Many followers of this blog have probably already heard about the paper co-authored by frequent D&S author and UMass-Amherst econ professor and director of the Political Economy Research Institute Bob Pollin (the other co-authors were UMass doctoral student Thomas Herndon and UMass econ prof Michael Ash–call these authors “HAP”) that found errors in an influential paper by Kenneth Rogoff and Carmen Reinhart (call them “RR”). The HAP paper started making a big splash on the Internets on Tuesday; I read about it in this piece in the New York Times yesterday morning. I later read Yves Smith’s more trustworthy account of the flap at Naked Capitalism.
The RR paper was the basis of the claim that the threshold of a country’s debt-to-GDP ratio when things get really bad–growth goes negative–is 90% (when debt is 90% of GDP); this was cited by deficit-hawks, including Paul Ryan, in favor of austerity policies. HAP raise a number of problems with the paper, including a “coding error” in Excel, that they say undermines the findings. It’s all very juicy. Here’s a summary of the flap from Ron Baiman of the Chicago Political Economy Group:
Friends,In case you didn’t see this, a new PERI paper by Herndon, Ash, and Pollin has discovered decisive errors in Rogoff and Reinhart finding that median growth rates fell by 1% in countries with over 90% debt to GDP – a result cited by numerous austerity mongers including U.S. Rep Paul Ryan and Olli Rehn of the European Commission, see Lowrey piece in today’s NYTimes :http://economix.blogs.nytimes.com/2013/04/16/flaws-are-cited-in-a-landmark-study-on-debt-and-growth/The Herndon et. al. study and backup data files are here:For a more detailed report on this see Mike Konczal piece at:http://www.businessinsider.com/thomas-herndon-michael-ash-and-robert-pollin-on-reinhart-and-rogoff-2013-4Konczal notes that ” From the beginning there have been complaints that Reinhart and Rogoff weren’t releasing the data for their results (e.g. Dean Baker). I knew of several people trying to replicate the results who were bumping into walls left and right – it couldn’t be done.”And that (after finally securing access to the Reinhart and Rogoff data and calculations, Herndon et. al. found three types of critical error.“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.”Konczal’s expanded report is at Roosevelt Institute “Next New Deal” blog at:Read more: http://www.nextnewdeal.net/researchers-finally-replicated-reinhart-rogoff-and-there-are-serious-problems#ixzz2QkA22yfa
Great work Bob and colleagues!