Austerians have had their worst week since the last time GDP numbers came out for a country that's tried austerity.
But this time is, well, different. It's not "just" that southern Europe is stuck in a depression and Britain is stuck in a no-growth trap. It's that the very intellectual foundations of austerity are unraveling. In other words, economists are finding out that austerity doesn't work in practice or in theory.
What a difference an Excel coding error makes.
Austerity has been a policy in search of a justification ever since it began in 2010. Back then, policymakers decided it was time for policy to go back to "normal" even though the economy hadn't, because deficits just felt too big. The only thing they needed was a theory telling them why what they were doing made sense. Of course, this wasn't easy when unemployment was still high, and interest rates couldn't go any lower. Alberto Alesina and Silvia Ardagna took the first stab at it, arguing that reducing deficits would increase confidence and growth in the short-run. But this had the defect of being demonstrably untrue (in addition to being based off a naïve reading of the data). Countries that tried to aggressively cut their deficits amidst their slumps didn't recover; they fell into even deeper slumps.
Enter Carmen Reinhart and Ken Rogoff. They gave austerity a new raison d'être by shifting the debate from the short-to-the-long-run. Reinhart and Rogoff acknowledged austerity would hurt today, but said it would help tomorrow -- if it keeps governments from racking up debt of 90 percent of GDP, at which point growth supposedly slows dramatically. Now, this result was never more than just a correlation -- slow growth more likely causes high debt than the reverse -- but that didn't stop policymakers from imputing totemic significance to it. That is, it became a "fact" that everybody who mattered knew was true.
Except it wasn't. Reinhart and Rogoff goofed. They accidentally excluded some data in one case, and used some wrong data in another; the former because of an Excel snafu. If you correct for these very basic errors, their correlation gets even weaker, and the growth tipping point at 90 percent of GDP disappears. In other words, there's no there there anymore.
Austerity is back to being a policy without a justification. Not only that, but, as Paul Krugman points out, Reinhart and Rogoff's spreadsheet misadventure has been a kind of the-austerians-have-no-clothes moment. It's been enough that even some rather unusual suspects have turned against cutting deficits now. For one, Stanford professor John Taylor claims L'affaire Excel is why the G20, the birthplace of the global austerity movement in 2010, was more muted on fiscal targets recently.
The discovery of errors in the Reinhart-Rogoff paper on the growth-debt nexus is already impacting policy. A participant in last Friday's G20 meetings told me that the error was a factor in the decision to omit specific deficit or debt-to-GDP targets in the G20 communique.
The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You've got to spend money.Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out -- even if a country can print its own currency and write its own checks. In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP. The question in terms of the long term and the short term is how quickly to do it.
Growth vigilantes are the new bond vigilantes. Gross thinks the boom, not the slump, is the time for austerity -- which sounds an awful lot like you-know-who.
The austerity fever has even broken in Europe. At least a bit. Now, eurocrats can't say that austerity has been anything other than the best of all economic policies, but they can loosen the fiscal noose. And that's what they might be doing, by giving countries more time and latitude to hit their deficit targets. Here's how European Commission president José Manuel Barroso framed the issue on Monday:
While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.
That's not much, but it's still much better than the growth-through-austerity plan Eurogroup president Jeroen Dijsselbloem was peddling on ... Saturday.
Now, Reinhart and Rogoff's Excel imbroglio hasn't exactly set off a new Keynesian moment. Governments aren't going to suddenly take advantage of zero interest rates to start spending more to put people back to work. Stimulus is still a four-letter word. Indeed, the euro zone, Britain, and, to a lesser extent, the United States, are still focussed on reducing deficits above all else. But there's a greater recognition that trying to cut deficits isn't enough to cut debt burdens. You need growth too. In other words, people are remembering that there's a denominator in the debt-to-GDP ratio.
But austerity doesn't just have a math problem. It has an image problem too. Just a week ago, Reinhart and Rogoff's work was the one commandment of austerity: Thou shall not run up debt in excess of 90 percent of GDP. Wisdom didn't get more conventional. What did this matter? Well, as Keynes famously observed, it's better for reputation to fail conventionally than to succeed unconventionally. In other words, elites were happy to pursue obviously failed policies as long as they were the right failed policies.
But now austerity doesn't look so conventional. It looks like the punchline of a bad joke about Excel destroying the global economy. Maybe, just maybe, that will be enough to free us from some defunct economics.
The Republican frontrunner repudiated a long litany of party orthodoxies in a contentious debate—but will that hurt his candidacy, or help it?
