Justification of austerity based on spreadsheet error

[minestrone]

"I don't care if the research was poorly thought out, riddled with errors and carried out to try and prove a pre conceived idea, my kids are not getting the MMR!"

[fullyautomatix]

Socialists will clutch at any straw to justify the state funding so they can have a luxurious lifestyle and gold plated pensions fully funded by the tax payer. Even the BBC will peddle this crap because they obviously want to suck at the State's teat also. Which of course explains why the BBC support Labour so much who pretty much allowed BBC to raise TV tax above inflation every year.

Keynesian policy has been so grossly mis understood by the socialists its literally hilarious. The main aspects of keynesian policy is that the State would spend a lot more during a recession on capital expenditure like building motorways, bridges and other critical infrastructure.

This theory has been twisted under New Labour to mean that the State should borrow billions and spend on creating unnecessary jobs in the public sector and boost public sector spending.

[EternalOptimist]

It's known as 'Policy based evidence'

as opposed to 'evidence based Policy'

[NickFitz]

In addition to the Excel cockup, which reports have concentrated on because it's such an easy target, there were other anomalies in the paper, where certain figures were deliberately discarded, or seemingly equivalent metrics were calculated in different ways for similar cases. These anomalous calculations tended to support the conclusion and, when removed, tend not to support the conclusion.

The authors of the paper have acknowledged - or at least, refused to deny - that they made these "adjustments", and apparently insist it was a legitimate part of their analysis; but they didn't explain their rationale in the paper itself, and have declined the opportunity to explain it now they've been asked. Not exactly confidence-inspiring.

[AtW]

Oh dear.

Maybe they used old Pentium's with errata?

[GB9]

The main problem is that the majority of western economies, including ours, are used to living on borrowed money.

We are surrounded by Keynesian economists who say 'borrow in the bad times and repay in the good'. Of course the last government borrowed in good and bad and failed to repay anything.

[BlasterBates]

It´s not about whether the UK could still grow with a 90% GDP debt level of course it could the problem is the rate at which the debt is growing. You can keep growing until you get to about 120%. The problem is when you get to 120% you run out of money because your gilt interest rates go spiraling out of control. So you generate 2% growth, which is a fat lot of good when your debt is growing 10% a year.

The problem is not the amount of debt (provided it doesn´t go beyond a certain level) it´s the rate at which your debt grows.

The problem is the UK´s debt was (and I think still is) growing faster than virtually other country in Europe. It was second to Greece, but Greece´s debt growth is very low now.

The national debt was growing around 10% a year. i.e. if you have a debt level 90% it very soon becomes 100% which then becomes 120%, and then "bang".

Greece went from growth to "pear shaped" overnight.

[mos]

Oh dear.

The error that could subvert George Osborne's austerity programme | Politics | The Guardian

are they going to give Nobel prize back????

[doodab]

"This conclusion was later cited by the International Monetary Fund and the UK Treasury to justify programmes of austerity that have arguably led to riots, poverty and lost jobs."

Eh? Oh, it's the Gruaniad.

I think they are talking about IMF / Troika policy in Greece, Spain and so on.

[Doggy Styles]

"This conclusion was later cited by the International Monetary Fund and the UK Treasury to justify programmes of austerity that have arguably led to riots, poverty and lost jobs."

Eh? Oh, it's the Gruaniad.

[mudskipper]

[doodab]

But will Georgie Porgie do a U turn?

Growth in a Time of Debt is the paper

http://www.peri.umass.edu/236/hash/3...blication/566/ is the critique.

And BBC News - Reinhart, Rogoff... and Herndon: The student who caught out the profs is the tale of how the error was uncovered.

The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).

Australia, Austria, Belgium, Canada and Denmark were missing.

Oops.

Herndon and his professors found other issues with Growth in a Time of Debt, which had an even bigger impact on the famous result. The first was the fact that for some countries, some data was missing altogether.

Oops indeed. Easy mistake to make I suppose. I wonder if HMRC will accept me underpaying my taxes because I only counted 15 out of 20 invoices

[Freamon]

Oh dear.

The error that could subvert George Osborne's austerity programme | Politics | The Guardian

It was a mistake in a spreadsheet that could have been easily overlooked: a few rows left out of an equation to average the values in a column.

The spreadsheet was used to draw the conclusion of an influential 2010 economics paper: that public debt of more than 90% of GDP slows down growth. This conclusion was later cited by the International Monetary Fund and the UK Treasury to justify programmes of austerity that have arguably led to riots, poverty and lost jobs.

Now the mistake in the spreadsheet has been uncovered – and the researchers who wrote the paper, Carmen Reinhart and Kenneth Rogoff, have admitted it was wrong.

The correction is substantial: the paper said that countries with 90% debt ratios see their economies shrink by 0.1%. Instead, it should have found that they grow by 2.2% – less than those with lower debt ratios, but not a spiralling collapse. Yet cutting public spending to avoid that contraction has become a linchpin of both George Osborne's and the IMF's policies.

For Reinhart and Rogoff, who have a huge reputation in the field – both worked at the IMF, Reinhart is a former chief economist at Bear Stearns, and Rogoff worked at the Federal Reserve – the discovery has been hugely embarrassing. "It is sobering that such an error slipped into one of our papers," they said in a statement.