Right, Max. If R&R hadn't existed, it (or something like it) would have been invented by the forces pushing for austerity. (Years ago, Benjamin Friedman published a book pushing for a war against the government debt.)
On Wed, Apr 24, 2013 at 11:42 AM, Max Sawicky <[email protected]> wrote: > To take nothing away from my buddies at UMAS/Amherst, the R-R paper was > hardly "the essential underpinning of the intellectual edifice of austerity > economics." It pays us politically to hype this affair, but there is much > more malignant substance to austerity economics than that diddly paper. > > Of course like everyone else I'm loving the mileage we are getting from it. > > > > > On Wed, Apr 24, 2013 at 2:17 PM, c b <[email protected]> wrote: > >> http://www.prwatch.org/node/12065 >> >> Pete Peterson Linked Economists Caught in Austerity Error >> >> by Mary Bottari — April 18, 2013 - 11:59am >> Topics: Economy >> Projects: Real Economy Project >> Share this >> A team of economists at the Political Economy Research Institute >> (PERI) at UMass Amherst broke a huge story this week that was promptly >> picked up by the New York Times, the Washington Post, the Financial >> Times, and newspapers around the globe. The economists proved that the >> essential underpinning "of the intellectual edifice of austerity >> economics," as Paul Krugman put it, is based on sloppy methodology and >> spreadsheet coding errors. >> >> Reinhart-Rogoff Study Debunked >> >> >> Kenneth Rogoff and Carmen Reinhart >> Three years ago, Harvard economists Carmen Reinhart and Kenneth Rogoff >> released a study that presented empirical evidence from 44 nations >> over a 200 year time span to demonstrate that countries with a public >> debt over 90 percent of GDP (the United States is at about 100 >> percent, Japan at 200 percent) have average growth rates one percent >> lower than other nations. >> >> Forty-four countries, 200 years, Harvard -- pretty convincing, huh? >> >> Except it was wrong. >> >> When the PERI team finally got a hold of the data used by Reinhart and >> Rogoff, they uncovered gaping problems. They found that "coding >> errors, selective exclusion of available data, and unconventional >> weighting of summary statistics lead to serious errors that >> inaccurately represent the relationship between public debt and GDP >> growth." Adjusting for these errors, the Amherst team contends that >> "the average real GDP growth rate for countries carrying a public >> debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 >> percent." >> >> It would all be a Massachusetts "Ivory Tower" kerfluffle if the >> Reinhart-Rogoff study were not cited by practically everyone in >> Washington, including Paul Ryan, Simpson-Bowles, and the entire "Fix >> the Debt" crowd, to justify harmful cuts and a stalemate on stimulus >> currently condemning millions to mass unemployment. >> >> And it should come as no surprise that the economists have ties to >> Wall Street billionaire Pete Peterson. >> >> Study Used to Justify Harmful Cuts and High Unemployment >> >> It is hard to understate the importance of the study. It has been >> cited around the globe by academics, politicians, and the mainstream >> media. In the U.S., it is one of Paul Ryan's favorite justifications >> for his draconian Path to Prosperity budget, for GOP rejection of >> further stimulus, and the Fix the Debt crowd's frenzied calls for >> urgent action. President Obama is now on the austerity bandwagon, >> enacting numerous cuts and proposing new cuts to programs like Social >> Security in order to achieve a "Grand Bargain" on deficits. As a >> consequence, mass unemployment is a new normal. >> >> In Europe, "R&R's work and its derivatives have been used to justify >> austerity policies that have pushed the unemployment rate over 10 >> percent for the euro zone as a whole and above 20 percent in Greece >> and Spain. In other words, this is a mistake that has had enormous >> consequences" for real people, says economist Dean Baker in a piece >> called "How Much Unemployment Did Reinhart and Rogoff's Arithmetic >> Mistake Cause?" >> >> Time and time again, economists tried to replicate the Reinhart-Rogoff >> results, but to no avail. Now, Thomas Herndon, Michael Ash, and Robert >> Pollin show us why. One mistake, admitted by the authors and gaining >> the most attention, is an Excel spreadsheet error. Check out the >> screen shot of the year. >> >> As the authors put it: "A coding error in the RR working