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.
It’s the cloudless map’s first major makeover since 2013.
More than 1 billion people use Google Maps every month, making it possibly the most popular atlas ever created. On Monday, it gets a makeover, and its many users will see something different when they examine the planet’s forests, fields, seas, and cities.
Google has added 700 trillion pixels of new data to its service. The new map, which activates this week for all users of Google Maps and Google Earth, consists of orbital imagery that is newer, more detailed, and of higher contrast than the previous version.
Most importantly, this new map contains fewer clouds than before—only the second time Google has unveiled a “cloudless” map. Google had not updated its low- and medium-resolution satellite map in three years.
Critics claim British voters were unqualified to decide such a complicated issue. But democracy itself isn’t the problem.
It’s easy, in retrospect, to characterize David Cameron’s decision to hold a referendum on Britain’s EU membership as a colossal blunder, at least from the prime minister’s perspective. The idea was reportedly conceived at a pizza restaurant at Chicago O’Hare airport, an inauspicious place to hatch plans of international consequence. Cameron, by many accounts, promised to stage the vote not because he believed in it, or took it especially seriously, or felt the public was demanding it, but because he wanted to appease right-wing “euroskeptics” in his party ahead of the 2015 election. It worked. Cameron won that election, and soon found himself campaigning for Britain to remain in the European Union. Then a majority of Britons voted to do just the opposite. A disgraced David Cameron now finds himself without a job and his country temporarily without its bearings, in a jolted world. Blunders don’t get much bigger.
It happened gradually—and until the U.S. figures out how to treat the problem, it will only get worse.
It’s 2020, four years from now. The campaign is under way to succeed the president, who is retiring after a single wretched term. Voters are angrier than ever—at politicians, at compromisers, at the establishment. Congress and the White House seem incapable of working together on anything, even when their interests align. With lawmaking at a standstill, the president’s use of executive orders and regulatory discretion has reached a level that Congress views as dictatorial—not that Congress can do anything about it, except file lawsuits that the divided Supreme Court, its three vacancies unfilled, has been unable to resolve.
On Capitol Hill, Speaker Paul Ryan resigned after proving unable to pass a budget, or much else. The House burned through two more speakers and one “acting” speaker, a job invented following four speakerless months. The Senate, meanwhile, is tied in knots by wannabe presidents and aspiring talk-show hosts, who use the chamber as a social-media platform to build their brands by obstructing—well, everything. The Defense Department is among hundreds of agencies that have not been reauthorized, the government has shut down three times, and, yes, it finally happened: The United States briefly defaulted on the national debt, precipitating a market collapse and an economic downturn. No one wanted that outcome, but no one was able to prevent it.
Three Atlantic staffers discuss “The Winds of Winter,” the tenth and final episode of the sixth season.
Every week for the sixth season of Game of Thrones, Christopher Orr, Spencer Kornhaber, and Lenika Cruz discussed new episodes of the HBO drama. Because no screeners were made available to critics in advance this year, we'll be posting our thoughts in installments.
American society increasingly mistakes intelligence for human worth.
As recently as the 1950s, possessing only middling intelligence was not likely to severely limit your life’s trajectory. IQ wasn’t a big factor in whom you married, where you lived, or what others thought of you. The qualifications for a good job, whether on an assembly line or behind a desk, mostly revolved around integrity, work ethic, and a knack for getting along—bosses didn’t routinely expect college degrees, much less ask to see SAT scores. As one account of the era put it, hiring decisions were “based on a candidate having a critical skill or two and on soft factors such as eagerness, appearance, family background, and physical characteristics.”
The 2010s, in contrast, are a terrible time to not be brainy. Those who consider themselves bright openly mock others for being less so. Even in this age of rampant concern over microaggressions and victimization, we maintain open season on the nonsmart. People who’d swerve off a cliff rather than use a pejorative for race, religion, physical appearance, or disability are all too happy to drop the s‑bomb: Indeed, degrading others for being “stupid” has become nearly automatic in all forms of disagreement.
It’s not because they’re inherently harsher leaders than men, but because they often respond to sexism by trying to distance themselves from other women.
There are two dominant cultural ideas about the role women play in helping other women advance at work, and they are seemingly at odds: the Righteous Woman and the Queen Bee.
The Righteous Woman is an ideal, a belief that women have a distinct moral obligation to have one another’s backs. This kind of sentiment is best typified by Madeleine Albright’s now famous quote, “There is a special place in hell for women who don’t help each other!” The basic idea is that since all women experience sexism, they should be more attuned to the gendered barriers that other women face. In turn, this heightened awareness should lead women to foster alliances and actively support one another. If women don’t help each other, this is an even worse form of betrayal than those committed by men. And hence, the special place in hell reserved for those women.
