How a student took on eminent economists on debt issue - and won

Comments (35)
Jimmy5462 wrote:

So the original researchers admit that the data they used to draw a conclusion was incorrect. But disagree that their conclusion was incorrect? It sounds to me like they started with a conclusion instead of a hypothesis. If they did that in the 6th grade science fair they would have failed.

Apr 18, 2013 6:48am EDT  --  Report as abuse
ChangB wrote:

Hmm 2.2 versus 0.1 not a significant difference. Someone doesn’t want their funding taken away.

Apr 18, 2013 7:28am EDT  --  Report as abuse
cwucnspt wrote:

If you think that major errors don’t happen in economics check this error of 30+ years; it is referred often by rational expectation economists. See

Apr 18, 2013 7:37am EDT  --  Report as abuse
SeniorMoment wrote:

Everyone has selective perception. It is part of human nature, which is exactly why the two esteemed professors should have not checked each others work, but instead had someone unrelated to their field examine the data and methodology before publishing it and its now its now proven wrong conclusions. There is a night and day difference between a deflationary 0.1% economic decline and a 2.2% non-inflationary growth economic growth rate.

Economists should learn from biologists who discovered that adding a physicist to the research teams made huge leaps in research progress because physicist have no preconceived ideas about biology, yet have the deep data analysis skills biologists generally lack. Now there is a subfield of Physics called Bio-Physics that does both data analysis and the development of crucial tools of biological and medical research. Tasks that once took 20 years using only biologists and medical researchers now take as little as 2 or 3 years.

Apr 18, 2013 8:24am EDT  --  Report as abuse
GRRR wrote:

“Hmm 2.2 versus 0.1 not a significant difference.”

Sure it is. I tell you what: You give me a guaranteed 2.2% return on $100,000, and I’ll give you -0.1% return on your $100,000.

Apr 18, 2013 8:42am EDT  --  Report as abuse
jaham wrote:

This so-called “coding error” sounds to me more like the numbers were cherry picked form the data to prove a point.

This is almost as farcical and disingenuous as the so-called “hockey stick graph” that exposed the world’s leading climate change scientists.

Apr 18, 2013 9:21am EDT  --  Report as abuse
cwucnspt wrote:

Most economists publish theories that support their own view or the consensus view. In effect, you have economic journals that only publish articles that support their “establishment” views. Although these article may be peer reviewed their content are mostly nonsensical. What differentiate this case from others is that numbers cannot lie (and math proofs neither, as I mentioned above). Several years ago, if you opened the Wall Street Journal, the Economist, the Business Week, Financial Times, Reuters, etc, one would see many front page articles arguing that US personal savings was (and is) too low. You don’t read these articles anymore. Why? To understand the macro economic theory of the last 250 years read To understand the effect of trade on economy read

Apr 18, 2013 9:42am EDT  --  Report as abuse
ofilha wrote:

This is very typical of academicians who are not able to keep an open mind. Their methodology produced incorrect results and yet the results are still valid. By those standards nobody would ever flunk a class.

Apr 18, 2013 9:59am EDT  --  Report as abuse
LoveJoyOne wrote:

I doubt these guys even know how to use a spreadsheet. They probably had a graduate student do the work: that’s usually the way it goes. The graduate student may have intentionally skewed the results to have them align with the boss’s theory, or just screwed up (not likely).

If the big brass economists actually did do the spreadsheet work themselves, that would clearly explain the error.

Apr 18, 2013 10:41am EDT  --  Report as abuse
LoveJoyOne wrote:

I doubt these guys even know how to use a spreadsheet. They probably had a graduate student do the work: that’s usually the way it goes. The graduate student may have intentionally skewed the results to have them align with the boss’s theory, or just screwed up (not likely).

If the big brass economists actually did do the spreadsheet work themselves, that would clearly explain the error.

Apr 18, 2013 10:42am EDT  --  Report as abuse
Mott wrote:

Much of the original thesis and derivation is common-sense to a great extent.

Accounting does clarify what’s projected as significant only to have turned out insignificant.

The fundamental issue with any type of these type of conclusions is the lack of solid data on correlation on past predictions. This is where, all these predictions fall-flat on their face, regardless of how famous the predictor may be or twisted or fancier the wording may be.

