That website is a whole bunch of crazy.
I brought that websites only for its quotation from RR's piece in the FT. I don't care about the a**lyses of this website.
Rogoff/Reinhart coding error -- ouch!!
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The Reinhart-Rogoff Rally
In the current issue of the New York Review of Books, Paul Krugman explains “How the Case for Austerity Has Crumbled,” focusing at length on the infamous Reinhart-Rogoff 90% debt-to-GDP threshold, and how it became a sort of banner, especially in the US and Europe, for the worldwide austerity caucus. Aside from some quibbles, I don’t have much to criticize in Krugman’s treatment, though I am puzzled by his Figure 1, showing, insofar as I can understand it, that government spending increased sharply in 2008 and tapered off thereafter. But Krugman asserts:
[A]fter a brief surge in 2009, government spending began falling in both Europe and the United States.
In his Figure 1 (reproduced below), Krugman identifies his zero year as 2007 (“zero year is the before global recession (2007 in the current slump) and spending is compared with its level in that base year.”) But government spending equals 100 in year -1 and increases sharply in year 0. So his figure indicates that spending increased in 2008 not 2009. It therefore seems to me that the horizontal axis in Figure 1 was mislabeled.
The 90% debt-to-GDP threshold was derived from a paper, “Growth in Time of Debt,” by Reinhart and Rogoff. After other researches had repeatedly failed to replicate its results, Thomas Herndon, Michael Ash, and Robert Polin identified a coding error, missing data, and an unconventional weighting of summary statistics by Reinhart and Rogoff, the three together accounting for the existence of the otherwise inexplicable 90% threshold in the paper.
Despite several attempts Reinhart and Rogoff to minimize the misleading implications of their paper, the 90% threshold, which never had any theoretical credibility, is now thoroughly discredited; any citation of it as authoritative would rightly invite scorn and ridicule.
Krugman comments:
At this point, then, austerity economics is in a very bad way. Its predictions have proved utterly wrong; its founding academic documents haven’t just lost their canonized status, they’ve become the objects of much ridicule. But as I’ve pointed out, none of this (except that Excel error) should have come as a surprise: basic macroeconomics should have told everyone to expect what did, in fact, happen, and the papers that have now fallen into disrepute were obviously flawed from the start.
What has not yet been commented on as far as I know is the extent to which the discrediting of the Reinhart-Rogoff 90% threshold has had tangible economic consequences.
When the Herndon, Ash, and Pollin paper was posted on the internet about 5 weeks ago on April 15, the S&P 500 closed at 1552.36. The S&P 500 began 2013 at 1426.19, surpassing1500 on January 25. From January 25 until April 15, the S&P 500 fluctuated in the 1500 to 1550 range, only occasionally rising above or falling below those limits. On April 16 and 17, the S&P 500 rose and then fell by about 20 points, closing at 1552.01 on Wednesday April 17. On Thursday April 18, Krugman wrote his New York Times column “The Excel Depression,” the S&P 500 fell to an intraday low of 1536.03 before closing at 1541.61. The S&P 500 has subsequently risen 17 of the next 21 trading days, closing at 1667.47 on last Friday, an increase of almost 126 points, or more than 8%.
I suggest that the most important economic news since April 15 may have been the collapse of the austerity caucus following the public exposure of the Reinhart-Rogoff 90% threshold as a fraud, so that the markets are no longer worried (or, at least, are less worried than before) about the risks that further fiscal tightening will offset the Fed’s modest steps in the direction of monetary ease.
Another positive development has been the decline in the CPI in both March and April, reflecting fortuitous supply-side expansions associated with declining energy and co...See full post
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I agree very strongly. If you recall, there was outrage felt across the land at the deletions, precisely because this is a very serious topic of discussion. Krik altered his moderation policy, seems in response to the outrage. It was another mod, while Krik was asleep presumably.
Seriously- I think that a big part of this thread was serious and that's why it should survive deletion.
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Wasn't the greek italics incident also this year? Maybe I'm mistaken... maybe it was last year. But I do know that the pregnant party girl incident was this year. Plus numerous Chicago infighting threads and attempts to take MIT stars (in the end they only got Greenstone...). Then the Stanford girl also had a go at the Stanford mafia. Although R&R are the only ones to be ridiculed on the Colbert report...
This was a fairly eventful year.
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