reinhart and Rogoff have done a great deal of damage to the world. As Paul Krugman has observed, their replies to their critics have thus far only compounded the confusion. They need to come clean, stop talking like their mistakes are minor, and own up to the enormity of their errors.

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71 comments

    1. Synopticist

      I am genuinelly shocked actually. That they’d be quite as blatant as this, and that the paper in question wasn’t even peer-reviewed.

      Again i’m surprised by my own naivety.

  1. harry

    1) The paper was not the entire foundation for global austerity. They are just very naughty girls and boys.

    More seriously, this was always a paper based on taxonomy. Not analysis. So why get all shook up when you find out the childish cross sectional data was shoddy?

    The foundation of global austerity is in every families belief that if only government could be more like a well run household we would all be better off. “Common sense”
    and propoganda mascarading as common sense.

    If you had asked me I would have characterised R&R as a fairly shoddily put together history piece – which served to note that recessions where banking systems go bust tend to be more long lasting than recessions where they dont.

    Whoop-di-do.

    I dont disagree. I just think it would have been interesting to think through the chain of events linking economic recession and financial collapse.

    1. David Lentini

      More seriously, this was always a paper based on taxonomy. Not analysis. So why get all shook up when you find out the childish cross sectional data was shoddy?

      And people wonder why the intellectual left is dead. No, this is all about a put-up job to cow the public into accepting austerity as policy, becuase [echochamber-on]THERE IS NO ALTERNATIVE[echochamber-off]. So we continues to propup to big to fail/jail banks and suffer near depression-level unemployment.

      Mission accomplished.

      1. AbyNormal

        Hot Coals David! Way to hold their feet to’em!

        there is no rest for the spin weary people

      2. Propertius

        The notion that a random collection of errors somehow all served to reinforce R&R’s conclusion is pretty suspect. I’d be more inclined to blame outright dishonesty (or confirmtion bias, if I were feeling charitable). It’s too bad all those harmed by austerian policies can’t sue economists for malpractice, isn’t it?

      3. Harry

        You missed my point.

        I have no idea why the Rogoff and Reinhart paper was considered so important. I have 2 guesses. 1) Timing – it was out quick. 2) Banal safe conclusions. They did some cross sectional historical analysis and it said depressions with financial crisis are worse than the ones with no financial crisis. When I was a school, the correct response to this conclusion was “Well, duh!”. Not “This is a path breaking paper”.

        Its not Ken Rogoff and Mrs Reinharts shoddy work which is the bid deal here. Its the way policy circle jerks jumped all over a taxonomy paper and treated it like it was definitive policy prescription.

  2. David Lentini

    Bottom line: The foundation of the entire global push for austerity and debt reduction in the last several years has been based on a screwup in an Excel spreadsheet and poorly constructed data.

    This isn’t some comedy of errors. This was deliberate. You can’t make so consistent a set of errors in spreadsheet coding, data weighting, and data selection without forethought.

    And the scrambling to obfuscate the impact of this revelation only makes the intellectual dishonesty of the original paper more glaring.

    And I think you should have mentioned that researchers tried to get copies of the spreadsheet and data for years before now. Why did R&R stall for so long? Was it to wait until after the decisions had been cast and the public had moved on? Then they can blush and look foolish, but all will be forgiven by Paul Krugman & Co. for the next round of propaganda.

    1. Mark Pawelek

      It makes far more sense to understand events in terms of screw-ups than conspiracies. The screw-up theory of history is a much simpler explanation so it is nearly always the right one.

      Economics have no scientific standing whatsoever. Economists don’t do science; they do anti-science. Economic theory always precedes data, which is why we have so many schools of economics, often named after a theorist (or group of): Neo-classical, Georgian, Keynesian, neo-Keynesian, post-Keynesion, real-Keynesian, Marxian, post-Marxian, Austrian, … the list goes on endlessly. We classify economists according to their mutually incompatible beliefs. There is only one way to do science, and only one agreed set of scientific principles; there are not dozens of incompatible sciences proclaiming the others to be wrong.