Donald Trump blamed the Bush administration for failing to heed CIA warnings before 9/11; denounced the Iraq War for destabilizing the Middle East; defended the use of eminent domain; promised to save Social Security without trimming benefits; and credited Planned Parenthood for “wonderful things having to do with women's health.”
He’s fresh off a crushing victory in New Hampshire, and the prohibitive favorite in the polls in South Carolina. Will his flouting of Republican orthodoxy sink his chances—or is it his very willingness to embrace these heterodox stances that has fueled his rise?
Even his rivals no longer seem certain of the answer. Jeb Bush, at one point, called Trump “a man who insults his way to the nomination.” He sounded like a man ruing a race that has run away from him.
The iconic conservative justice, who died Saturday at age 79, left an indelible stamp on the nation’s courts, its laws, and its understanding of itself.
Antonin Scalia, the judicial firebrand who stood as the intellectual leader of the U.S. Supreme Court’s conservative wing during his three-decade tenure as a justice, died Saturday at a ranch in western Texas. He was 79 years old.
“He was an extraordinary individual and jurist, admired and treasured by his colleagues. His passing is a great loss to the Court and the country he so loyally served,” Chief Justice John Roberts said in a statement on behalf of the Court.
President Obama, who will have the opportunity to nominate Scalia’s successor, offered his sympathies to the justice’s family on Saturday night. “He will no doubt be remembered as one of the most consequential judges to serve on the Supreme Court,” he said.
Fredrickson, a leading researcher of positive emotions at the University of North Carolina at Chapel Hill, presents scientific evidence to argue that love is not what we think it is. It is not a long-lasting, continually present emotion that sustains a marriage; it is not the yearning and passion that characterizes young love; and it is not the blood-tie of kinship.
Rather, it is what she calls a "micro-moment of positivity resonance." She means that love is a connection, characterized by a flood of positive emotions, which you share with another person—any other person—whom you happen to connect with in the course of your day. You can experience these micro-moments with your romantic partner, child, or close friend. But you can also fall in love, however momentarily, with less likely candidates, like a stranger on the street, a colleague at work, or an attendant at a grocery store. Louis Armstrong put it best in "It's a Wonderful World" when he sang, "I see friends shaking hands, sayin 'how do you do?' / They're really sayin', 'I love you.'"
The current system for gaining entry to elite colleges discourages unique passions and deems many talented students ineligible.
March madness is almost here. No, I’m not referring to the college-basketball playoffs; I’m alluding to the anxious waiting of young people and their families of word about their fate from the highly selective colleges of America. And I’m talking as well about those who are about to venture forth on the ritualistic campus tours to determine where they will apply next fall. What few of these families realize is how broken the admission system is at these selective colleges.
At these institutions of higher learning, the goal is to “shape a class,” which involves trying to admit qualified and diverse students who will learn from each other as well as from their experiences in the classroom. These are the students who have the greatest potential to use their education in productive ways and to contribute to their own well-being and to the needs of the larger society. Diversity is not defined here as solely pertaining to race, ethnicity, or gender, although that weighs on decisions, but also on a range of interests and talents that students can develop and share with others during their college years. These are high-minded goals.
The GOP presidential candidate—and at least two of his rivals—are acting as if the meaning of the Constitution changes depending on the timing of the next election.
Antonin Scalia is dead. Is it legitimate for the Republican-controlled Senate to refrain from confirming a replacement for the late Supreme Court justice until a new president is elected, as Ted Cruz, Marco Rubio, Ben Carson and others on the right have urged? Or does the Senate have an obligation to approve a qualified nominee put forth by President Obama, as many on the left argued as soon as news of the death broke?
The debate on Twitter was instantaneous. “The Democrat-controlled Senate confirmed Ronald Reagan's nominee to the Court, Anthony Kennedy, in his last year in office: 1988,” the liberal journalist Glenn Greenwald observed. Jim Antle, a paleoconservative, retorted with a Robert Bork reference, writing, “And it wouldn't quite have been in his final year if first choice had been confirmed in 1987.”
“During the 100 days before the relationship starts, we observe a slow but steady increase in the number of timeline posts shared between the future couple.”
Facebook might understand your romantic prospects better than you do.
In a blog post published yesterday, the company’s team of data scientists announced that statistical evidence hints at budding relationships before the relationships start.
As couples become couples, Facebook data scientist Carlos Diuk writes, the two people enter a period of courtship, during which timeline posts increase. After the couple makes it official, their posts on each others’ walls decrease—presumably because the happy two are spending more time together.