Apr 18, 2013 12:04pm EDT  --  Report as abuse
puzzled wrote:

I commend Thomas Herndon for recreating and stumbling on these errors. He is confirming the facts of our current society – data is omitted and calculations are manipulated so that the results the economists/bankers/thieves (yes I am lumping them together and I have a finance background)want are achieved. It should be no surprise to anyone these events take place daily – how do you think JPM and UBS achieve trading losses in the billions while their shareholders are only alerted years after the fact? How do you think corporate valuations are achieved to satisfy the investment community? Numbers are played with every day on wall street and to assume you are getting “facts” is very very naïve. Having worked in the investment banking community for decades I can tell you honestly that numbers are “adjusted” to reflect the desired outcome daily – - daily

Apr 18, 2013 12:16pm EDT  --  Report as abuse
Concernedcitz wrote:

We have known for some time the GOP has been buying college professors to produce documents to back their agenda. Now we have proof! GOP will go to any length with lies, distortion, twisted or false logic, bribes, false flatery, and who knows what else to further their facist sick agenda.

Apr 18, 2013 12:24pm EDT  --  Report as abuse
Calvin2k wrote:

Note to editors: it’s “pore over” not “pour over.”

Apr 18, 2013 12:49pm EDT  --  Report as abuse
Chazz wrote:

Concernedcitz wrote:
“We have known for some time the GOP has been buying college professors to produce documents to back their agenda.”

Let’s take this one step at a time…, the GOP has been “buying college professors?” That means there are still some conservative professors left out there….an interesting hypothesis.

That would mean those same GOP bought professors have been generating all the “Global Warming” and “Climate Change” documents as well?

No matter, what ever way they lean it’s clear that EVERYONE has a price – politicians most notably – and they’ll sell out without any looking back once their price is met. But instead of calling that fact out, people would choose to regurgitate the same-old, same-old anti-GOP, anti-Dem rhetoric.

The REAL questions we should be asking is, “Who can we believe anymore?” and “Why do I believe THEM?”

Apr 18, 2013 1:26pm EDT  --  Report as abuse
JimmytheFat wrote:

Look, just because there was an error on the spreadsheet, does not mean that having debt over 90% of GDP is better than previously believed. There are several recent examples from Greece and other countries that lend credibility to their original argument. And closer to home there are cties such as Detroit which prove that debt can rise to a dagerous ratio. As long as we keep growing the roles of those who welch off of the rest of sciety, we become more and more like Greece and Detroit.

Apr 18, 2013 1:30pm EDT  --  Report as abuse
JimmytheFat wrote:

Concernedcitz wrote:
“We have known for some time the GOP has been buying college professors to produce documents to back their agenda.”

The GOP need not pay professors to prove what is common sense to most taxpayers. There is some level of danger when Govt expenditures exceed revenue. Your level of paranoia tells me that you’re probably one of the many Americans on the receiving end of Govt handouts.

Apr 18, 2013 1:50pm EDT  --  Report as abuse
jswain23 wrote:

“An error slipped into their work….”? Really? If I read the article correctly it was multiple errors, and they were all not “coding errors”.

So now we have proof that their work is WRONG. We also have verification on the fallacy of their work via the real life results in Italy and elsewhere that austerity is the answer.

But watch the republicans keep on pushing for “spending cuts” by government. It goes to the heart of their agenda. More money for the wealthy. More harm to the president. More damage to the middle class and poor. It is class warfare being waged on the poor and middle class.

Apr 18, 2013 2:04pm EDT  --  Report as abuse
Segev wrote:

While I’m not about to defend the economists – their methodology was flawed and their analytical software faulty – their hypothesis that there IS a decline in growth is supported. It just isn’t nearly a block-buster severe as indicated. This is, at least, better than the global warming activist “scientists” have done, wherein their hypothesis has been actively disproven deliberate fraud is known to have gone into their works.

Still, that’s beside the point.

Our economy is not growing at anything resembling a healthy rate. Our government expenditures are way, WAY up, mostly in social programs and “stimulus” meant to spur economic growth. Supposedly. All they HAVE done is drain resources from the sectors of the economy that traditionally are responsible for growth, frighten those same sectors into sitting on their assets due to the insecurity of their knowledge of what the rules will be tomorrow, and increased dependency on the government.

Well, okay, that’s not ALL it’s done: it’s also enriched the cronies of the politicians running the show, even as their businesses fail or produce nothing…and pay no taxes even when they make money off the federal grants. And the politicians, too, benefit; Obama himself owns significant shares in the company that got part of the stimulus to buy Amazon rain forest land for purposes of carbon offset credit sales.