      The contempt that economists have for the real world facts can also be seen at NC. This is where born-again Keynesians, aka MMTs, will tell me that MMT is the solution to every economic problem. No where on planet earth has MMT ever been tried but its propagandists are certain of its validity because they have proved it in THEORY.

      In every version of economics, THEORY always takes precedence over fact. So much so that R&R treat facts with so much contempt they can’t even be bothered to check their workings. You can’t actually ever prove a thing ‘in theory’.

      Only a total revolution in economics; as it is taught and practiced can hope to improve things.

      1. Binky Bear

        Conspiracy is simply a code word for policy in this case and as we have been trained. Of course it is a conspiracy, in that multiple people are coordinating their activities in obscurity. But it is policy, and that is why the main stream of economists did not question it. It is the Chicago school of Rockefeller gussied up with Ivy league haughtiness.

      2. David Lentini

        Mark, history is full of conspiracies; attriubuting everything to chance or honest mistake is pollyanna. Look at the Tonkin Gulf incident and the decision to invade Iraq; those weren’t “honest mistakes”.

        The facts here really stink.

        And yes, I wholly agree that we need to tear down economics and start from scratch. If I had my druthers, economists have to start as trained scientsts with real experience in the world before studying economics as a career. Aristotle was right–you should’t be allowed to study this stuff until you’re about 45. After you’ve had kids and seen the world turn a few times, then you can start trying to make scientific sense of it. Otherwise, you’re too naïve and fall for nonsense.

      3. allcoppedout

        I couldn’t agree more Mark. There are examples of cheating in science (Wikki on JL Schon is a start) – but key in economics and most social science is lack of data one can take at face value. Reams can be read on data really being capta, but the whole philosophy of science (interesting as it is) leads away from the practice I remember.

        If we could imagine amassed wealth and its rent seeking as just another variable we would want to control to increase or decrease others in the system we were trying to understand and control we might be free of some of the ideology. I know it isn’t as simple as this. But economics doesn’t even get to the positivism of Hume through Mach, let alone grasp later work. Its technocrat in the worst manner and when it sounds like science is using unwarranted abstractions.

        If R&R could be trashed as technically incompetent once their method was out, what would happen if we could visit the ‘assets’ claimed in the financial sector?

      4. TK421

        “No where on planet earth has MMT ever been tried”

        Really? No government has ever produced massive amounts of fiat money to bail itself out of a jam? Is that your final answer?

        “THEORY always takes precedence over fact”

        You should learn the actual definition of “theory”.

        1. Ben Johannson

          MMT is a toolset for economic analysis, and to my knowledge no government has ever internalized it. MMT is not about printing lots of money for bailouts and never was.

        2. skippy

          The government did not bail out – its self – it bailed out the massive fraud committed by the private sector.

          skippy… now if you wish to quibble over the currant governments staffing at the behest of the private sector… well…

      5. Ben Johannson

        R&R have had work bankrolled by Pete Peterson, the guy who has been attempting to destroy Social Security for decades. Reinhart is on the Peterson Institute board of directors, an organization dedicated to inflicting punishing austerity in the U.S.

        Their results were pre-determined.

        1. Mark Pawelek

          The results were predetermined. By fraud, conspiracy, ineptitude or by willful blindness? My bet is willful blindness. R&R knew what the Truth was because their ideas (theory, ideology, religion or just elite smugness) gave them certainty. When this happens people muck up every time, putting theory before empiricism always leads to hubris.

          You can tell I’m an atheist with scientific leanings – R&R (among many others) are the reason why.

      6. Nathanael

        “In every version of economics, THEORY always takes precedence over fact.”

        Not every version. Ever looked at “experimental economics”? There’s the exception.

        The first major result of experimental economics was that people usually care more about fairness than about profit. It’s a very solid result.

        Of course, this destroys most of the economics theories out there.

  3. Amit

    That’s not surprising – I reda somewhere that fewer than 3% of economists give out the data/models supporting their “findings”. What is disappointing (and what makes me even more cynical) is that R/R are digging in their heels even now.