During the 100 days before the relationship starts, we observe a slow but steady increase in the number of timeline posts shared between the future couple. When the relationship starts ("day 0"), posts begin to decrease. We observe a peak of 1.67 posts per day 12 days before the relationship begins, and a lowest point of 1.53 posts per day 85 days into the relationship. Presumably, couples decide to spend more time together, courtship is off, and online interactions give way to more interactions in the physical world.
Einstein’s gravitational waves rest on a genuinely radical idea.
After decades of anticipation, we have directly detected gravitational waves—ripples in spacetime traveling at the speed of light through the universe. Scientists at LIGO (the Laser Interferometic Gravitational-wave Observatory) have announced that they have measured waves coming from the inspiral of two massive black holes, providing a spectacular confirmation of Albert Einstein’s general theory of relativity, whose hundredth anniversary was celebrated just last year.
Finding gravitational waves indicates that Einstein was (once again) right, and opens a new window onto energetic events occurring around the universe. But there’s a deeper lesson, as well: a reminder of the central importance of locality, an idea that underlies much of modern physics.
The number of American teens who excel at advanced math has surged. Why?
On a sultry evening last July, a tall, soft-spoken 17-year-old named David Stoner and nearly 600 other math whizzes from all over the world sat huddled in small groups around wicker bistro tables, talking in low voices and obsessively refreshing the browsers on their laptops. The air in the cavernous lobby of the Lotus Hotel Pang Suan Kaew in Chiang Mai, Thailand, was humid, recalls Stoner, whose light South Carolina accent warms his carefully chosen words. The tension in the room made it seem especially heavy, like the atmosphere at a high-stakes poker tournament.
Stoner and five teammates were representing the United States in the 56th International Mathematical Olympiad. They figured they’d done pretty well over the two days of competition. God knows, they’d trained hard. Stoner, like his teammates, had endured a grueling regime for more than a year—practicing tricky problems over breakfast before school and taking on more problems late into the evening after he completed the homework for his college-level math classes. Sometimes, he sketched out proofs on the large dry-erase board his dad had installed in his bedroom. Most nights, he put himself to sleep reading books like New Problems in Euclidean Geometry and An Introduction to Diophantine Equations.
Today’s empires are born on the web, and exert tremendous power in the material world.
Mark Zuckerberg hasn’t had the best week.
First, Facebook’s Free Basics platform was effectively banned in India. Then, a high-profile member of Facebook’s board of directors, the venture capitalist Marc Andreessen, sounded off about the decision to his nearly half-a-million Twitter followers with a stunning comment.
“Anti-colonialism has been economically catastrophic for the Indian people for decades,” Andreessen wrote. “Why stop now?”
After that, the Internet went nuts.
Andreessen deleted his tweet, apologized, and underscored that he is “100 percent opposed to colonialism” and “100 percent in favor of independence and freedom.” Zuckerberg, Facebook’s CEO, followed up with his own Facebook post to say Andreessen’s comment was “deeply upsetting” to him, and not representative of the way he thinks “at all.”
A passionate, complex conservative, Scalia forever changed how Americans think about original intent. Both liberals and conservatives now play by Scalia’s rules.
In 1996, Antonin Scalia assessed the legacy of the great liberal Justice William Brennan: “He is probably the most influential justice of the century.” Depending on future events, the legacy of the great conservative Scalia—who died Saturday at 79—may eclipse that of Brennan.
Scalia’s death is a monumental event; a Supreme Court without him is difficult to imagine. His legacy is so large and complex that it will take weeks simply to catalogue the questions he leaves behind.
By all accounts, in private Scalia was a figure of considerable charm to liberals and conservatives alike. As a public man, he was by turns impish, saturnine, quarrelsome, and penetrating. He set the terms of debate in the law in not one but two areas: the interpretation of statutes (which is the bulk of the Court’s docket) and the application of an 18th-century Constitution for 20th- and 21st-century needs. In statutory construction, he emphasized the text and the text alone. Before his ascendancy, it had been customary to infer the “intent” of the legislature from committee reports and statements by the measure’s sponsors. Scalia would not have that—only the words of the statute were law, he insisted; a reviewing court should apply only them. Though Scalia called his approach a modest one, the austere textual creed had the effect of placing judges at the center of the complex world of federal statutes. That said, it must be added that his background in the law of administrative agencies made him a careful reader—which a textualist ought to be. In cases with no ideological valence, it was clear that his colleagues often looked to him for legal guidance.