The excel error in Rogoff-Reinhart
I see the Rogoff-Reinhart figures regarding the correlation between GDP growth and the size of the debt stock are currently under attack – due largely to an unfortunate excel error discovered reported by Mike Konczal. Here are the list of posts about it at the moment:
- The initial post.
- Tyler Cowen’s thoughts.
- The R-R reply. (Here)
- A post suggesting that it mattered for policy settings.
All very nice. Depending on the message people were trying to sell they either said the result was meaningless, or central, so I don’t think this makes any actual difference. Honestly, without clear causal drivers there just were not good evidence based claims for actual policy adjustments – a lot of people were actually just saying we need to do X based on their preconceptions. And they found this correlation either something that supports that (somehow) or something they need to rule out.
Over the last few years I have seen authors, at different times, use R-R as central to their argument on one thing, and then dismiss it for arguments regarding other issues (I’m not going to name names). For example, you can’t use this result to say we need more savings policy because the stock of debt is to high, then complain that the study is flawed when you want more government borrowing … just focus on the actual core elements of your frikken argument instead!
My problem with the result isn’t the excel errors, or anything R-R appear to have said – it is the way it has been used as an inconsistent marketing tool by people for selling their own unrelated ideological policies. I’m just hoping that this shuts that up.
As a side note, here are my feelings on twitter:
People who think the R&R result caused austerity overestimate the impact evidence has on government policy.
You dislike results that are used to support people’s priors? Can you point me to a useful, empirical result that doesn’t fall in that box, please 😛
I dislike the same person using the same empirical result inconsistently (or at least unwilling to illustrate the assumptions that would make the results consistent – so that they can be open to scrutiny) OR too firmly.
The first is a more objective irritation, while the second is indeed tinged by my own subjective firm on what “too firm” is. However, I have to be honest 😉
Nice tweet, Matt 🙂
Sweetly cynical, and perhaps especially applicable to the British government which is now being begged by the IMF, of all people! to reverse course as the evidence mounts in the economic stats of the foolishness of austerity in a time of depressed demand.
Of course this is not to imply that the IMF would advocate fiscal stimulus. It seems to me that in the IMF world fiscal policy should be contractionary by default, with only a slight bias towards neutrality if they sense the great unwashed are becoming particularly restless.
But that view may just be my own ideological baggage…sigh.
And if we thought what Argo did to us Kiwis was bad, look at what R-R did to our bucolic land:
“This is a very odd response from two authors who equated one year of New Zealand to 19 years of the far larger UK economy. Worse still when you add the fact that by excluding several years when New Zealand had a debt/GDP ratio over 90%, they got an “average” (actually only one year) growth rate of -7.6%, when the correct average, with all relevant years over 90% included, was 2.58%, a 10.18 point swing!”
Extract from http://middleclasspoliticaleconomist.blogspot.com.au/2013/04/breaking-reinhartrogoff-shot-full-of.html
What can I say, it is really hard to measure how much we produce right 😉
We all have ideological baggage – the best we can do is try to make sure everyone can see it, rather than trying to hide it behind something. And by everyone, this includeds the person with the baggage 😉