    Regardless, I found the obsession with their findings before the error was discovered hilarious & depressing at the same time. Even though causality was never clearly established (it is more likely that slow growth causes countries to run up high debts as with Japan), a large part of dumbed-down Washington took away the R/R “conclusion” as gospel. It didn’t matter that sensible economists like Dean Baker & Paul Krugman had pointed out that there was nothing special about the 90% debt threshold – if interest rates go up, a country can just use other assets to pay down the debt at a discount to get down to say, 89%, and all would be well again, supposedly. The interest burden remains unchanged, but I doubt whether anyone understands even basic economics/finance – it’s all about sticking to your flawed beliefs, whether it’s society or Washington.

    I did myself a favor by not reading as much of the news as I used to – reading PK, Delong, Thoma, Baker & Bernstein daily is good enough. I might’ve included Yves too but for her obsession with the extreme left version of the Austrian school (read certain Australians).

  4. The Dork of Cork.

    Lets try to get at the core of this inner private banking debate.

    One group comes on with a paper claiming we cannot make money out of a large group of people so we must throw them off a monetary cliff.

    The “good guys” claim that no they are wrong…………we can make money out of the poor bastards.

    1. JTFaraday

      So, is it your theory that the drivers of “aggregate demand” will be the next interested faction to drive its parasitic blood funnels into its captive peasant host?

      Or is that too harsh?

  5. Synopticist

    Reading some of the comments below articles about the R&R “mistakes” *cough FRAUD cough* reminds me once again of the neuro-level differences between people on the hard right and the rest of humanity.

    Those folks just will not change their minds, regardless of the information they’re presented with. Facts plain dont matter. The same smug commentors who would triumphantly flourish R&R as a winning argument now go back to “logic” and ‘commonsense’, without missing a beat.

  6. Maju

    As of late I feel like demanding their head on a pike for that kind of mass murder criminals because that’s what they are: guilty of scientific malpractices no doubt but that can be relatively harmless… in their case they are also clearly guilty of crimes against Humankind, very serious ones comparable to the Holocaust. How many million people has lost all they have and are being pushed to suicide or other extreme situations like homelessness, lack of proper health care, lack of a decent job… because of them.

    Heads on pikes, please. Only that way justice will be enacted.

    1. David Lentini

      I think a comparison to the Holocaust may be a bit too much, but I do agree these are crimes against humanity.

    2. Murky

      Wrote a detailed reply and hit the post button, and poof, my words disappeared forever. Memo to self: Never write directly to Naked Capitalism. Use a word processor first, and then post.

      Anyway, here are a few salvaged thoughts.

      About political blogs in general, I think almost everybody occasionally likes to vent, exaggerate their points a bit, and rush to judgement on issues. Some things that get said are a bit extreme. Your demand that Rogoff’s and Reinhart’s heads be put on stakes for public display is figurative and not literal, right?. You also speak of ‘crimes’ for which Rogoff and Reinhart bear responsibility. That part I think you mean literally, so I’ll address the issue of their ‘crimes’.

      But first I must respond to your mention of the Holocaust. Words written by Rogoff and Reinhart can never be equivalent to the horror of the Jewish Holocaust. You must know that. Words are clearly one thing and murder is clearly another. The two are not comparable and run on different scales of evil.

      I agree with you that much damage can be done with the written word. For example, it can be argued that the writings of Marx led to the creation of communist regimes, which in turn led to the death of millions in gulag prison camps. Likewise you can argue that Rogoff’s and Reinhart’s words created an economic ideology that resulted government austerity on populations, which resulted in impoverishment and loss of life. But this chain of logic is stretched almost to nonsense, and can be challenged at every link in the chain. It’s very difficult to explain how a ‘crimes’ ise commited’ through use of the written word. Advocating an ideology of austerity would become a punishable crime if we go by the standard of your post. Soon we could silence anybody’s views if they don’t fit our standard.

      Demanding bloody justice right now just isn’t always a viable option. Rogoff and Reinhart are untouchable in that respect. It’s not clear exactly what ‘crime’ they have committed, if any crime at all. The best you’ll get from them is watching this controversy play out. Rogoff and Reinhart are already caught in storm of public criticism. Their reputations as economists have been tarnished. And the philosophy of austerity is in the process being discredited. Maybe that is enough.

      1. Nathanael

        They have commmitted an academic crime and should be punished academically.

