Falliable Economics
May/02/2013 09:48
Here the “Planet Money” podcast does an episode about the story Dannah mentioned in our last discussion.
Episode 452: How Much Should We Trust Economics?
Three years ago, Carmen Reinhart and Ken Rogoff published a study that quickly became one of the most famous, most talked about economics papers since the financial crisis. It got so much attention because it answered a basic question everybody was asking: How much debt is too much?
Reinhart and Rogoff looked at what had happened in many different countries over many years. And they found a what looked like a clear debt threshold: 90 percent. Average growth was much, much slower in countries with debt-to-gdp ratios over 90 percent.
The paper got a lot of coverage in the press. Politicians cited it in the U.S. and Europe.
Then, this week, a 28-year-old grad student and his professors published a startling finding: Reinhart and Rogoff had made a simple Excel error in one part of their study. The authors of the new critique also questioned other elements of the study and argued that, in fact, there is no debt threshold.
I would be remiss if I didn’t make clear that I find the literal conclusion of the program -- in which they try to sum up -- utterly idiotic. Their explanation for the value of economics is that it’s the “best” we’ve “got.” It’s certainly not and one speaker’s derogatory allusion to studying “history” suggests all sorts of possible solutions. Step one, understanding that numbers are culturally created.
Episode 452: How Much Should We Trust Economics?
Three years ago, Carmen Reinhart and Ken Rogoff published a study that quickly became one of the most famous, most talked about economics papers since the financial crisis. It got so much attention because it answered a basic question everybody was asking: How much debt is too much?
Reinhart and Rogoff looked at what had happened in many different countries over many years. And they found a what looked like a clear debt threshold: 90 percent. Average growth was much, much slower in countries with debt-to-gdp ratios over 90 percent.
The paper got a lot of coverage in the press. Politicians cited it in the U.S. and Europe.
Then, this week, a 28-year-old grad student and his professors published a startling finding: Reinhart and Rogoff had made a simple Excel error in one part of their study. The authors of the new critique also questioned other elements of the study and argued that, in fact, there is no debt threshold.
I would be remiss if I didn’t make clear that I find the literal conclusion of the program -- in which they try to sum up -- utterly idiotic. Their explanation for the value of economics is that it’s the “best” we’ve “got.” It’s certainly not and one speaker’s derogatory allusion to studying “history” suggests all sorts of possible solutions. Step one, understanding that numbers are culturally created.