Spending is not helping the economy. Spending is rapidly sending us the way of Greece and Cyprus and Spain. It’s not sustainable, whether or not it “provably decreases” economic growth.

Apr 18, 2013 2:35pm EDT  --  Report as abuse
seymourfrogs wrote:

I believe it. Fischer Black was highly thought of for his mathematical analysis of markets, for hedging. But was half-baked and no-one saw it. He used bits from other mathematical ideas (which would be OK if they were ‘stand-alone’ – but they were not). He used incorrect integration in his equations.
Its a wonder it even seemed to work long enough to allow some early success. Can’t see why he’s still highly thought of.

Apr 18, 2013 3:08pm EDT  --  Report as abuse
LeighSRyan wrote:

It’s great that Herndon has his doctoral thesis locked down, but, did Herndon only find the omitted countries in Reinhart and Rogoff’s spreadsheet or did he actually disprove their theories. R&R seem to think it does not. Really interested, please clarify. Thanks. Also, thanks should be extended to Kyla Walters who confirmed Herndon’s initial discovery of the errors.

Every economist worth his salt has been saying austerity makes no economic sense and will only harm. What made Reinhart and Rogoff so persuasive or did politicians cherry pick among many studies till they found one that served their prejudices?

Is there a way to follow up on this? I really want to know.

Apr 18, 2013 3:13pm EDT  --  Report as abuse
ptiffany wrote:

Krugman was right all along. Too bad that millions of people have lost out to a silly little theory that turned out to be baloney. Of course, Ryan won’t give up his Quixote Quest to destroy our government.

Apr 18, 2013 3:37pm EDT  --  Report as abuse
flashrooster wrote:

So often rightwing positions are based on faulty science or no science, yet they seem to always find a receptive audience here in the good ol’ USA. No wonder we’re in decline.

Apr 18, 2013 3:41pm EDT  --  Report as abuse

Harvard Business School offers a license to steal, prevaricate and obfuscate. Always have, always will.

Apr 18, 2013 3:55pm EDT  --  Report as abuse
WiseOldElf wrote:

So there were errors, but one thing’s remained unchanged- high debt slows economic growth. This doctorate student’s discovery that economic growth slows to 2.2% instead of -0.1% is cold comfort! The underlying principle of Reinhardt and Rogoff’s theory is still relevant. Governments should not live above their means, Simple!

Apr 18, 2013 4:18pm EDT  --  Report as abuse
ArghONaught wrote:

Denial of plausibility. Always the hallmark of academic excellence. Harvard? Hmmm.

Apr 18, 2013 4:22pm EDT  --  Report as abuse
Burns0011 wrote:


The problem with Greece isn’t that their public debt was huge. The problem with Greece is that, to curb public debt and bring it into line with this now discredited theory, public spending had to be slashed to the point of destroying Greece’s economy.

Understand: The difference between the professor’s false figures and the actual figures, is the difference between contraction of the economy (at -.01%) and the growth of the economy (at an admittedly anemic 2.2%).

While it is true that high debt slows growth, consider *why* high debt slows growth; More money is devoted to paying interest on that debt, and is not available to be spent on public works.

‘Austerity’ is still destructive to economies.

Apr 18, 2013 4:29pm EDT  --  Report as abuse
Foxdrake_360 wrote:


2.2 % IS GROWTH!

That would be GREAT right now!

(-)negative 0.1 % is RECESSION or contraction! The OPPOSITE of GROWTH!

WiseOldElf should be STUPID-OLD-TROLL

Apr 18, 2013 4:37pm EDT  --  Report as abuse
UauS wrote:

public debt… Gosh, i worked and saved for 15 years like crazy so i could buy my townhouse and my first new car for cash… and I never had these math problems…

Apr 18, 2013 5:51pm EDT  --  Report as abuse
WiseOldElf wrote:


It is evident from your post that
1. Either you did not read the article OR you read but did not understand it.
2. You are clueless about economics; describing a growth rate of -0.1% as a recession.

Your ignorance is laughable, especially so given your attempts at giving me a lecture.
Go get yourself educated.