        It actually doesn’t seem that they can be proven guilty of one of the three cardinal academic crimes, the ones for which tenure should be revoked. (Misfeasance, malfeasance, and nonfeasance.) There are hints that the paper may have been academic fraud, which is misfeasance, but it’s not provable beyond a reasonable doubt.

        The academic crimes which they can be proved guilty of are (a) publishing a paper without vetting it properly, and (b) refusing to accept corrections.

        The former merely results in reputational loss; the latter is substantially worse, and should result in blacklisting from publication. People who don’t accept corrections don’t learn and can’t be trusted to write anything.

        1. Murky

          I really like that you have identified a proper domain, academia, in which Rogoff and Reinhart might possibly be taken to task. WIth any luck a few experts can be found having detailed knowledge of the rule-set for academic publications. If there is some little infraction that publishers or universities can crack open, it’d be lovely to see Rogoff and Reinhart get BBQed before some formal committee of inquiry. There’s just no excuse for pushing the rhetoric of austerity, when the consequences to millions of people are so dire.

  7. Tyler

    I can’t believe the evil people do. Do they just cross their fingers and hope there’s no afterlife?

    1. TK421

      Many people believe in an afterlife that is open only to those chosen before their birth, regardless of their acts during life, so that isn’t much of a hedge.

  8. Yan

    This from Oli Rehn:

    Asked by Kathimerini to comment on the new accusations made against him, Rehn said that “we have cited this study in the past as illustrative, but let’s be clear that we do not design our policies on the basis of any other single piece of research. We design our policies on the basis of a holistic assessment drawing on a wealth of studies – but also of course on our own analyses.”

    I would love for him to share with his subdits, sorry, constituents, the “wealth of studies – but also of course on our own analyses” that have led them to their conclusions.

    1. ScottS

      Conclude a course of action, then drum up support. It doesn’t matter if R&R’s paper is bogus, they’ll find another.

    2. David Lentini

      Rhen ducked the question–He and the austerian pundits (Krugman’s Very Special People) used the study to justify their actions, regardless of how the details of those actions came to be. That’s the issue.

  9. PhilK

    “Reinhart and Rogoff had been so sloppy in their work that they had not bothered to check their own spreadsheet.”

    It’s mind-boggling to see supposedly intelligent people writing such stupid or naive stuff. OF COURSE they checked their spreadsheet. They made sure that they created formulas that distorted the data the way they WANTED it to be distorted.

    Bottom line: The foundation of the entire global push for austerity and debt reduction in the last several years has been based on a screwup in an Excel spreadsheet and poorly constructed data.

    Pathetic horse-puckey. She’s implying that if this spreadsheet had been correct, there would never have been a “global push” for austerity from TPTB.

    I’m sorry, but I can’t buy Parramore’s view from Bunny Land. TPTB didn’t need this spreadsheet to want austerity for the rest of us — they only needed it to bamboozle gullible saps.

    1. ScottS

      If it were a conspiracy, they would have just omitted the data like they did for the high-debt high-growth UK data instead of a simple Excel formula error. Especially since they eventually released it for all to see (eventually).

      I’m sure they are guilty of bias, however. They had the conclusion first, then massaged the data until it supported their conclusion.

  10. allcoppedout

    As a mad scientist I would be working with the BoE to establish a new gold standard (I read Biggles as a boy), whilst developing commercial application of bacteria that excrete gold nano-particles (which are purple)in a brine culture. We might hire R&R to do the balance of payments spreadsheet, neglecting our new source of gold! At least this scheme doesn’t involve an invasion of today’s South Africa.

  11. Capo Regime

    The limitations of excel in performing serious calculations have been well trod for some time. See: http://homepages.ulb.ac.be/~gmelard/rech/gmelard_csda23.pdf

    B.D Mccullough and Wilson covered the issue of excel as far back as 1999 and no serious econometrician up to date on the literatute would use excel.

