Harvard professor Ken Rogoff has not had a good week (Reuters)
For an economist, the five most terrifying words in the English language are: I can't replicate your results. But for economists Carmen Reinhart and Ken Rogoff of Harvard, there are seven even more terrifying ones: I think you made an Excel error.
Listen, mistakes happen. Especially with Excel. But hopefully they don't happen in papers that provide the intellectual edifice for an economic experiment -- austerity -- that has kept millions out of work. Well, too late. As Mike Konczal of the Roosevelt Institute reported, Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst, have found serious problems with Reinhart and Rogoff's austerity-justifying work. That work, which shows that countries with public debt of 90 percent of GDP or more tend to grow slower, omitted data for five of its 19 countries, and used the wrong data for another. The former was, embarrassingly enough, due to an Excel misadventure, and the latter an unrelated issue. If you use all of the (right) numbers, it turns out growth does slow when debt is high, but not nearly as much as Reinhart and Rogoff -- hereafter, R-R -- claimed.
In other words, there is no evidence for anything resembling a growth tipping point when debt hits 90 percent of GDP.
This is the academic's version of the dream where you're naked in public. Except it's not a dream. It's the mortifying reality for R-R, who have admitted that they forgot to drag their Excel formula down five more cells. But it's worse than mortifying for everybody else. It's been a catastrophe. Not that R-R made a pretty galling mistake; rather, that such a flawed paper gave the intellectual ballast to an idea that has failed everywhere it's been tried the past few years. Now, policymakers would have pursued austerity regardless, but R-R gave them a reason (and seemingly a bright red 90 percent of GDP line) to do so sooner. If too much debt is associated with too little growth, then there's no time to lose for slashing deficits.
Those are important words: "associated with". As I pointed out before, the best argument against taking R-R as austerity's gospel truth was it was just a correlation. Of course a ratio tends to increase more when its denominator increases less. That's how fractions work. But it doesn't prove that the rising ratio causes the stagnating denominator. If anything, the causality runs the other way -- lower growth tends to cause higher debt, as tax revenue falls and safety-net spending rises during a slump. Indeed, as you can see below, Arindrajit Dube of the University of Massachusetts, Amherst, found that debt-to-GDP predicts past GDP growth much better than future GDP growth. In other words, higher debt doesn't cause lower growth as much as lower growth causes higher debt.
Of course, this hasn't stopped deficit hawks from touting R-R's work as proof that we must tackle the long-term debt and we must tackle it now. Including, sometimes, R-R themselves. Now, in their paper, R-R are careful to say the relationship between higher debt and lower growth is just that: a relationship. In fact, that's been their defense: they never said it was anything more than a correlation, and that correlation still holds after correcting for all their mistakes, albeit not as strongly.
That's true ... if you only look at what they said in their paper, and ignore what they said about their paper. For example, here's what they said in Bloomberg View back in July 2011:
Our empirical research on the history of financial crises and the relationship between growth and public liabilities supports the view that current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP....
The biggest risk is that debt will accumulate until the overhang weighs on growth....
Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare (see attached chart 2 for U.S. public debt since 1790). Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?
To be fair, R-R do say that they only found that higher debt and lower growth are "associated" and that there's no "bright red line" (even if policymakers interpret it that way) at 90 percent. But they also make it quite clear that they think their correlation is more than just a correlation. They think higher debt causes lower growth, and, after a little throat-clearing, they're not too shy about saying so.
In a series of academic papers with Carmen Reinhart - including, most recently, joint work with Vincent Reinhart ("Debt Overhangs: Past and Present") - we find that very high debt levels of 90% of GDP are a long-term secular drag on economic growth that often lasts for two decades or more....
Of course, there is two-way feedback between debt and growth, but normal recessions last only a year and cannot explain a two-decade period of malaise. The drag on growth is more likely to come from the eventual need for the government to raise taxes, as well as from lower investment spending. So, yes, government spending provides a short-term boost, but there is a trade-off with long-run secular decline.
It's the same pattern: a few caveats, and then a semi-speculative overselling of their results. But their biggest overselling didn't come in the media. It came behind closed doors -- in Congress. Tim Fernholz of Quartz flagged the following passage from 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."
R-R whisper "correlation" to other economists, but say "causation" to everyone else. Now, they don't always say it outright -- at least not at first. Rather, they say "this isn't definitely causation ... but come on, what else could it be?" That's been more than enough for the austerians who have been desperate for any kind of justification to forget about unemployment and worry about debt instead.
The boring reality is the relationship between public debt and growth isn't clear. As Justin Fox of Harvard Business Review points out, there simply isn't enough data. Some countries run up big debts fighting wars, and then grow fine. Some countries run up big debts fighting financial crises, and then grow slowly as the private sector deleverages. Some countries run up big debts as a matter of course, and then grow slowly as rising rates crowd out private investment. And even the few data points we do have don't always tell us all that much. Indeed, as Paul Krugman points out, it shouldn't surprise us that the U.S. has averaged negative growth during its high debt years, because most of those years came during the World War II demobilization. In other words, it's impossible to say anything dispositive about debt and growth more broadly.
