Busted!

You see, merely one op-ed in The New York Times will not sufficiently restore the reputation of Reinhart and Rogoff.  Unfortunately for them 2 won’t either.

Debt, Growth and the Austerity Debate

By CARMEN M. REINHART and KENNETH S. ROGOFF, The New York Times

Published: April 25, 2013

Our research, and even our credentials and integrity, have been furiously attacked in newspapers and on television. Each of us has received hate-filled, even threatening, e-mail messages, some of them blaming us for layoffs of public employees, cutbacks in government services and tax increases. As career academic economists (our only senior public service has been in the research department at the International Monetary Fund) we find these attacks a sad commentary on the politicization of social science research. But our feelings are not what’s important here.

Reinhart and Rogoff: Responding to Our Critics

By CARMEN M. REINHART and KENNETH S. ROGOFF

Published: April 25, 2013

Our critics seem to suggest that they can ignore everything else we have done because we are somehow going around placing great emphasis on one outlier estimate for growth. This is wrong. We have never used anything but the conservative median estimate in our public discussions, where we stated that the difference between growth associated with debt under 90 percent of G.D.P. and debt over 90 percent of G.D.P. is about 1 percentage point. See, for example, a Bloomberg Businessweek article from July 2011 that has been cited as evidence that we are fiscal hawks. In that article, we cite only the median.

Some have claimed that where we have really done damage is not in our public statements, but in what we say behind closed doors to policy makers. Some of those discussions have indeed leaked out over time, but they consistently show that our focus has been the median estimate.

We might add that when we give public opinions and especially when we give policy advice, we base our ideas on our entire experience and knowledge of the literature, never just on our own work.

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(W)e view ourselves as scholars, though obviously given the prominence of book, and the extraordinary circumstances of the financial crisis, politicians will of course try to use our results to advance their cause. We have never advised Mr. Ryan, nor have we worked for President Obama, whose Council of Economic Advisers drew heavily on our work in a chapter of the 2012 Economic Report of the President, recreating and extending the results.

Reinhart and Rogoff Are Not Being Straight

Dean Baker, Center for Economic and Policy Research

Friday, 26 April 2013 04:32

Carmen Reinhart and Ken Rogoff, used their second NYT column in a week, to complain about how they are being treated. Their complaint deserves tears from crocodiles everywhere. They try to present themselves as ivory tower economists who cannot possibly be blamed for the ways in which their work has been used to justify public policy, specifically as a rationale to cut government programs and raise taxes, measures that lead to unemployment in a downturn.

This portrayal is disingenuous in the the extreme. Reinhart and Rogoff surely are aware of how their work has been used. They have also encouraged this use in public writings and talks. While it is unfortunate that they have “received hate-filled, even threatening, e-mail messages,” as one who works in the lower-paid corners of policy debates, let me say, welcome to the club.

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In addition to misleading the public about the role their work has played in policy debates, they also are not quite straight about two strictly factual points. The first sentence begins by referring to the publication of their article in May of 2010. This might lead readers to believe that this is when their claims about high debt slowing growth first began to affect public debate on stimulus and deficits.

This is not right as I know since my first e-mail requesting their data was written in January of 2010. In fact, their work first made a splash in international debates when they put out a version of this article as a National Bureau of Economic Research working paper in January, 2010. Their findings were already widely known by the time the paper was published in May, 2010.

The other point on which they mislead readers is the claim:

“Our 2010 paper found that, over the long term, growth is about 1 percentage point lower when debt is 90 percent or more of gross domestic product. The University of Massachusetts researchers do not overturn this fundamental finding, which several researchers have elaborated upon.”

Actually, their 2010 paper found that growth was 2.9 percentage points lower in countries with debt to GDP ratios above 90 percent than in the group with debt to GDP ratios in the 60-90 percent range.

Herr Doktor Professor-

Grasping At Straw Men

Paul Krugman, The New York Times

April 26, 2013, 8:53 am

OK, Reinhart and Rogoff have said their piece. I’d say that they’re still trying to have it both ways, on two fronts. They deny asserting that the debt-growth relationship is causal, but keep making statements that insinuate that it is. And they deny having been strong austerity advocates – but they were happy to bask in the celebrity that came with their adoption as austerian mascots, and never to my knowledge spoke out to condemn all the “eek! 90 percent!” rhetoric that was used to justify sharp austerity right now. Sorry, guys, but with so much at stake you have a responsibility not just to put stuff out but to make crystal clear what you think it implies for policy.

Evidence and Economic Policy

Paul Krugman, The New York Times

April 24, 2013, 8:03 pm

Henry Blodget says that the economic debate is over; the austerians have lost and whatshisname has won. And it’s definitely true that in sheer intellectual terms, this is looking like an epic rout. The main economic studies that supposedly justified the austerian position have imploded; inflation has stayed low; the bond vigilantes have failed to make an appearance; the actual economic effects of austerity have tracked almost exactly what Keynesians predicted.

But will any of this make a difference? The story of the past three years, after all, is not that Alesina and Ardagna used a bad measure of fiscal policy, or that Reinhart and Rogoff mishandled their data. It is that important people’s will to believe trumped the already ample evidence that austerity would be a terrible mistake; A-A and R-R were just riders on the wave.

The cynic in me therefore says that after a brief period of regrouping, the VSPs will be right back at it – they’ll find new studies to put on pedestals, new economists to tell them what they want to hear, and those who got it right will continue to be considered unsound and unserious.

The 1 Percent’s Solution

By PAUL KRUGMAN

Published: April 25, 2013

Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close – at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.

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(T)he dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity – Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. – faced withering criticism almost as soon as they came out.

And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error. Meanwhile, real-world events – stagnation in Ireland, the original poster child for austerity, falling interest rates in the United States, which was supposed to be facing an imminent fiscal crisis – quickly made nonsense of austerian predictions.

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What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.

And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?