Austerity policies driven by calculation error

[Mr. Big Dog 10,747]

oops.

‘Austerity measures in Europe are due to an Excel error’

One of the academic papers supporting the austerity policies is being questioned after several mistakes were found in its Excel calculations, writes i.

Presented in 2010 by Harvard economists Carmen Reinhart and Kenneth Rogoff, the study “Growth in a time of debt” claims that countries with debt ratios above 90 per cent of GDP suffer a yearly 0.1 per cent contraction in their economies.

The Lisbon daily recalls that Nobel prize winner Paul Krugman considers this paper one of the pillars of the “intellectual building of the austerity economy.” Now, another team of economists found out that countries with the quoted debt ratio grew 2.2 per cent, only 1 per cent less than nations with lower debt ratios.

The mistake? Australia, Austria, Belgium, Canada, and Denmark had been accidentally excluded from a sum in their Excel spreadsheet.

Influential Reinhart-Rogoff Pro-Austerity Research Riddled With Errors: Study

Influential research by U.S. economists Carmen Reinhart and Ken Rogoff, touted by policymakers pushing government austerity in the United States and Europe, is riddled with errors, a bombshell new academic study claims.

The findings may not have much impact on the debate over government debt, and it probably won't cause those who have spent the past several decades panicking over government debt to stop their panicking. But it seriously erodes the intellectual underpinnings of the pro-austerity argument -- and makes the damage done by austerity in Europe and the U.S. in recent years all the more poignant.

"This is a mistake that has had enormous consequences," wrote Dean Baker of the Center for Economic and Policy Research. "If facts mattered in economic policy debates, this should be the cause for a major reassessment of the deficit reduction policies being pursued in the United States and elsewhere."

The new paper, by Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst, set out to reconstruct the findings of an influential 2010 paper by Reinhart and Rogoff, called "Growth In A Time Of Debt." Reinhart and Rogoff, of the University of Maryland and Harvard, respectively, claimed that economic growth slowed fairly dramatically for countries whose public debt crossed a threshold of 90 percent of gross domestic product.

The problem is that other economists have been unable to recreate Reinhart and Rogoff's findings. Herndon, Ash and Pollin now say they were able to do so -- but only by leaving out big, important pieces of data.

Using the same spreadsheet that Reinhart and Rogoff used for their research, Herndon, Ash and Pollin found that "Growth In A Time Of Debt" was built around a handful of significant errors. Correcting for those errors changes the findings dramatically: Average GDP growth for high-debt countries jumps from negative 0.1 percent to 2.2 percent.

The most important error appears to be a failure to include years of data that showed Australia, Canada and New Zealand enjoying high economic growth and high debt at the same time. Including all the years of data boosts New Zealand's average economic growth rate under high debt to 2.58 percent, from negative 7.6 percent. Given the small amount of data used in Reinhart and Rogoff's study, this has a huge impact on the overall findings.

[Ban Hammer 13,345]

This has nothing to do with the topic at hand. Please open your own thread if you want to discuss this. I asked the mods to remove this post from my thread.

one post unrelated to the op split into its own topic.

[Póg mo 1,749]

How long before those advocating blunt austerity admit they have gotten it wrong?

By Edward Krudy

NEW YORK (Reuters) - When Thomas Herndon, a student at the University of Massachusetts Amherst's doctoral program in economics, spotted possible errors made by two eminent Harvard economists in an influential research paper, he called his girlfriend over for a second look.

As they pored over the spreadsheets Herndon had requested from Harvard's Carmen Reinhart andKenneth Rogoff, which formed the basis for a widely quoted 2010 study, they spotted what they believed were glaring errors.

"I almost didn't believe my eyes when I saw just the basic spreadsheet error," said Herndon, 28. "I was like, am I just looking at this wrong? There has to be some other explanation. So I asked my girlfriend, 'Am I seeing this wrong?'"

His girlfriend, Kyla Walters, replied: "I don't think so, Thomas."

In the world of economic luminaries, it doesn't get much bigger than Reinhart and Rogoff, whose work has had enormous influence in one of the biggest economic policy debates of the age.

Both have served at the International Monetary Fund. Reinhart was a chief economist at investment bank Bear Stearns in the 1980s, while Rogoff worked at the Federal Reserve, passing through Yale and MIT before landing at Harvard.

Their study, which found economic growth slows dramatically when a government's debt exceeds 90 percent of a country's annual economic output, has been cited by policymakers around the world as justification for slashing spending.

Former U.S. vice presidential candidate Paul Ryan, a Republican congressman from Wisconsin, is one influential politician who has cited the report to justify a budget slashing agenda.

Using the two professors' data, Herndon found that instead of a dramatic fall in growth, the decline was much milder, slowing to about 2.2 percent, instead of the slump to minus 0.1 percent that Reinhart and Rogoff predicted.

http://news.yahoo.co...--business.html

[The Nature Boy 4,224]

How long before those advocating blunt austerity admit they have gotten it wrong?

and he called his girlfriend over to confirm. :rofl:

[Mr. Big Dog 10,747]

How long before those advocating blunt austerity admit they have gotten it wrong?

Amazing what huge damage an small calculation error can cause, isn't it? This was already posted, by the way...

http://www.visajourney.com/forums/topic/425613-austerity-policies-driven-by-calculation-error/page__view__findpost__p__6163987

[decocker 7,198]

and he called his girlfriend over to confirm. :rofl:

why is that funny?

[Ban Hammer 13,345]

Amazing what huge damage an small calculation error can cause, isn't it? This was already posted, by the way...

http://www.visajourney.com/forums/topic/425613-austerity-policies-driven-by-calculation-error/page__view__findpost__p__6163987

duplicates have been merged

[The Nature Boy 4,224]

why is that funny?

As Jerry Clower use to say.... If you have to ask you already know

one post unrelated to the op split into its own topic.

ROFL at Mr. Big Dog... Mods... can't live with them... can't live without them..

[Mr. Big Dog 10,747]

ROFL at Mr. Big Dog... Mods... can't live with them... can't live without them..

I asked for a completely unrelated post to be removed from my thread. So what?

[decocker 7,198]

As Jerry Clower use to say.... If you have to ask you already know

come on guy, it's no fun if you don't play along..

and i don't get what you found funny, although i do know the art of proof reading is often lost on you.

[The Nature Boy 4,224]

come on guy, it's no fun if you don't play along..

and i don't get what you found funny, although i do know the art of proof reading is often lost on you.

A. we are so passed anybody caring about my lack of spell check and proof reading.. It is a given

B. The funny part is he called a chick to check math

[The Nature Boy 4,224]

come on guy, it's no fun if you don't play along..

and i don't get what you found funny, although i do know the art of proof reading is often lost on you.

A. we are so passed anybody caring about my lack of spell check and proof reading.. It is a given

B. The funny part is he called a chick to check math

[decocker 7,198]

B. The funny part is he called a chick to check math

atta boy

the real funny part is, the source of the error and the fools who've been hollering austerity pretty much blindly..

[Mr. Big Dog 10,747]

the real funny part is, the source of the error and the fools who've been hollering austerity pretty much blindly..

looking at the people that are suffering under these misguided measures, I am not sure they're in the mood to be laughing

[himher 634]

A. we are so passed anybody caring about my lack of spell check and proof reading.. It is a given

B. The funny part is he called a chick to check math

Yeah admit it or not though we're (dudes) are often better off with a chick around to straighten up our math. Just sayin'