The economic blogosphere lit up a couple weeks ago when the 90% debt cliff, pretty much the only empirical basis austerians have for imposing austerity during a weak economy, blew up. It reached the liberal (real, not corporate) media, and even got so mainstream as to warrant extensive coverage on The Colbert Report. When the story first broke, it reminded me of Andrew Wakefield, the former doctor who is former because of his fraudulent research that “found” the MMR vaccine causes autism, the research that kicked off the anti-vaccer movement as we know t today. The comparison seemed harsh when I first thought of it, to a degree still does, yet the more I think about it, the more comparable the claims appear.
The still at the start of this video would look like the Great Depression if it was black and white. It's about Spain hitting 27% unemployment, higher than the US hit in the 1930?s.
To make sure everyone knows what we're talking about, the 90% debt cliff came from Growth in a Time of Debt. Feel free to read it of course, but keep in mind it turned out to be very wrong, verging on fraudulent. It's a paper by Carmen M. Reinhart and Kenneth S. Rogoff, usually referred to as “Reinhart and Rogoff” and even shorter, R&R or R-R. Or, if you look at that last link, you might think of them as people who make up more things when they get caught making things up.
R&R claimed to have found a correlation between government debt and economic growth, where more debt causes slower growth, with a big dropoff when debt hits 90% of GDP. This is the claim that has been frequently repeated by austerians in the debate over fiscal austerity versus fiscal stimulus, which debate is probably very familiar to anyone regularly visiting this site. Anyone familiar with that debate is probably already aware that the preponderance of the evidence has been on the stimulus side, even though, tragically, the preponderance of money and political power has been with the austerians. When it comes to defending their position though, using something empirical rather than the assertions of conservative ideology, this debt cliff has pretty much been it. But now the one paper providing supporting evidence has been debunked spectacularly.
So why the harsh comparison to the one paper that supported the anti-vaccers before it was found to be a fraud?
Something Wakefield-like that suggested the comparison was no one could replicate R&R's results. They were left standing alone with their claims, and seemed quite happy to be lionized by the people who wanted to believe their findings. From Paul Krugman:
And the everyone hyping Reinhart-Rogoff very much included Reinhart and Rogoff themselves. Matt O'Brien has the goods. It's true that their papers never said outright that the relationship was causal, but they weren't anywhere near that scrupulous in op-eds and other media presentations. And the truth is that the papers may not have stated causation flatly, but it was clearly insinuated. By trying to claim now that they never meant to imply such a thing, R-R are falling down seriously in the menschhood test.
The causality Krugman refers to is a criticism made of the claim that government debt slows economic growth, when it looked like there was a correlation. They never established that they were more than correlated, and critics pointed out it was as likely that slow growth was causing high debt. Krugman seems to think there is still a case to be made for slow growth causing high debt, apart from the correlation in the really wrong research, but the point is R&R were too busy receiving the accolades from the right to answer their critics.
Another red flag was that they didn't want to show their work. Thomas Herndon, the graduate student who discovered their errors, was the first person to see it. He asked for their data when, trying to replicate their famous research for a class project, couldn't do it, and he told Colbert in the linked interview that he just assumed he was getting it wrong. Instead, he discovered what they were hiding. Other economists had already noticed in the published paper that they left out some contradictory evidence, and Herndon found the weird truncating of data, but he also found whole countries were left out that significantly changed the result. Most attention has gone to an error in a formula in their spreadsheet that missed some countries and changed the result, and that was surely an accident. The other problems however consistently skewed the data to the preferred conclusion, and calling it cherrypicking seems like the nicest way to describe it.
I stop short of calling it outright fraud like Wakefield because I can't think they would have provided their data to anybody, even a student, if they knew they had committed fraud. Yet, I have trouble believing they weren't aware they had excluded evidence that failed to fit the conclusion. It could be just plain old-fashioned denial, that they don't even know they're saying things that are false. In their editorial defending themselves, they said:
Our 2010 paper found that, over the long term, growth is about 1 percentage point lower when debt is 90 percent or more of gross domestic product. The University of Massachusetts researchers do not overturn this fundamental finding, which several researchers have elaborated upon.
Yes, they did “overturn this fundamental finding”. That's why it's such a big deal. Herndon himself said:
R&R state that the results of our paper are consistent with, or confirm their finding—that, even with our criticisms of their work, we nevertheless still observe economic growth declining significantly when public debt relative to GDP rises above the 90 percent threshold. This is not our interpretation of our work, and indeed the purpose of the second half of our paper is to argue this point.
R&R even tried a milder version of Wakefield responding to criticism not with some evidence to support their claim, but by attacking the motives and honesty of the critics, “The fact that high-debt episodes last so long suggests that they are not, as some liberal economists contend, simply a matter of downturns in the business cycle.” What liberal economists ever contended this? I suppose if they can find a couple, somewhere, the statement becomes true, but strawman arguments aren't normally the tactic of those with strong cases. They're more a tactic for conservatives whose worldview won't let them accept that their evidence just fell apart, and all they have left is a refusal to accept the evidence still there — in this case, that austerity is a dreadful idea during a weak economy, and stimulus works.
That gets to what I expect will turn out to be the truly painful similarity. I have no expectation any conservatives will change their views over this, at least not those viscerally dedicated to fiscal austerity. I hope I'm wrong, but given how they've essentially been in denial ever since the deregulated financial industries threw the world economy into crisis and, in those places where austerity has been imposed since the recessions hit, the Second Great Depression, why think they're going to admit anything now? When The Lancet withdrew Wakefield's paper because it was lousy science, and then when he was stripped of his license because his paper turned out to be outright fraud, the anti-vaccers didn't question their assumptions (to avoid a strawman myself, I expect some changed their minds, but the continued existence of anti-vaccers shows some stuck to their beliefs). They just thought of Wakefield as a martyr. Anyone really think the same won't happen with Reinhart and Rogoff, that they're about to be regarded as martyrs by the Wall Street Journal, the DC Beltway pundit class, and the austerians working on the impoverishment of Europe? I suppose we can always hope for a pleasant surprise, but Greece just laid off another 15,000 civil servants under orders from the IMF, EU, and ECB — after news of the exposure of R&R had broken.
Why does it matter? Because a lot of people are suffering for no useful purpose. Were it just a matter of some people holding tight to empty claims on a purely academic matter that didn't really affect anyone, we wouldn't care. They'd be of no more importance than the people who insist someone else wrote Shakespeare's plays, or who really care about the number of angels on the head of pin. Unfortunately, governments and central banks are in the grip of believers and ideologues. The believers won't believe the evidence has fallen apart, and the ideologues won't care because certain policies are just right regardless of the effects — that's what makes them ideologues. So they'll continue trying to achieve prosperity by sending pensioners dumpster diving.
So too bad if R&R feel picked on, because as they said, “But our feelings are not what's important here.” No, what's important is that the debunking of this ineffective and inhumane doctrine be widely know, so it never happens again that decision makers think it makes sense to end the misery by creating more of it. If doing so costs R&R their reputations, it's hard to find sympathy for people who did work that was sloppy at best, ignored the questions, refused to show their work, and drank in the accolades from the right while millions of innocents suffered privations to no good end.