Reinhart and Rogoff Claim Persecution

Krugman revisits a question he raised in last Friday's column. Why if austerity has been so thoroughly discredited does it persist? The answer is the title to his column today, "The 1 Percent's Solution":

You can’t understand the influence of austerity doctrine without talking about class and inequality. 

What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening. 

Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise. 

You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.

On the same Opinion page economists Reinhart and Rogoff defend themselves and their thesis that high debt hurts growth without actually going into the details of the criticism of their paper, “Growth in a Time of Debt.” They save that for an online appendix (see below). Also, they claim to be victims of political persecution. (Have you ever noticed how conservatives are forever carping about victimization?) As Reinhart and Rogoff explain,

Last week, three economists at the University of Massachusetts, Amherst, released a paper criticizing our findings. They correctly identified a spreadsheet coding error that led us to miscalculate the growth rates of highly indebted countries since World War II. But they also accused us of “serious errors” stemming from “selective exclusion” of relevant data and “unconventional weighting” of statistics — charges that we vehemently dispute. (In an online-only appendix accompanying this essay, we explain the methodological and technical issues that are in dispute.)

Our research, and even our credentials and integrity, have been furiously attacked in newspapers and on television. Each of us has received hate-filled, even threatening, e-mail messages, some of them blaming us for layoffs of public employees, cutbacks in government services and tax increases. As career academic economists (our only senior public service has been in the research department at the International Monetary Fund) we find these attacks a sad commentary on the politicization of social science research. But our feelings are not what’s important here.

But the damage is done. One of the original criticisms of "Growth in a Time of Debt" is that the authors never establish that low growth was the result of high debt; it can just as easily be the other way around. They attempt to answer this by saying that they never made the argument in the first place:

The academic literature on debt and growth has for some time been focused on identifying causality. Does high debt merely reflect weaker tax revenues and slower growth? Or does high debt undermine growth? 

Our view has always been that causality runs in both directions, and that there is no rule that applies across all times and places. In a paper published last year with Vincent R. Reinhart, we looked at virtually all episodes of sustained high debt in the advanced economies since 1800. Nowhere did we assert that 90 percent was a magic threshold that transforms outcomes, as conservative politicians have suggested.