To keep this thread alive in part...but this is also very
interesting.
Most Ph.D. students spend their days reading esoteric books and
stressing out about the tenure-track job market. Thomas Herndon, a
28-year-old economics grad student at UMass Amherst, just used part
of his spring semester to shake the intellectual foundation of the
global austerity movement.
Herndon became instantly famous in nerdy economics circles this
week as the lead author of a recent paper, "Does High Public Debt
Consistently Stifle Economic Growth? A Critique of Reinhart and
Rogoff," that took aim at a massively influential study by two
Harvard professors named Carmen Reinhart and Kenneth Rogoff.
Herndon found some hidden errors in Reinhart and Rogoff's data set,
then calmly took the entire study out back and slaughtered it.
Herndon's takedown — which first appeared in a Mike Konczal
post that crashed its host site with traffic — was an
immediate sensation. It was cited by prominent anti-austerians
like Paul
Krugman, spoken about by
incoming Bank of England governor Mark Carney, and mentioned on
CNBC and several other news outlets as proof that the pro-austerity
movement is based, at least in part, on bogus math.
We spoke to Herndon about his crazy week, and how he's planning to
celebrate his epic wonk takedown.
"This week has been quite the week," Herndon told us in a phone
call from UMass Amherst's campus. "Honestly, I was not expecting at
all the kind of attention it has received."
Herndon, who did his undergraduate study at Evergreen
State College, first started looking into Reinhart and Rogoff's
work as part of an assignment for an econometrics course that
involved replicating the data work behind a well-known study.
Herndon chose Reinhart and Rogoff's 2010 paper, "Growth in a Time
of Debt," in part, because it has been one of the most politically
influential economic papers of the last decade. It claims, among
other things, that countries whose debt exceeds 90 percent of their
annual GDP experience slower growth than countries with lower debt
loads — a figure that has been
cited by people like Paul Ryan and Tim Geithner to justify
slashing government spending and implementing other austerity
measures on struggling economies.
Before he turned in his report, Herndon repeatedly e-mailed
Reinhart and Rogoff to get their data set, so he could compare it
to his own work. But because he was a lowly graduate student asking
favors of some of the most respected economists in the world, he
got no reply, until one afternoon, when he was sitting on his
girlfriend's couch.
"I checked my e-mail, and saw that I had received a reply from
Carmen Reinhart," he says. "She said she didn't have time to look
into my query, but that here was the data, and I should feel free
to publish whatever results I found."
Herndon pulled up an Excel spreadsheet containing Reinhart's data
and quickly spotted something that looked odd.
"I
clicked on cell L51, and saw that they had only averaged rows 30
through 44, instead of rows 30 through 49."
What Herndon had discovered was that by making a sloppy computing
error, Reinhart and Rogoff had forgotten to include a critical
piece of data about countries with high debt-to-GDP ratios that
would have affected their overall calculations. They had also
excluded data from Canada, New Zealand, and Australia — all
countries that experienced solid growth during periods of high debt
and would thus undercut their thesis that high debt forestalls
growth.
Herndon was stunned. As a graduate student, he'd just found serious
problems in a famous economic study — the academic equivalent of a
D-league basketball player dunking on LeBron James. "They say
seeing is believing, but I almost didn’t believe my eyes," he says.
"I had to ask my girlfriend — who's a Ph.D. student in sociology —
to double-check it. And she said, 'I don't think you're seeing
things, Thomas.'"
The mistakes Herndon found were so big, in fact, that even
Herndon's professors didn't believe him at first. As Reuters
reported earlier:
"At first, I didn't believe him. I thought, 'OK he's a student,
he's got to be wrong. These are eminent economists and he's a
graduate student,'" [UMass Amherst professor Robert] Pollin said.
"So we pushed him and pushed him and pushed him, and after about a
month of pushing him I said, 'Goddamn it, he's right.'"
After consulting his professors, Herndon signed two of them —
Pollin and department chair Michael Ash — on as co-authors, and the
three of them quickly put together a paper outlining their
findings. The paper cut to the core of a debate that has been
dividing economists and politicians for decades. Fans of austerity
believe that governments should cut spending in order to grow their
economies, while anti-austerians believe that government spending
in times of economic duress can create growth and reduce
unemployment, even if it increases debt in the short term. What
Herndon et al. were claiming, in essence, was that the
pro-austerity movement was relying on bogus information.
When Herndon and his professors published their study, the reaction
was nearly immediate. After Konczal's blog post went viral,
Reinhart and Rogoff — who got a fawning New
York Times profile when their book was
released — were forced to
admit their embarrassing error (although they still
defended the basic findings of their survey). And today, another
UMass Amherst professor,Arindrajit
Dube, followed up on Herndon's paper with additional
proof that there were serious theoretical and causal
problems (as opposed to just sloppy Excel work) in the
Reinhart-Rogoff study. Observers have been raising serious
questions about what Herndon's work means for the future of
austerity politics, and Reinhart and Rogoff's respectability as
scholars.
Herndon says he isn't implying that Reinhart and Rogoff
intentionally skewed their data to support a pro-austerity finding,
and simply reported the errors.
"I
don’t want to sound the alarm and call for anyone’s jobs," he says.
"I didn’t do this to be punitive or malicious."
With Reinhart and Rogoff's once-authoritative work now under
serious question, there's no question that the austerity movement
has been dealt a major blow. But Herndon's finding won't likely
stop politicians from trying to reduce the deficit. The global
march for austerity began before Reinhart and Rogoff's work was
published, and will continue as long as there are people who
believe that governments can shrink their way to prosperity.
Still, Herndon holds out hope. He calls austerity policies in the
United Kingdom and elsewhere "counterproductive," and implies that
part of why he took up the study of Reinhart and Rogoff's study was
to question the benefits of current economic policy. "I
have social motivations," he says. "I care deeply about how policy
affects people."
Now that he's left his mark, Herndon says he's coping with the
effects of academic celebrity — getting a new publicity head shot
taken, receiving kudos from his professors and colleagues, handling
interview requests. He says he's gotten extensions on some of his
papers in order to handle his quasi-fame, but that he hasn't been
popping Champagne yet in celebration.
"I’m going to celebrate this weekend," he says. "But for now, I
have a really gnarly problem set."
