Sunday, April 21, 2013

FUBAR Economics

If it weren't for the fact "austerity" policies have created so much human misery, the Reinhart-Rogoff scandal would be hilarious.

Unfortunately, it isn't.

Paul Krugman has been rubbing this in for the past few days.

In a new 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 successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed Herndon et al. to see how how Reinhart and Rogoff's data was constructed.

They find that three main issues stand out. 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.

They fucked up. They could have published their findings in the National Enquirer, but even that publication would want something to back it up.

This is just a minor blip, however; it won't matter when there are ideologues who insist on screwing over everybody to enrich the few.

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