Conservatives keep screaming that we have to cut spending in order to reduce the national debt, claiming that the high debt is what is causing the economy to stagnate. Never mind that some spending (cough, military) somehow seems to be exempt from this rule. But now there is new evidence of the bankruptcy of their ideology.
The argument that high public debt depresses the economy is largely based on a single paper published in 2010 by economists Reinhart and Rogoff, which claims that historically, when the debt-to-GDP ratio has gotten above 90%, the economy always tanks.
But last week, researchers at the University of Massachusetts, Amherst, released a new paper. The authors tried to duplicate the results of the earlier paper and ran into severe problems. So they reached out to the original authors and found that the spreadsheet used to provide evidence for the results of the original paper contained coding errors, among other problems. They corrected the errors and found that the results of the original paper were largely invalid.
If you’re curious, here’s a good summary of the situation up to that point (in language non-economists like me can largely understand).
But then it gets even more interesting. The original authors then issue a rebuttal to the new paper that questioned their results, acknowledging their original coding error, but making a series of excuses for the error, which, frankly, sound just like a bunch of excuses.
Which leads economist Paul Krugman to question not just their math (which they have admitted was flawed), and not just their results, but their motives. After all, even if their math wasn’t flawed in the original paper (so they did show that when the national debt is high that the economy doesn’t perform well), this (as people like to point out) in no way proves any causality. Indeed, it seems obvious that when the economy is bad, stimulus spending will make the national debt go up (spending that helps improve the economy!).
So even if their research wasn’t severely flawed, there is a much more reasonable explanation for their results (remember that their original results aren’t even valid, due to the flaws). And yet the authors are still claiming that their original conclusions (which were based on both a logical fallacy and a calculation failure) are still valid.
I guess conservative ideology is just a matter of faith.
6 Comments
faith??? or delusion?
Starve the beast.
Deficits don’t matter, unless the other party is in power.
England has madly cut it’s budget, last I heard they’ve proudly acomplished a “triple dip” recession.
End the Plutocracy now before we become the “third world.”
What, exactly, is the problem with slow growth, anyway? Is it just the lack of instant gratification, or what?
I’m with Jon here (though Dan also makes quality points). There isn’t anything wrong with slow growth. The idea that we can have growth forever seems a little silly to me anyway. Though I’m not an economist (so this may be a very base, layman’s idea of things), it would seem to me that on a world with finite resources and one would assume a population capacity, economies can’t just keep growing forever. Slow and steady seems fine. Record profits for corporations while cutting social safety nets, however, seems a little questionable.
Excel? No wonder.
As a scientist, I cringe at the thought that such high impact research is dependent on computations written so poorly…
And then I remember that billions, possibly trillions, of dollars are decided upon every day based on flimsy and bug-prone Excel spreadsheets. But the researchers have not the excuse that they need to make decisions quickly and on the fly.
(different Dan)
Jon, generally speaking the problem with low growth is that the economy needs to grow at a certain pace to employ those entering the work force every month, and in the case of the current economy the large number of unemployed in general. With growth that is too low, there will either be more unemployed (and thus human misery) or absent technological innovation a general decline in living standards for most people rather than living standards remaining stagnant. I assume in the future the need for growth is going to hinge more on supporting the ever graying population with fewer and fewer workers
thanks for that