But that hasn't stopped R-R from trying. This kind of overhyping is why Joe Weisenthal called them "the most dangerous economists in the world" back in 2011. And it's a far more damning error than anything they did with Excel.
The Fox host’s insistence that black laborers building the White House were “well-fed and had decent lodgings” fits in a long history of insisting the “peculiar institution” wasn’t so bad.
In her widely lauded speech at the Democratic National Convention on Monday, Michelle Obama reflected on the remarkable fact of her African American family living in the executive mansion. “I wake up every morning in a house that was built by slaves. And I watch my daughters, two beautiful, intelligent, black young women, playing with their dogs on the White House lawn,” she said.
On Tuesday, Fox News host Bill O’Reilly discussed the moment in his Tip of the Day. In a moment first noticed by the liberal press-tracking group Media Matters, O’Reilly said this:
As we mentioned, Talking Points Memo, Michelle Obama referenced slaves building the White House in referring to the evolution of America in a positive way. It was a positive comment. The history behind her remark is fascinating. George Washington selected the site in 1791, and as president laid the cornerstone in 1792. Washington was then running the country out of Philadelphia.
Slaves did participate in the construction of the White House. Records show about 400 payments made to slave masters between 1795 and 1801. In addition, free blacks, whites, and immigrants also worked on the massive building. There were no illegal immigrants at that time. If you could make it here, you could stay here.
In 1800, President John Adams took up residence in what was then called the Executive Mansion. It was only later on they named it the White House. But Adams was in there with Abigail, and they were still hammering nails, the construction was still going on.
Slaves that worked there were well-fed and had decent lodgings provided by the government, which stopped hiring slave labor in 1802. However, the feds did not forbid subcontractors from using slave labor. So, Michelle Obama is essentially correct in citing slaves as builders of the White House, but there were others working as well. Got it all? There will be a quiz.
At the Democratic convention, the president framed America as a shining city on a hill—under constant construction.
Barack Obama is a tinkerer and a poet in whose hands the concept of “American exceptionalism” is being reshaped for the 21st century and weaponized against Trumpism.
First used with respect to the United States by Alexis de Tocqueville, the concept of American exceptionalism is that this country differs qualitatively from other developed nations because of its national credo, ethnic diversity, and revolution-sprung history. It is often expressed as superiority: The United States is the biggest, most powerful, smartest, richest, and most-deserving country on Earth.
Obama drew from this tradition in his Democratic National Convention address Wednesday night. “America has changed over the years,” he said, remembering his Scotch-Irish ancestors who didn’t like braggarts or bullies or people who took short cuts, and who valued honesty and hard work, kindness and courtesy, humility and responsibility.
Psychologists have long debated how flexible someone’s “true” self is.
Almost everyone has something they want to change about their personality. In 2014, a study that traced people’s goals for personality change found that the vast majority of its subjects wanted to be more extraverted, agreeable, emotionally stable, and open to new experiences. A whopping 97 percent said they wished they were more conscientious.
These desires appeared to be rooted in dissatisfaction. People wanted to become more extraverted if they weren’t happy with their sex lives, hobbies, or friendships. They wanted to become more conscientious if they were displeased with their finances or schoolwork. The findings reflect the social psychologist Roy Baumeister’s notion of “crystallization of discontent”: Once people begin to recognize larger patterns of shortcomings in their lives, he contends, they may reshuffle their core values and priorities to justify improving things.
His call on a foreign government to hack Hillary Clinton’s email account is a complete subversion of GOP ideals.
The first excuse for Donald Trump’s amazing press conference on Wednesday, in which he called on the Russians to hack and publish the 30,000 emails wiped from Hillary Clinton’s home server, was: He was only joking.
That excuse almost immediately dissolved. When Trump was asked by CNN’s Jim Acosta whether he would call on Vladimir Putin to stay out of U.S. elections, the presidential nominee answered that he would not tell Putin what to do. After the conference ended, Trump tweeted out a slightly tidied up request to the Russians to find Clinton’s emails—but to hand them over to the FBI rather than publish them.
The second excuse, produced on Twitter minutes later by Newt Gingrich, is that Trump’s remark, while possibly unfortunate, mattered less than Clinton’s careless handling of classified material on her server. That defense seems likely to have more staying power than the first—about which, more in a minute.
With six adults per apartment, a new approach to building community in Brooklyn focuses on the “intentional” life.
Stare into another person’s eyes long enough, and you start to feel like you might be in love.
It worked for Ryan Fix and Poppy Liu. On their first date, they tried a two-hour eye gaze—a concerted effort to relate by sitting at arm’s length and silently staring at one another. Now they are partners in romance, and in business. They also live together as part of that business, along with around 20 other people, in what some might call a commune.
