• Krugman proves my point

    He makes many good points I agree with while proving mine. I did not make any big mistakes in my post, but what if I had? His amplification would be very embarrassing or worse. Like I said, fame has risks. Speak your mind publicly, stumble a little (or a lot), and somebody with a big megaphone could make things unpleasant for you.

    Fortunately, in this case, I’m in the clear. Reinhart and Rogoff made several errors. Among them was to claim causality when their work didn’t support it. They made a big show of it, ratcheting up their fame. Was it risky? You bet.


    • It is truly somewhat odd (and ironic) that Paul Krugman has become the voice of reason in this particular debate on wonkery in the public sphere.

      Paul Krugman was trained as a trade economist. He is arguably one of the most brilliant and influential trade economists of our generation (with the exception of his mentor , Jagdish Bhagwatti).

      However, Krugman uses his New York Times column to comment on a range of issues that are far outside his realm of expertise: us domestic policy, us foreign policy, chinese foreign policy, chinese currency policy, etc.

      While he (rightly) excoriates R&R for their intellectual sloppiness, perhaps he should also take a good, hard look in the mirror.

    • I am glad that Krugman amplified this issue, but it seems to me that in this column he plays a game with implied causality not unlike R&R’s debt/growth sleight-of-hand. That is, he implies that R&R’s paper caused or enabled the austerity programs of the last 3 years, rather than just providing a bit of rhetorical cover. He leads with two tales of math errors that caused real harm, and asks: “, did an Excel coding error destroy the economies of the Western world?” Admittedly, at the end, he hedges the impression that he’s answering “yes” — ” I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on” — but that follows a whole column strongly implying that the paper did enable the budget cuts.

      • He never says R-R caused the austerity programs. That is reading failure on your part. But did they enable it? Yes! It gave charlatan wonks like Paul Ryan an intellectual basis to create harmful policies.


        “It’s the same pattern: a few caveats, and then a semi-speculative overselling…. But their biggest overselling… came behind closed doors — in Congress…. Senator Tom Coburn’s recent book about the time R-R briefed members of Congress in April 2011, a few months before the debt ceiling debacle:

        Johnny Isakson, a Republican from Georgia and always a gentleman, stood up to ask his question: “Do we need to act this year? Is it better to act quickly?”

        “Absolutely,” Rogoff said. “Not acting moves the risk closer,” he explained, because every year of not acting adds another year of debt accumulation. “You have very few levers at this point,” he warned us.

        Reinhart echoed Conrad’s point and explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous to let that much debt accumulate. She said, “If it is not risky to hit the 90 percent threshold, we would expect a higher incidence.”
        (end quotation)

        R-R whisper “correlation” to other economists, but say “causation” to everyone else… [to] the austerians who have been desperate for any kind of justification to forget about unemployment and worry about debt instead.”

        Rhetorical cover is inherently enabling.

        • Krugman strongly implies at the outset that the intellectual cover provided by R&R enabled austerity programs. Headline more so, though admittedly Krugman probably didn’t write that.

          • R&R did (initially) provide a semblance of rhetorical cover for politicians with an austerity bias; but as we see now they did not need it.

            The appropriate example here is not the much maligned Paul Ryan but likely George Osborne, the UK’s Chancellor of the Exchequer.

            George Osborne, perhaps one of the most vocal supporters of R&R’s work, has continued his program of austerity in the face of numerous failures by merely emphasizing different aspects.

            Indeed, after Britain had its credit rating downgraded by two different firms, growth has slumped and the deficit has continued to rise, and R&R have been discredited, he merely falls back on plan D: no one has a better plan. Let’s not put too much credence in the connection between R&R’s work and the cover given to politicians who have made decisions based on ideology rather than evidence from the beginning.

    • Anyone interested in a careful evaluation of the claims at the center of the RR/Krugman debate should read the following link.


      What’s fascinating about the whole episode to me is that literally every single DSGE model employed in the service of modern macro have built in faults and limitations that render their utility vastly, vastly less reliable and more problematic than R-and-R’s empirical work, flaws included. Which makes it all the more amusing to see new-keynesian-macro jockey’s piling on R&R.

      For a brief overview of DSGE models and their limitations, read the post at the link below (from a working macroeconomist):
      “Almost every DSGE result you see is the result of linearization, If you drop linearization, very funky stuff happens. In particular, equilibria become non-unique, and DSGE models don’t give you a good idea of what will happen to the economy, even in the fictional world where the DSGE model’s assumptions are largely correct!”


      More of the same here:


      I’d be astonished if the simplifying assumptions baked into the cake of standard welfare econ were any less problematic.