    Interestingly, it was B.D. Mccullough who persuaded then Editor of the American Economic Review B Bernanke to consider requiring authors to include data and software used so that get this–findings could be replicated! B.D. Muccullough managed to get the data for a number of studies and guess what–findings wrong! This was not done until 2000 or so. Many journals in economics still do not require data for replication–as is required in real science. If merit rather than clubishness were the norm Mccullough should be at Princeton but alas being honest makes the top tier folks nervous…

  12. Garyj

    Yves – given your history as working for the likes of McKinsey etc, I am surprised you and your readers are “shocked”.

    Lets be honest in how the world works; the work of most consultants including the vast majority of academics is simply to provide verbal diarrhoea in support of the decision that has already been made.

    Anyone who seriously believes R+R are the cause of austerity need a serious wake up call. Do not be fooled, you fools.

    1. Maju

      Not “the vast majority of academics”, and certainly not in all fields equally (if you’re dishonest in rocket science or engineering your practical works will collapse, putting you in evidence) however a relative high number of studies are suspect of some kind of bias. That’s what happens when science work is dependent on “sales” or hierarchies or both.

      In spite of that systemic corruption, there is a lot of scientists who are terribly honest and ethical, even to the point to acknowledge their own errors (as they must but it’s hard).

      1. psychohistorian

        Nice call on the deception of all science being based on politics.

        We are only talking here about economics, the most non science that is indeed based on the politics of covering for our class based, inheritance maintained plutocracy.

        1. Harry

          Jeez be reasonable.

          You come to the sensible conclusion that politics corrupts science. Example, climate science. You then slag off economics when its clear that the subject deals directly with political choice.

          Anyway, before the university of chicago went on its technocratic agenda, the subject was called political economy. The name is a clue.

  13. Capo Regime

    Again, its worth noting that replication of work has been resisted by many in the economics/political science racket. Even the “top” journals only recently began to require data and software used so that studies could be replicated–interestingly many resisted this move! It was an outsider from a second tier school who convinced Bernanke to require replication. The think tank, consulting and government agency data are ofen not provided to replicate. Yes, I am a nerd and former econometrician who always thought this should be a bigger deal. Its a big deal but its about details and not large asbract concepts and thus does not get the attention it warrants.

  14. The Black Swan

    Looks to me like they got the exact results out of their spreadsheet that they wanted. The fact that the data didn’t support their results is of no concern. It is not a mistake when you get all the answers you were looking for to validate all the policies you wish to implement. I don’t agree with heads on stakes, but I think Economics as a field of study should be burned to the ground and all it’s practitioners forced to live in the world that they so ignorantly and maliciously created.

  15. lambert strether

    The elites, stupid or evil? Krugman goes with evil:

    Again, however, the larger story is the evident urge of Very Serious People to find excuses for inflicting pain.

    Alas, however, Krugman just can’t bring himself to treat R-R as Serious:

    It wasn’t worthy of the authors.

    Personally, I think it was entirely worthy of them.

    1. scraping_by

      My former wife, the PhD in biochemistry, once explained to me why an organic chemist’s insight on biological molecules wasn’t refuted, it was just ignored.

      “It’s our sandbox and we’ll get to say who plays in it.”

      Whatever else, they’re sandboxmates.

  16. tongorad

    Maybe if we could all see how deliberate this supposed “error” was, we could start to turn the corner on these bastards, or at least ignite a spark of hope.

    Alas, the masses have not only rejected solidarity for working people, but also, even more frustratingly, refuse to recognize the solidarity of the elites who have their boots on our necks.

  17. MarkS

    “Global Austerity Based on a Spreadsheet Error”??? A bit hyperbolic n’est pas? … You betcha that the banksters are all lining up behind policy to startup the securitization bandwagon again. Who wants to admit that no amount of pump priming will result in an economy that can actually service the total credit debt accumulated (north of $56 Trillion in the USA, or more than 637% of the 2012 civilian economy). Banksters and their political henchmen just want another belt of free credit that they can clean off the table and forge a few more links in the chains binding most of the population to eternal servitude.

    Yves – The choices are clear:

    A. Force bad paper to be valued at its ACTUAL MARKET VALUE. This will force bankruptcy in the banking system, and we will suffer relatively short-term social and economic pain.