“It’s not a commune,” Fix explains, but rather a culmination of his life’s journey. He worked on Wall Street but left as he felt his soul corroding, to find a life that would prioritize human connection. Fix keeps his head shaved, and he was barefoot in a tunic when we met. The serenity he exudes is intense, if somewhere below guru-level. And if what he was running were a commune, the love seat we were sitting on wouldn’t be in a six-person apartment in the middle of Williamsburg, Brooklyn—one of the most densely populated places in the country, and among the most expensive.
Does the Democratic Party—open to all immigrants, races, genders, and sexual orientations—have enough room for less educated white voters?
The evocative sound of barriers falling was the signal note during the Democratic National Convention’s first two nights.
First Lady Michelle Obama’s riveting Monday-night speech condensed the centuries of racial pain and progress bound up in her husband’s two victories into a single indelible phrase: “I wake up every morning in a house that was built by slaves.” One night later, Hillary Clinton shattered another ceiling when she became the first major-party female presidential nominee.
The delegates have displayed understandable pride in these twin social milestones. But there is also an undercurrent of concern that something old is being lost in this celebration of the new. The fear among some is that this polychromatic Democratic Party, open to all races, both genders, all sexual orientations, welcoming to immigrants, and championing diversity, may not have preserved enough room for the working-class white voters who anchored the party from Andrew Jackson through Lyndon Johnson.
A casual survey at the DNC reveals not youthful folly, but Millennial pragmatism.
You could call it the Twilight of the Bernie Bros: the young men (and women) who have animated the convention hall of the DNC with their incessant booing, cries of mistrust, and suggestions of delegate vote suppression. On Tuesday, their candidate officially lost the nominating race to Hillary Clinton in a roll-call vote, and on Wednesday, her campaign moved forward with the most public endorsement yet from the titular head of the Democratic party, President Obama. There will no doubt be forthcoming analysis about the effect this movement has, or hasn’t, had on the next three months of general election campaigning; about how precisely Clinton and Kaine have embraced or denied their progressive base. But for a community of young people who have found a home in this world of outsider camaraderie, this particular party—as they say—is over. Cue the lights.
The Green Party candidate wants disillusioned Bernie Sanders supporters to join her—not Hillary Clinton.
PHILADELPHIA—Jill Stein takes public transportation to the Democratic National Convention. On the day after Hillary Clinton made history as the first woman to win a major party presidential nomination, the Green Party presidential candidate is on the subway en route to the Wells Fargo Center. Adoring fans spot her on the way over and demand selfies. A heavily tattooed woman complains to Stein: “It’s been a Hillary party the whole time. It’s like brainwash, like waterboarding. It’s awful.”
Stein is in high demand. The populist progressive tells me that after Bernie Sanders endorsed Clinton two weeks ago, effectively ending his insurgent campaign for president, a lot more people started paying attention to her campaign. “The floodgates opened,” Stein says. “I almost feel like a social-worker, being out there talking to the Bernie supporters. They are broken-hearted. They feel really abused, and misled, largely by the Democratic Party.”
The Republican presidential nominee appeared to suggest he’d recognize Russia’s annexation of the Ukrainian territory in 2014.
Donald Trump’s call on Russia to hack Hillary Clinton’s emails Wednesday resulted in widespread criticism. But his comments on Crimea, coupled with ones he made last week on NATO, are likely to have greater significance if he is elected president in November.
The question came from Mareike Aden, a German reporter, who asked him whether a President Trump would recognize Crimea as Russian and lift sanctions on Moscow imposed after its 2014 annexation of the Ukrainian territory. The candidate’s reply: “Yes. We would be looking at that.”
That response is likely to spread much cheer through Russia—already buoyant about the prospect of a Trump victory in November. But it could spread at least an equal amount of dread in the former Soviet republics. In a matter of two weeks, the man who could become the next American president has not only questioned the utility of NATO, thereby repudiating the post-World War II security consensus, he also has seemingly removed whatever fig leaf of protection from Russia the U.S. offered the post-Soviet republics and Moscow’s former allies in the Eastern bloc.
Biology textbooks tell us that lichens are alliances between two organisms—a fungus and an alga. They are wrong.
In 1995, if you had told Toby Spribille that he’d eventually overthrow a scientific idea that’s been the stuff of textbooks for 150 years, he would have laughed at you. Back then, his life seemed constrained to a very different path. He was raised in a Montana trailer park, and home-schooled by what he now describes as a “fundamentalist cult.” At a young age, he fell in love with science, but had no way of feeding that love. He longed to break away from his roots and get a proper education.
At 19, he got a job at a local forestry service. Within a few years, he had earned enough to leave home. His meager savings and non-existent grades meant that no American university would take him, so Spribille looked to Europe.