http://nymag.com/daily/intelligencer/2013/04/grad-student-who-shook-global-austerity-movement.html
Meet the 28-Year-Old Grad Student Who Just Shook the Global Austerity Movement
By Kevin Roose
Thomas Herndon, Excel sleuth.
Most Ph.D. students spend their days reading esoteric books and
stressing out about the tenure-track job market. Thomas Herndon, a
28-year-old economics grad student at UMass Amherst, just used part of
his spring semester to shake the intellectual foundation of the global
austerity movement.
Herndon became instantly famous in nerdy economics circles this week
as the lead author of a recent paper, "Does High Public Debt
Consistently Stifle Economic Growth? A Critique of Reinhart and
Rogoff," that took aim at a massively influential study by two Harvard
professors named Carmen Reinhart and Kenneth Rogoff. Herndon found
some hidden errors in Reinhart and Rogoff's data set, then calmly took
the entire study out back and slaughtered it. Herndon's takedown —
which first appeared in a Mike Konczal post that crashed its host site
with traffic — was an immediate sensation. It was cited by prominent
anti-austerians like Paul Krugman, spoken about by incoming Bank of
England governor Mark Carney, and mentioned on CNBC and several other
news outlets as proof that the pro-austerity movement is based, at
least in part, on bogus math.
We spoke to Herndon about his crazy week, and how he's planning to
celebrate his epic wonk takedown.
"This week has been quite the week," Herndon told us in a phone call
from UMass Amherst's campus. "Honestly, I was not expecting at all the
kind of attention it has received."
Herndon, who did his undergraduate study at Evergreen State College,
first started looking into Reinhart and Rogoff's work as part of an
assignment for an econometrics course that involved replicating the
data work behind a well-known study. Herndon chose Reinhart and
Rogoff's 2010 paper, "Growth in a Time of Debt," in part, because it
has been one of the most politically influential economic papers of
the last decade. It claims, among other things, that countries whose
debt exceeds 90 percent of their annual GDP experience slower growth
than countries with lower debt loads — a figure that has been cited by
people like Paul Ryan and Tim Geithner to justify slashing government
spending and implementing other austerity measures on struggling
economies.
Before he turned in his report, Herndon repeatedly e-mailed Reinhart
and Rogoff to get their data set, so he could compare it to his own
work. But because he was a lowly graduate student asking favors of
some of the most respected economists in the world, he got no reply,
until one afternoon, when he was sitting on his girlfriend's couch.
"I checked my e-mail, and saw that I had received a reply from Carmen
Reinhart," he says. "She said she didn't have time to look into my
query, but that here was the data, and I should feel free to publish
whatever results I found."
Herndon pulled up an Excel spreadsheet containing Reinhart's data and
quickly spotted something that looked odd.
"I clicked on cell L51, and saw that they had only averaged rows 30
through 44, instead of rows 30 through 49."
What Herndon had discovered was that by making a sloppy computing
error, Reinhart and Rogoff had forgotten to include a critical piece
of data about countries with high debt-to-GDP ratios that would have
affected their overall calculations. They had also excluded data from
Canada, New Zealand, and Australia — all countries that experienced
solid growth during periods of high debt and would thus undercut their
thesis that high debt forestalls growth.
Herndon was stunned. As a graduate student, he'd just found serious
problems in a famous economic study — the academic equivalent of a
D-league basketball player dunking on LeBron James. "They say seeing
is believing, but I almost didn’t believe my eyes," he says. "I had to
ask my girlfriend — who's a Ph.D. student in sociology — to
double-check it. And she said, 'I don't think you're seeing things,
Thomas.'"
The mistakes Herndon found were so big, in fact, that even Herndon's
professors didn't believe him at first. As Reuters reported earlier:
"At first, I didn't believe him. I thought, 'OK he's a student,
he's got to be wrong. These are eminent economists and he's a graduate
student,'" [UMass Amherst professor Robert] Pollin said. "So we pushed
him and pushed him and pushed him, and after about a month of pushing
him I said, 'Goddamn it, he's right.'"
After consulting his professors, Herndon signed two of them — Pollin
and department chair Michael Ash — on as co-authors, and the three of
them quickly put together a paper outlining their findings. The paper
cut to the core of a debate that has been dividing economists and
politicians for decades. Fans of austerity believe that governments
should cut spending in order to grow their economies, while
anti-austerians believe that government spending in times of economic
duress can create growth and reduce unemployment, even if it increases
debt in the short term. What Herndon et al. were claiming, in essence,
was that the pro-austerity movement was relying on bogus information.
When Herndon and his professors published their study, the reaction
was nearly immediate. After Konczal's blog post went viral, Reinhart
and Rogoff — who got a fawning New York Times profile when their book
was released — were forced to admit their embarrassing error (although
they still defended the basic findings of their survey). And today,
another UMass Amherst professor, Arindrajit Dube, followed up on
Herndon's paper with additional proof that there were serious
theoretical and causal problems (as opposed to just sloppy Excel work)
in the Reinhart-Rogoff study. Observers have been raising serious
questions about what Herndon's work means for the future of austerity
politics, and Reinhart and Rogoff's respectability as scholars.
Herndon says he isn't implying that Reinhart and Rogoff intentionally
skewed their data to support a pro-austerity finding, and simply
reported the errors.
"I don’t want to sound the alarm and call for anyone’s jobs," he says.
"I didn’t do this to be punitive or malicious."
With Reinhart and Rogoff's once-authoritative work now under serious
question, there's no question that the austerity movement has been
dealt a major blow. But Herndon's finding won't likely stop
politicians from trying to reduce the deficit. The global march for
austerity began before Reinhart and Rogoff's work was published, and
will continue as long as there are people who believe that governments
can shrink their way to prosperity.
Still, Herndon holds out hope. He calls austerity policies in the
United Kingdom and elsewhere "counterproductive," and implies that
part of why he took up the study of Reinhart and Rogoff's study was to
question the benefits of current economic policy. "I have social
motivations," he says. "I care deeply about how policy affects
people."
Now that he's left his mark, Herndon says he's coping with the effects
of academic celebrity — getting a new publicity head shot taken,
receiving kudos from his professors and colleagues, handling interview
requests. He says he's gotten extensions on some of his papers in
order to handle his quasi-fame, but that he hasn't been popping
Champagne yet in celebration.
"I’m going to celebrate this weekend," he says. "But for now, I have a
really gnarly problem set."
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