Apr 18, 2013 6:13pm EDT  --  Report as abuse
paintcan wrote:

So what’s the point? If debt stimulates the economy, the money can still suffer inflation because the government’s ability to meet the debt service suffers some credibility, especially if it can’t seem to raise taxes at the same time to service that debt. But too low interest rates keep the cost of debt service down by pinching the returns to investors and that doesn’t help stimulate the economy. A single country doesn’t establish the foreign exchange value of its currency alone.

The economy may grow but the money also got less valuable and everything imported becomes more expensive. That is also why this country is racing rapidly to build domestic fuel independence.

The problem that can’t quite be fixed here is the problem of employment in high value production for a very large percentage of the population. Improving unemployment figures alone don’t say that. They may be rising now but they may also all be at much lower paid jobs. That doesn’t help the country raise the taxation to service the larger debt. This is not something new or the result of industrial society or even capitalism.

This article is a little too much like: “good for you kids, there is a hope that a star is within your midst (likely to join the academics actually) and it’s still worth putting your life in hock to get that degree”

BTW – Academics are usually accused of being blazingly liberal and many comments are doing it in reverse here. How did the Harvard profs suddenly become the tools of the GOP? But, I suppose, an institution is conservative with it’s planet scaled endowments while also wanting a more liberal social environment? I rather like that, actually.

The present problem is not an exact match of the great depression. It isn’t built the same way it was over 80 years ago. The population of the world has also more than tippled. One would think the economy would have to, at least, match the rate of domestic population growth or the country is actually getting poorer. But the problem is – what can the country do that developing countries aren’t also doing at far lower costs? The war spending doesn’t help. Iraq and Afghanistan were/are little more than a “legal” variant on the tactic of dumping: that is, depending on what laws you value most highly, it is legal. They are a way to stimulate at least some basic employment and keep morale up. At least they started by doing that.

Perpetual warfare is not going to work. Washington may simply be running out of effective tricks and tools to cope with a global sea change?

But I always feel so naive.

Apr 18, 2013 9:53pm EDT  --  Report as abuse

What do we learn from this for the replication debate in political science and economics?

Replication should be part of graduate education! Herndon only looked into the Reinhart and Rogoff paper as part of an assignment for a course he took in econometrics.

Replication has been part of grad student methods training in a few universities: Gary King at Harvard, Victoria Stodden at Columbia University, and we are running a Cambridge Replication Workshop based on King and Stodden’s example right now. We need more classes like this! See my post on this here:

Apr 19, 2013 9:14pm EDT  --  Report as abuse
Foxdrake_360 wrote:


Oh, I read it, and understood it. You, however, don’t understand the difference between NO return or 2.2% return. BTW: NO return IS losing money (when money can be made elsewhere) – which for all intents and purposes IS losing money, and thus contraction and thus recession.

But whatever geezer.

Apr 20, 2013 4:58am EDT  --  Report as abuse
jerrynew wrote:

So three people are interviewed for a job. A mathmatician, an accountant and an economist.
The mathmatician is asked “What is 2 plus 2?”. The mathmatician answers “It must be 4″.
The Accountant is asked the same question and answers “Well, after depreciation , it should be about 3 and 1/2″.
The economist is asked the same question and suddenly jumps up, runs over and shuts the door, returns to the interviewer, leans in and whispers : “What do you want it to be?”

Apr 24, 2013 4:20pm EDT  --  Report as abuse
Beta_adjusted wrote:

hmm several points.

(i) What is actually shocking is that its taken this long for someone to actually bother to check their calculations! in any area of science, competing groups would immediately try to replicate the results of the paper, subjecting it to rigorous testing. Why did this not happen here???

(ii) Economics is not a science. What is the ‘error’ associated with this number? a number without an error is completely meaningless. So the number they came up with was always somewhat suspect. I suspect the error is rather large since one of the problems with economics is that we don’t have enough extreme data points to really understand it yet (and I gather most of the models are wrong/politically compromised, the economic system is very complicated, and the world/’laws’ of economics are ever changing).

(iii) Given both of the points above, I find it odd that economists are given much time of day. I enjoyed Reinhardt and Rogoff’s book and read what they say with interest. But as per (i) and (ii) I take their views (and those of any other economist) with a very big pinch of salt. We should stop respecting economists, they are frequently wrong and what they practice has more in common with astrology than astronomy. I’m also very disappointed with the way that their unfortunate mistake has been seized upon by vested political interests. Its another sign of how far we have now moved from a civilized society, respectful of intellectual debate and differing opinions.

Apr 25, 2013 6:08am EDT  --  Report as abuse
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