Because science works through controversy. So a « lowly » MIT student finds a faulty excel table at the heart of an influential economics paper that claimed « economic growth slows dramatically when the size of a country’s debt rises above 90% of Gross Domestic Product, the overall size of the economy »
This goes straight into the controversy corner of our blog! Not a full blown diagram but at least the skeleton:
1. Like Hamlet, economists and policy makers are asking « is it best to let debt increase in the hope of stimulating economic growth to get out of the slump, or is it better to cut spending and raise taxes aggressively to get public debt under control? »
2. Early 2010 Two very prestigious economists (one a former IMF chief economist) present a paper at the annual meeting of the American Economic Association concluding that 90% national debt slows economic growth dramatically. This is the programme.
3. The programme enrols actors including, influential policy makers like Finland’s EU Commissioner Oli Rehn, who have been using the paper to support austerity measures.
4. Late summer 2012 Ash & Polin, two MIT profs, set their grad students the following task: « pick an economics paper and see if you can replicate the results. »
5. MIT student Tom Herndon picks the Reinhart & Rogoff paper.
6. Tom can’t replicate the results (antiprogramme appears)
7. MIT profs say « try harder » (on programme side)
8. The prestigious Harvard authors send the lowly MIT student the original spreadsheet at the heart of the results (antiprogramme side)
9. Tom finds error but can’t believe it’s possible (programme side)
10. Asks his girlfriend to check
11. Last week Tom and the MIT profs publish a working paper stating that « high levels of debt are still correlated with lower growth – but the most spectacular results from the Reinhart and Rogoff paper disappear. High debt is correlated with somewhat lower growth, but the relationship is much gentler and there are lots of exceptions to the rule. » This paper is now an antiprogramme and the controversy front line shifts to the left.
12. A bit more when the Harvard profs admit « We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper. It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future.
12. But then back to the right, since they add « We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work. »
13. And of course, the debate goes on.
14. That’s the second time this week « lowly » economics students have done brilliant work. The other, published in Le Monde this week and which I’ll write about soon, is a snapshot of the diet mix of all French economics degree programmes. In a high power distance country like France, that’s quite extraordinary