    B. Sweep the bad debt under the rug, and covertly tax everyone with FINANCIAL AUSTERITY. ie: Keep interest rates below inflation for a very long period. (The last such example of this policy was the post-war period from 1945-1972.)

    C. Do the Zimbabwe shuffle, and inflate the hell out of the currency. (It doesn’t work worth a damn, but people feel good for a little while as they carry big wads of high denominated currency). Eventually the big rolls of cash become a bother when you need a hand truck to buy your groceries.

    Don’t confuse government social policy (support, education and business grants for the poor) with banking/financial policy… Of course I support option A, and I suspect you support it too. At the same time, you should acknowledge that option B is feasible, but is less attractive for a host of reasons.

    I believe that an airing of the pros and cons of options A & B is worthy of an in-depth analysis….

    Keep up the good work!

  18. Sleeper

    I think there’s been a real change in the approach / attitude that has evolved in the last year or so.

    While Yves has been most gracious and polite to ascribe the spreadsheet errors as unfortunate errors of honest men, tne census seems to be take the authors are little more than villianous hacks.

    We’ve lost the veneer of polite argument we had a year ago Perhaps the blindfold has been stripped away.

    1. scraping_by

      Tweren’t no veneer. And even now most of our far right brethern are wrong-headed rather than cold-blooded.

      The violent suppression of Occupy, the puppet show of sequester, and now Barry wants to stick a knife into Social Insurance. This is not reasonable persons reasonably disagreeing.

      Propaganda comes in many flavors, many levels, many forums. Calling them down, just part of the job.

  19. Tim

    Although I do believe that specific debt thresholds before negative issues set it is fantasyland, I do think there is an increasing element of risk a country takes on as it’s debt to GDP grows.

    “High” National debt is something that is fine until all the bondholders decide it isn’t and that perception can change very quickly and can be initiated by an apparent black swan. Once debtholders decide the debt is not going to be properly paid (i.e. return of investment is unlikely) they demand such high interest rates you are left with 2 options, default or print/cancel the debt, both of which completely destroy trust in the debt based currency, and the open system debt funding mechanism for government functions, which forces government spending to adjust to revenues in a flash, driving GDP into the ground in a hurry.

    Take on debt in the bad times but reduce debt in the good times per Keynes, but who really believes politicians have the wisdom/fortitude to reduce debt during good times in a democratic republic?

    Those are the real worries with taking on debt during bad times, that are difficult to address.

  20. hans howe

    jeezuz h, that’s no error and it ain’t sloppy either… if they’d pulled that shit on a loan app or their tax returns they’d be – or ought to be – headed to jail. doesn’t anyone recognize intentional fraud when they see it anymore ?

  21. craazyman

    Bus Bingo

    if you really think about debt and money it gets weird. put yourself 200 miles above Kansas and sit there and watch with power binoculers.

    you can see money, sort of, but not debt. It’s purely imaginary. But you can see the trees and rocks turn into houses and machines and the land turn into fields and streets.

    you can see people move around in their bodies. you can see them collect in groups and then disperse, by themselves.

    but you can’t see debt. and alot of the time you can’t even see money, only cash, which is the top of the pyramid (no pun intended) of nothing but an imaginary projection.

    if you really reflect on this it’s clear that debt itself isn’t a final reality — since all the people and trees and rivers and swamps and mountains don’t change except with time and birth and death. what changes is how the people interact with each other and with the land, that changes with time, and it changes due to other things way beyond debt and money.

    debt is one thing that changes how they interact with each other, but it’s only one of many things that do, and so it has to be a part of something else, something above itself and beyond money, a category of force that includes all those other things too. that’s where it starts to make sense, when that larger category is perceived and defined and analyzed to the extent it can be.

    If there’s a lot of debt or not much of it, it’s only one of many related things within a larger phenomenon, and that larger reality has to include those things for any view of it and of debt to be meaningful and complete.

    This is sometimes what I think about on the bus in the morning and then again sometimes in the evening, if I take the bus, mostly by floating in the mind and just watching the movie flow. During the day, the sun is too high and you can’t imagine very well. I don’t know if anyone realizes that, but even when it’s cloudy out the sun is too strong and its energy disrupts the dream time. Nobody imagines very well between about 10:30 and 3 pm, even if they don’t realize it while it’s not happening. It may be different at higher latitudes in the winter.