spreadsheet >> entirely excludes five countries, Australia, Austria, Belgium, Canada, >> and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in >> lines 30 to 44 instead of lines 30 to 49... This spreadsheet error... >> is responsible for a -0.3 percentage-point error in RR's published >> average real GDP growth in the highest public debt/GDP category." >> Belgium, in particular, has 26 years with debt-to-GDP above 90 >> percent, with an average growth rate of 2.6 percent (though this is >> only counted as one total point due to the weighting above). >> >> Mother Jones dubbed it "the Excel Error Heard Round the World." >> >> Pete Peterson's Fingerprints >> >> >> It will come as no surprise that Reinhart and Rogoff have ties to Wall >> Street billionaire Pete Peterson, a big fan of their work. Peterson >> has been advocating cuts to Social Security and Medicare for decades >> in order to prevent a debt crisis he warns will spike interest rates >> and collapse the economy. (Peterson failed to warn of the actual >> crisis building on Wall Street during his time at the Blackstone >> Group.) >> >> When Washington Post writer Suzy Khimm pointed out to Peterson that >> the U.S. built significant deficits during the financial crisis but >> maintained very low interest rates, Peterson responded that America >> still needed to be on high alert: "you know [Kenneth] Rogoff and >> [Carmen] Reinhart -- I've talked to them, and they say [debt crises] >> are sudden, they're sharp, they're very substantial. The risk is >> simply too big. At some point, if we lurch from crisis to crisis, then >> confidence will decline on our economy in general." >> >> As the Center for Media and Democracy detailed in the online report, >> "The Peterson Pyramid," the Blackstone billionaire turned >> philanthropist has spent half a billion dollars to promote this chorus >> of calamity. Through the Peter G. Peterson Foundation, Peterson has >> funded practically every think tank and non-profit that works on >> deficit- and debt-related issues, including his latest astroturf >> supergroup, "Fix the Debt," which has set a July 4, 2013 deadline for >> securing an austerity budget. >> >> Reinhart, described glowingly by the New York Times as "the most >> influential female economist in the world," was a Senior Fellow at the >> Peterson Institute for International Economics founded, chaired, and >> funded by Peterson. Reinhart is listed as participating in many >> Peterson Institute events, such as their 2012 fiscal summit along with >> Paul Ryan, Alan Simpson, and Tim Geithner, and numerous other Peterson >> lectures and events available on YouTube. She is married to economist >> and author Vincent Reinhart, who does similar work for the American >> Enterprise Institute, also funded by the Peterson Foundation. >> >> Kenneth Rogoff is listed on the Advisory Board of the Peterson >> Institute. The Peterson Institute bankrolled and published a 2011 >> Rogoff-Reinhart book-length collaboration, "A Decade of Debt," where >> the authors apparently used the same flawed data to reach many of the >> same conclusions and warn ominously of a "debt burden" stretching into >> 2017 that "will weigh heavily on the public policy agenda of numerous >> advanced economies and global financial markets for some time to >> come." (Note that not everyone associated with the Institute touts the >> Peterson party line.) >> >> Bankrupt Analysis >> >> >> The authors have issued two rebuttals to the Amherst study. In their >> latest, they object that anyone would think they were "misconstruing >> analysis to support austerity" or a political agenda. Perhaps it had >> to do with pieces like this one entitled "Too Much Debt and the >> Economy Can't Grow" that warns against further stimulus at a time when >> mass unemployment is wreaking devastation on the lives and livelihoods >> of workers young and old. >> >> Economists like Herndon, Ash, Pollin, Baker, and Krugman have never >> bought the argument that economies can cut their way out of a crisis, >> and now data from the Reinhart-Rogoff study, from numerous European >> countries, from the IMF, and even from CMD's home state of Wisconsin >> (now ranked an astonishing 44th in job creation), support their >> contentions. >> >> If only they had half a billion to spread the word. >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > > -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
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