
The Excel Depression - nate_martin
http://www.nytimes.com/2013/04/19/opinion/krugman-the-excel-depression.html?smid=tw-NytimesKrugman&seid=auto&_r=0
======
gordaco
"So the Reinhart-Rogoff fiasco needs to be seen in the broader context of
austerity mania: the obviously intense desire of policy makers, politicians
and pundits across the Western world to turn their backs on the unemployed and
instead use the economic crisis as an excuse to slash social programs."

Amen. After reading any piece of news, you'd think that the only utility
economists have is to (rather poorly) justify decisions that are actually
fully ideological in nature, using numbers whose origin is uncertain.

~~~
YokoZar
I think Krugman himself has noted that economists are referenced most on
things they disagree on (such as the relation between deficits and growth),
and referenced least on things they agree on (such as the effects of rent
control).

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kfk
Please, bear in mind that Krugman has a very opinionated view against
austerity (he seems to be going the Keynes way these days) and this article is
not about Excel. He just wants to show how right he is and how sloppy the
austerity guys are.

The way to compete against Excel is actually learning to love the tool (it
took me 2 years, but I almost can say I love it... sometimes).

EDIT Since I am on HN, I always try to have a serious discussion about Excel
and business software. That's why I always try to tie this kind of topic to my
general idea: that we need to understand very well the type of work people do
in Excel before proposing any solution.

But... if we want to talk about austerity, let's talk.

What is the real problem with anti-austerity measures today? We could accept a
GDP/Debt ratio of 200, 300, 1000, infinity, and let people live their lives,
right? Well, hell no. For 1 simple reason: interests. And I am not talking
about the obvious problem with interests (that you have to pay them), but the
bit that everybody forgets: they are a bet against the future that growth will
be high enough to pay them. And that's the problem. We have a low growth rate
expectancy (we western countries). And that's why serious economists (meaning:
not Krugman) are telling us that increasing our debt exposure is the path to
future ruin.

Now, you will say, but anti-austerity financed with higher taxes will bring
growth! If that were true, we would have had serious growth the last 50 years
(a period within which tax ratio on GDP increased pretty much everywere). The
truth is that historically public spending has brought much less growth (if
any) than private spending. Meaning: for each $ that we take away from
privates to the public we are deliberately reducing present and future growth.
And why public spending brings less (if any) growth? Well, simply because the
market is so complex that we need multiple agents. Giving too many resources
to 1 agent (the State) is like betting most of our money on 1 black jack game,
does it make sense? No. You need to spread risk and resources, you need to let
people make decisions and you need to let people keep most of what they
produce.

~~~
fulafel
He does have a very polemical writing style but of the New Keynesian vs
Chicago school (or saltvater vs freshwater) camps his side does come out of
the post-2008 crisis looking better, if you look at the predictions.

Pro-austerity camp have been on pretty weak ice recently, with the IMF
admitting the big multiplier and European states (eg. Britain) doing so poorly
with austerity. And now this.

And yeah, he's not really blaming Excel, just ridiculing the programming error
lightly. Hw could be saying Word if it turned out some key wording had been
autocorrected to an unintended meaning.

Edit: your amended discussion about austerity goes ad-hominem against Krugman
("not serious"?, he's got a Nobel, and is one of the most respected & prolific
guys in the field) and is based on counterfactual claims (absence of "serious
growth in last 50 years", see eg.
[http://en.wikipedia.org/wiki/List_of_regions_by_past_GDP_%28...](http://en.wikipedia.org/wiki/List_of_regions_by_past_GDP_%28PPP%29#World_1.E2.80.932003_.28Maddison.29))

~~~
gd1
Exactly what kind of "austerity" do you think is happening in Britain?
Government spending has gone up. Saying something doesn't make it true.

~~~
fulafel
There are lots of references here. Everyone in the UK seems to agree they have
a austerity program.

[http://en.wikipedia.org/wiki/United_Kingdom_government_auste...](http://en.wikipedia.org/wiki/United_Kingdom_government_austerity_programme)

If the spending isn't going down that just means it's not working very well
even for its stated purpouse, nevermind its damaging effects to the economy.
More people will be falling on the social safety net programs.

------
tlb
GDP is in $/yr, while debt is in $. Thus, debt/GDP has units of time. 90%
really means 10.8 months.

One of the reasons the idea was sticky is that 90% seemed like a significant
number, almost all the way to 100%. Where there's nothing so obviously magical
about 10 or 12 months.

~~~
Someone
For an analogy, look at individual households. Many of them have over a year
of debt, aka over 100%. Getting a mortgage of 3 or 4 times one's yearly income
isn't that hard.

Now, people will argue that, for many, the value of their house will be
higher. That is true, but the same applies to governments. Infrastructure such
as roads has value.

Traditionally, in many countries, the state also owned airports, water pipes,
and electrical wiring that brought in money. That, I think, is where the real
problem lies for some countries: they have sold the stuff that brings in money
without bringing down their debt.