    1. psychohistorian

      You may want to crank back on that “throttle” there a bit, or maybe it is the latitude and not the altitude that is getting you down. In which case you may want to crank up the “throttle”.

      In either case, enjoy the process!

  22. Claudius

    In their February 2012 CERDI paper: ‘Is High Public Debt Always Harmful to Economic Growth? Reinhart, Rogoff, and some complex nonlinearities’Also, were among the first to question Reinhart and Rogoff (RR) was Alexandru Minea and Antoine Parent

    However, initially, they deferred towards agreement (using RR data sets though not the spreadsheet) by stating:

    “…similarly to RR, average economic growth is lower for countries with debt levels between 90 and 115 percent, compared to countries with debt levels between 60 and 90 percent.”

    However, they lacked the courage of their conviction to call it outright fraud when they discovered from the same data that:

    “Average economic growth is higher for countries with public debt above 115 percent, compared to countries with debt levels between 90 and 115 percent”, and more importantly…. “That average economic growth is not statistically different for the former group compared to countries with debt levels between 60 and 90 percent.”

    Effectively they discovered a debt to GDP doughnut- the hole (90-115 percent) being right where RR had stipulated the DGP to debt range and the dangerous tipping point – and an almost certain statistical impossibility.

    As such, these brilliant economists provide a perfect example of how, in order not to appear ‘RR’ heterodoxic (a death knell for their career no doubt) they lean, deferentially, towards couching their findings in such terms as:

    “Although one should reasonably refrain from concluding that governments should adopt loose fiscal policies, leading to high public debt levels, to foster economic growth, this latter result provides a new perspective on the “debt intolerance ratio” emphasized by RR.”

    Emphasizing that:

    “Additional evidence is needed before suggesting policy recommendations regarding growth effects of fiscal policy in such high debt regimes, which may be subject to complex nonlinearities. Similar to RR, we find that a debt-to-GDP ratio over 90 percent is reducing average economic growth. However, contrary to RR, the contraction ineconomic (sic) growth is much less obvious”.

    Being unable to close the hole in the econometric doughnut (‘shortcomings, including (i) the specification of exogenous thresholds in the public debt-to-GDP ratio, (ii) the absence of econometric tests for the relevance of the régimes, and (iii) the presence of brutal transitions in the debt-growth relation around the debt thresholds’).

    Therefore, Alexandru Minea and Antoine Parent attempted to apply a technique called the ‘Panel Smooth Threshold Regression (PSTR) method’ (a statistical fudge factor). Still, despite this statistical deference to orthodoxy (as they call it, “In the spirit of RR”) they still find that:

    “… compared to countries with a debt ratio between 60 and 90 percent, countries with a debt ratio between 90 and115 percent experience a decline in their average economic growth rates. Although this decline is statistically significant, (we) notice that the economic growth contraction is much less pronounced than acknowledged by RR. In addition, contrary to RR, we find that countries with a public debt ratio above 115 percent present an average growth rate which is higher compared to the average growth rate of countries with a public debt ratio between 90 and 115 percent”.

    In addition, more importantly:

    “….the growth rate of countries with a debt ratio above 115 percent is not found to significantly decline compared to the growth rate of countries with a debt ratio between 60 and 90 percent”, and “In addition, we even show that raising public debt can even increase economic growth, in a context of high debt levels, namely when the public debt-to-GDP ratio is above a threshold level estimated at around 115 percent.”

    Now, if only these two young economists had been less concerned about upsetting the ‘establishment’ (Reinhart and Rogoff in particular), they might now be holding laurels and instead of bupkis.

  23. Gil Gamesh

    Economists are quite good at getting paid for saying the right thing. Dismal? Hardly. Ripping Yarns is more like it.

  24. George Phillies

    Curiously, many families think that going into debt to pay for a child’s education is a good investment. Many entrepreneurs launching from a garage think that maxing out all credit cards if other paths fail is a sound way to finance part of a start-up firm.

    On the other hand, there are the families that go into profound unpayable debt to eat at five-star restaurants, rather than cutting back to less than income will support.

