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Excel Error Contributes To Problems With Austerity Study
quarterbuck writes "Many politicians, especially in Europe, have used the idea that economic growth is impeded by debt levels above 90% of GDP to justify austerity measures. The academic justification came from a paper and a book by Kenneth Rogoff and Carmen Reinhart. Now researchers at U Mass at Amherst have refuted the study — they find that not only was the data tainted by bad statistics, it also had an Excel error. Apparently when averaging a few GDP numbers in an excel sheet, they did not drag down the cell ranges down properly, excluding Belgium. The supporting website for the book, 'This time it is different,' has lots of financial information if a reader might want to replicate some of the results."
The Excel error is making the rounds as the cause of the problems with the study, but it's actually a minor component. The study also ignores some post-WWII data for countries that had a high debt load and high growth, and there's some fishy weighting going on: "The U.K. has 19 years (1946-1964) above 90 percent debt-to-GDP with an average 2.4 percent growth rate. New Zealand has one year in their sample above 90 percent debt-to-GDP with a growth rate of -7.6. These two numbers, 2.4 and -7.6 percent, are given equal weight in the final calculation, as they average the countries equally. Even though there are 19 times as many data points for the U.K."
Arguably, using excel (with its known to be finnicky automatic conversions for extra user friendlyness, reported on here previously) for research is already an user error, of large enough magnitude to make any research using it suspect.
Call it a sign on the wall. Which is justified here by their sloppy data handling, cherrypicking of data, and other grave scientific no-nos. Concluding: These people are not scientists.
Altough it has to be said that thorougly unscientific "studies" are a staple in policy making. Such as the "piracy" numbers the industry keeps quoting from some UK "study" that nobody can find, yet the relevant government departments keep adding the numbers to internal memor. In fact, real scientists are liable to get fired for science. Again the UK, where the head of the science committee on drugs got fired for not toeing the government policy stance. Where they said "science led policy making" they were actually meaning "policy led science making". Because science cannot be allowed to interfere with policy making but a science-y sauce makes onerous policies go down better, it is hoped.
Ahhh, yes, Libertards, the people who believe there is no such thing as an externality, and no such thing as collective preference. Who claim markets are magic -- indeed bargaining, rigidities and information asymmetries are irrelevant -- and always get to optimal pricing instantly. Apparently, they also live in an alternative universe where "Keynesian" US is currently undergoing a triple-dip depression, whereas "austere" Europe is adding jobs and growth month-on-month.
In that alternate universe Mr. Hawley is called "Hawly", too. Presumably, it is also a magical universe where gold supplies automatically match the production of goods and services.
You are entitled opinions, but not facts.