WikipediaThe world of economics is going into convulsions about the news that Kenneith Rogoff and Carmen Reinhart made a Microsoft Excel coding blunder, which caused them to ‘notably’ understate average growth rates for countries that have debt surpassing 90% of GDP.
Reports of the blunder came out yesterday.
Reinhart and Rogoff admitted to the blunder today.
As Tim Fernholz nicely laid out yesterday, the Reinhart/Rogoff study has been quoted by numerous officials around the world in their attempts to justify austerity and other measures to reduce the national debt.
Some might think that if it hadn’t been for this blunder, then maybe the world wouldn’t have had this disastrous flirtation with austerity (which has been horrible for Europe) and which has been a constant threat in the US.
But all of this would have happened anyway.
As Paul Krugman states in one of his (several) posts on the Reinhart/Rogoff issue: “the larger story is the evident urge of Very Serious People to find excuses for inflicting pain.”
This impulse, to show your seriousness by promoting pain, is the real overriding drive behind austerity, not an academic study.
For example after Obama publicly embraced a “chained CPI” (a form of Social Security cut). Economist Dean Baker told Business Insider: “You piss on the people who care about Social Security, then you’re serious.”
Austerity advocates think that through taking the pain we’ll be better off. Or at least they claim they believe it.
The 90% threshold added a nice bit of intellectual heft to the arguments that cutting the deficit was a matter of urgency, but it’s hard to imagine it making a big difference.