    There are also the firms that issue bonds that pay for solid marble board of directors’ rooms with gold-washed eating utensils for the truffles with sturgeon caviar.

    There is a difference here someplace, I think.

    Is there a difference here?

    1. Timothy Gawne

      Well said!

      The fact that the two ‘economists’ being discussed here are lying whores has perhaps distracted us from a real issue.

      I propose that when a country goes into debt to build roads, bridges, schools, airports etc., that this debt indeed can be stimulative in the Keynesian sense and the even more old-fashioned sense of being a good investment.

      However, when a country goes into debt to bail out foreign financial speculators, well, that I think is something else.

      So after world war II, the United States had a lot of debt: but the country owed the debt to itself, and had used it to build factories roads power plants etc.

      Today Greece and Ireland owe massive debts: that they used to bail out foreign financial speculators from which they derived nothing.

      Debt is not debt: it matters to whom and what for. So be careful about blindly saying that ‘debt is good’: some debt is indeed bad.

  25. JoeShump

    As someone who makes a living presenting a lot of reporting and analysis through excel, the fact that such a fundamental error could be made and never caught seems….I dunno….beyond coincidental?

    In the corporate world I have a line of people that validate my analysis before its presented to anyone…you can’t tell me r&r don’t have the same in academia.

    The only conclusion is that they must have some reason for excluding the data in question in the first place.

    I can’t wait to hear it.

  26. Paul Tioxon

    We need austerity like we need a hole in the head. But, if you wait long enough, a nut with half a dozen guns will show up in a public place and cure you of that character deficiency. Debt was supposed to be the weakness of character of the swarthy races inability to adopt the protestant work ethic. Instead of the sweat of the brow and elbow grease, access to cheap money backed up by an asset class of bubbling real estate values propelled lazy types into the opulent lifestyle formerly preserved for notables of extreme merit. You know, like George W. Bush inheriting his job from his dad, that kind of hard, back breaking work.

    But borrowing, dipping into someone else’s capital and then spend spend spend, like there is no tomorrow. Well, that’s just doomed to fail!! And, it crushed the economic expansion. Instead of more money in the hands of more people, what we really need are Fewer jobs, less money spent by family and government alike and contracting economic demand will lead to more profits, and an orgy of job creation. Makes logical sense to someone, somewhere, at least on the Council of Economic Advisers.

    Better shore up the doomed Social Security Trust Fund instead, bursting with $TRILLIONS, that is just so sad. It needs less payout and more options to hedge against its disastrous climb into the stratosphere of cash holdings. I mean, who wants to just pile up cash, year after year and not give it away to hedge fund managers who will multiply your returns beyond your wildest imagination? Apple? Microsoft? pfffftt!!!!

  27. Abe, NYC

    I think we should be very grateful for the Excel formula error. R&R would likely still cook up the same thesis if they’d noticed the error, however it’s the “Death By Excel” that made the headlines and helped popularize the debunking analysis.

    This has now received such publicity that it is unlikely anyone can ever quote the “90% threshold” again without being ridiculed. But if it weren’t for the error, Herndon et al’s paper would be given little notice and considered just another point of view.

  28. Timothy Gawne

    Oh please. These people did not make “errors”. That gives them too much credit.

    They lied for money. If they had not (deliberately?) messed up their excel spreadsheet, they would have found some other excuse to support the corrupt positions of their wealthy patrons. Get real. This is not about incompetence, or sloppiness. It’s about selling out.

    Consider: will these people apologize for their mistakes? Or will they attack their critics, use their powerful friends to destroy the careers of those who dare to speak the truth, and move from one fat paycheck to the next? Well?

    1. Timothy Gawne

      I’m replying to my own post! How cool is that?

      Consider also: why did these economists finally release their hacked and invalid spreadsheets? When they must have known what they would show? Because they didn’t care! Because they are so arrogant, and our system is so corrupt, that they realize that nothing can touch them. Perhaps this is a demonstration of power: even shown to be (at least) totally incompetent you can’t touch us! F*** you! Perhaps they are smarter than we give them credit for. They may not know much about academic economics, but they understand power better than any of us.

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