The party's presumptive nominee and the Republican National Committee are working together to avoid a revolt at the July convention, according to The New York Times.
Only a few weeks ahead of the Republican National Convention, Donald Trump is preparing for what’s likely to be a charged event, as some Republicans look to upend the gathering. How? The Republican National Committee and the Trump campaign are threatening to keep those who are not in favor of the party’s nominee from taking speaking slots at the gathering, according to The New York Times.
It’s the culmination of a heated primary season that began with 17Republican presidential candidates and that, over time, narrowed, as Trump swept states across the nation. And right now, it’s unclear if some of those who exited the race will be permitted to speak at the convention, given Trump’s conditions. Take Senator Ted Cruz: He dropped out of the race in May, and he still has not endorsed Trump. But as the Times notes, however much Trump may want to bar the Texas senator, it may not be possible for him to keep Cruz from speaking. That’s because, since Cruz “won a majority of delegates in at least eight states, he would probably be able to have his name entered into nomination, guaranteeing him a speech under party rules.”
Millions of men in the prime of their lives are missing from the labor force. Could a big U.S. housing construction project bring them back?
Something is rotten in the U.S. economy. Poor men without a college degree are disappearing from the labor force. The share of prime-age men (ages 25-54) who are neither working nor looking for work has doubled since the 1970s.
The U.S.’s labor participation rate for this group of men is lower than every country in the OECD except for Israel (an outlier, because of the high number of non-working Orthodox Jewish men) and Italy (an economic omnishambles). Today, one in six prime-age men in America are either unemployed or out of the workforce altogether—about 10 million men.
So, this is the 10-million-man question: Where did all these guys go?
According to a report from White House economists released last week, non-working prime-age men skew young, are less likely to be parents, are disproportionately black and less educated, and are concentrated in the South.
The rapper has said celebrities shouldn't be disrespected, and yet here are nine minutes of naked Taylor Swift.
On one of the great issues of the day, Kanye West has long made his position clear: Celebrity lives matter. He’s said that famous people are “treated like blacks were in the ’60s, having no rights.” He’s railed against how it “is OK to treat celebrities like zoo animals.” He’s vowed “to raise the respect level for celebrities so that my daughter can live a more normal life.”
The rapper says his new video, for “Famous,” is “a comment on fame.” It’s basically nine minutes of night-vision camera leering over sleeping naked bodies made to uncannily resemble—ready?— Taylor Swift, Bill Cosby, Caitlyn Jenner, Amber Rose, Ray J, Kim Kardashian, Chris Brown, Rihanna, Donald Trump, Anna Wintour, George W. Bush, and, yes, Kanye West. Watching it, you think of leaked sex tapes and the violation they represent. You think of how celebrities are the foremost victims and beneficiaries of voyeurism. You think of how famous people are, well, people. You think of tattoos and implants and hairpieces and snoring. You think, perhaps most of all, of West’s reputation as a jackass.
A Yale law professor suggests that oft-ignored truth should inform debates about what statutes and regulations to codify.
Yale law professor Stephen L. Carter believes that the United States would benefit if the debate about what laws ought to be passed acknowledged the violence inherent in enforcing them.
Law professors and lawyers instinctively shy away from considering the problem of law’s violence. Every law is violent. We try not to think about this, but we should. On the first day of law school, I tell my Contracts students never to argue for invoking the power of law except in a cause for which they are willing to kill. They are suitably astonished, and often annoyed. But I point out that even a breach of contract requires a judicial remedy; and if the breacher will not pay damages, the sheriff will sequester his house and goods; and if he resists the forced sale of his property, the sheriff might have to shoot him.
This is by no means an argument against having laws.
It is an argument for a degree of humility as we choose which of the many things we may not like to make illegal. Behind every exercise of law stands the sheriff – or the SWAT team – or if necessary the National Guard. Is this an exaggeration? Ask the family of Eric Garner, who died as a result of a decision to crack down on the sale of untaxed cigarettes. That’s the crime for which he was being arrested. Yes, yes, the police were the proximate cause of his death, but the crackdown was a political decree.
The statute or regulation we like best carries the same risk that some violator will die at the hands of a law enforcement officer who will go too far. And whether that officer acts out of overzealousness, recklessness, or simply the need to make a fast choice to do the job right, the violence inherent in law will be on display. This seems to me the fundamental problem that none of us who do law for a living want to face.