The Reinhart and Rogoff rolled through the internet today like a tsunami. Peter Coy at Bloomberg:
The point and counterpoint of academic debate that once occurred over months or years has been compressed to mere hours by social media. Today the Twitterverse exploded with chatter about a new research paper claiming to find holes in a landmark academic paper that’s been cited to justify extreme austerity measures. By mid-afternoon the authors—Harvard economists Carmen Reinhart and Kenneth Rogoff—had emailed reporters a quick reply defending their work.
I first saw the Mike Konczal’s post. More excellent commentary came from Tyler Cowen, Dean Baker,Jared Berstein, and FT Alphaville. Joe Weisenthal reminded us on Twitter that he was never an RR fan. While some like Cowen argue that the case for austerity did not rest on Reinhart and Rogoff themselves, Tim Fernholtz has an impressive list of policymakers who use the paper as what they see as clear and convincing evidence for austerity now.
For their part Reinhart and Rogoff responded, concluding that the new results are very similar to their own:
These results are, in fact, of a similar order of magnitude to the detailed country by country results we present in table 1 of the AER paper, and to the median results in Figure 2. And they are similar to estimates in much of the large and growing literature, including our own attached August 2012 Journal of Economic Perspectives paper (joint with Vincent Reinhart) . However, these strong similarities are not what these authors choose to emphasize.
They also claim they were very careful about distinguishing between causality and correlation:
By the way, we are very careful in all our papers to speak of “association” and not “causality” since of course our 2009 book THIS TIME IS DIFFERENT showed that debt explodes in the immediate aftermath of financial crises.
Which brings this comment by Dan Davies:
once more, from the compliance department – knowingly allowing a very misleading view of your research to persist is not OK either.
One thing’s for sure – this isn’t the end of this debate. Back to Coy:
This isn’t an obscure academic debate. As Krugman points out, the Reinhart-Rogoff research is one of the two main threads in the pro-austerity argument, the other being Harvard’s Alberto Alesina on the macroeconomic effects of austerity. With so much at stake, the argument that caught fire in one afternoon is likely to keep burning for months.
There will definitely be more to come.
This piece is cross-posted from Tim Duy’s Fed Watch and is reproduced with permission.