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. [...]
Their study, which found economic growth slows dramatically when a government's debt exceeds 90 per cent of a country's annual economic output, has been cited by policymakers around the world as justification for slashing spending.
Former US 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 per cent, instead of the slump to minus 0.1 per cent that Reinhart and Rogoff predicted.
Seriously, how the heck does this happen? You've got a study that's influencing the direction of the global economy, and it turns out the authors didn't even get their sum function right in Excel.
It sounds like they are standing behind their original point. Is it because they don't want to be embarrassed, or does it fit a political agenda?
Quote:
Reinhart and Rogoff, however, say their conclusion that there is a correlation between high debt and slow growth still holds. "It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful," they said in a joint statement. "We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work."
Does it change the fact that most countries with out of control spending and debt problems are still screwed? No.
Does it mean they should cut like crazy when the economy is slow and needs a boost? No. But it doesn't mean to still spend recklessly, and it SURE as hell doesn't mean spend even more like crazy when you the economy is going again.
Influential study used to justify austerity measures gets totally debunked
