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."

Comments

Re:Excel error?

[TheRaven64]

I'm not quite sure how one could make it even more obvious without punching the user in the face.

How about by not conflating data, formulae, and layout in the UI? This is an error made by all VisiCalc clones, but not by Improv clones. If you use something like Improv, FlexiSheet or Quantrix then this kind of error is almost impossible to make. If you use something like VisiCalc, 1-2-3, Excel or OpenOffice.org Calc, it is trivial.

Re:Excel error?

[Anonymous Coward]

There's an arguement that this wasn't ignorance on the part of the person asking the question, rather it was a polite way of asking whether the machine was rigged to give only the answer to the single question it was given.