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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."
No, finite resources do.
When I read the title, I expected a calculation or rounding issue, or an internal range issue from built in components and not "dumb ass user didn't set the range correctly when averaging". That's not an Excel error, that's a user error - Excel did exactly what it was told to do.
Anyone who prefers debt is a fucking idiot and shouldn't be trusted.
That statement is plain daft. It's much too broad. Sometimes debt can be good. For example, getting a mortgage for a home might not be bad. Sure, it would be better to buy with cash and avoid paying all the interest, but if you don't have a pile of cash lying around, you are limited to saving while paying rent. It might actually work out better to get the mortgage.
Also, getting a loan to start a company might be a great way to have enough capital to get to the market quickly and by doing so make a huge profit.
Not all debt is bad. Debt without any plan to pay it off and without evaluating whether the costs of managing the debt outweigh the benefits is bad. The problem is that most political parties these days seem to have a horizon of the next election when it comes to balancing the books. The problem with this sort of debt is that they spend up big and have no real plan to pay it back.
Moved to http://soylentnews.org/. You are invited to join us too!
Attempting to justify more theft of the public and increased government spending.
It's simple to answer this question, do you want to incur debt or spend money that you have? Anyone who prefers debt is a fucking idiot and shouldn't be trusted.
Wow this brings stupidity to new levels. A report is widely used to justify government cut backs. The report proves to have mistakes in it that would have given a different result - so pointing out the error is "Statist Bullshit"? There would be some justification in arguing that the report does not matter, though for people who previously used it to argue their case this would be hypocritical. But to argue that we should continue to use the incorrect report because correcting it is statist is just dumb.
" a dutch boy sticking his arm up a cow. And jerking of a bull."
The red light district has changed since I was last there..
He tried to kill me with a forklift!
Carmen Reinhart: (Chief Economist) Bear Stearns -> IMF -> Harvard
\-> married with Vincent Reinhart: FED -> (Chief US Economist) Morgan Stanley.
famous quote: "Secretary Paulson Makes the Right Call" The Wall Street Journal, Sept. 16, 2008:
"In other words, some government aid might ultimately have to be directed toward financial firms whose failure would otherwise threaten the financial system.
The politicians now running for office should also appreciate that their grand ambitions for new spending programs or tax cuts may have to be tempered by the need to rescue financial firms."
Kenneth Rogoff: IMF -> Harvard
It's "affect" Mr Highly Educated.
"BRAINPOWER" would be included in the "labor" category, just as physical labor is. What is with this idea that those of us who work with ideas do not labor? Of course we do, it's just in a different way from those who do physical labor. All forms of labor require some form of mental capacity, some more than others, but the amount of mental capacity required does not make it more or less labor.
"The US government for example is spending about 50k per US household. The median income of US households is about 49k."
These statements do a great job of conflating median and mean. If you're comparing per household spending to per household income, you don't want median because a small proportion of American households take home a huge amount of income.
The mean per capita income in 2012 was $42,693 [1]. Per capita spending by the federal government was $11,260 [2]. Total spending including state and local government spending was $19,015.7 [2]. This means that the federal government would be fully fundable with only revenue increases, even with lower taxes than much of western europe.
The US has a long-term health care problem. In the short term, the US has a small revenue problem and a very large austerity problem (which is actually causing long term harm to the economy). The US, currently, does not have a spending problem from an economic point of view.
If you want to argue that the US has a moral spending problem like many austerity/deficit hawks, feel free, but don't conflate that with an actual economic argument.
[1] http://bber.unm.edu/econ/us-pci.htm
[2] http://www.usgovernmentspending.com/year_spending_2012USdn_14ds1n_F0#usgs302