Friday, May 3, 2013

Best Single Quote on Reinhart-Rogoff

By now most are aware that Carmen Reinhart and Kenneth Rogoff have come under attach for data errors in a 2010 working paper they authored arguing that too much debt is not good for the economy. It turns out that a graduate student attempting to replicate their study found a mistake in their original work. This, unfortunately, caused Keynesians and other statists amongst us to dance the "I told you so" jig.

Greg Mankiw had a good reasonable blog post on the issue of data error. The best single quote on the entire subject, however, comes from Caroline Baum in her most recent Bloomberg column "Reinhart-Rogoff Uproar Settles Nothing"
Forget the data for a minute. Imagine asking the average person on the street, Is too much debt a problem? Do you think you would get any negative responses? That’s the essence of Reinhart and Rogoff’s research. You don’t need a doctorate in economics to understand that you can’t spend beyond your means forever, or that piling on debt because it’s cheap to borrow isn’t sound policy.
HT: EconomicPolicyJournal

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