~~~
gd1
GDP isn't your income, tax receipts are. Tax receipts as a percentage of GDP
are about ~25%, so 100% debt/GDP is 4 years worth of debt, not 1.

------
temphn
Question: has Paul Krugman made a practice of releasing his raw data? Can
anyone point me to the database of tab-delimited text files behind the
econometric papers he's written, or to any systematic attempts to replicate
them? If not, should be fun to try to get a dataset out of him. Most published
macroeconomics research won't stand up to attempts to replicate it (whether
"pro" or "anti" austerity), if the great replication experiment in psychology
is any guide:

<http://psychfiledrawer.org>

Basic kinds of corrections like weighting nations by population will often
invalidate macroeconomic correlations.

~~~
pessimizer
Couldn't you answer this question yourself by using the Internet? A
combination of Google and other, more academic services might give you a list
of papers, and by reading them, you might find datasets that are mentioned,
but do not seem to be public. Then you could return to HN to ask a more
specific question, or email Krugman yourself for the answers you seek. That
should be fun, too.

~~~
jbooth
Fair enough, but that's way less effective as rhetoric. How do we know Krugman
_didn't_ falsify his results and murder people?

------
olivier1664
The excel error: _Coding Error. As Herndon-Ash-Pollin puts it: "A coding error
in the RR working spreadsheet entirely excludes five countries, Australia,
Austria, Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff]
averaged cells in lines 30 to 44 instead of lines 30 to 49._

[http://www.nextnewdeal.net/rortybomb/researchers-finally-
rep...](http://www.nextnewdeal.net/rortybomb/researchers-finally-replicated-
reinhart-rogoff-and-there-are-serious-problems)

------
FelixP
This is a bit misleading since the Excel error in question merely overstated
the magnitude of the impact of high debt, not the direction.

~~~
podperson
Yes, the direction was created by ignoring swathes of contrary data and
arbitrarily weighting the data that was included. The paper was unworthy of
publication in a credible journal. Just correcting the latter eliminates their
result, while the former would probably suggest the reverse effect.

~~~
Lazare
I'm not sure where you're getting this, but that's absolutely untrue.

As luck would have it, their coding errors mostly cancelled each other out;
fixing them changed their conclusion from growth of -0.1% in high-debt
countries to 0.2%; an insignificant change.

As for the weighting chosen, Reinhart and Rogoff chose a fairly standard
weighting which - as it turns out - has some flaws. In particular it makes
their conclusion highly sensitive to the experience of NZ (which had
_terrible_ growth during the brief period it had high debt), which is -
admittedly - problematic. But their chief critic suggests an unusual weighting
which is subject to the _precise same flaws_ except in reverse. By weighting
each year equally, Herndon's conclusions are dominated by the results of
Greece (which ran debts for year after year will little result). Than
sensitivity is _also_ problematic, and the inherent correlation of debt loads
in sequential years raises questions about the meaningfulness of their
results.

Professional economists are now debating the question of the best weighting,
but if anything Reinhart and Rogoff seem to have the better argument so far.

In short: Their errors did _not_ eliminate their result. Even changing
weighting did not eliminate the result (much less _reverse_ it - that would
mean more debt leads to higher growth; a simply absurd result!). And in any
case, the method they chose has strong arguments in its favour.

Or for real TL;DR: Everything you said was wrong.

~~~
podperson
Negative growth to positive is a change in direction, no?

How is treating nineteen years of British data as having the same weight as
one year of NZ data a "fairly standard weighting"? Britain is far larger in
population on top of everything else.

"So what do Herndon-Ash-Pollin conclude? They find "the average real GDP
growth rate for countries carrying a public debt-to-GDP ratio of over 90
percent is actually 2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim]."
[UPDATE: To clarify, they find 2.2 percent if they include all the years,
weigh by number of years, and avoid the Excel error.] Going further into the
data, they are unable to find a breakpoint where growth falls quickly and
significantly."

2.2 vs -0.1 — you're only out by an order of magnitude.

As you say, weighting by number of years is also a problem. If you weighted
the values by population or size of economy ("fairly standard weighting") I
suspect the results would shift again but be biased in favor of more recent
figures (economies and populations are bigger over time).

[http://www.nextnewdeal.net/rortybomb/researchers-finally-
rep...](http://www.nextnewdeal.net/rortybomb/researchers-finally-replicated-
reinhart-rogoff-and-there-are-serious-problems)

TL;DR -- none. Read the evidence.

------
gtani
I thought it was kind of well known: don't use Excel for floating point math,
statistical analysis, anything moderately involved that would have to be
reproducible and auditable

<http://www.pages.drexel.edu/~bdm25/excel2007.pdf>

<http://support.microsoft.com/kb/78113>

[http://en.wikipedia.org/wiki/Numeric_precision_in_Microsoft_...](http://en.wikipedia.org/wiki/Numeric_precision_in_Microsoft_Excel)

~~~
podperson
The errors in question has nothing to do with inherent flaws in Excel (beyond,
perhaps, the difficulty of reviewing Excel code). The problems were in
decisions made to exclude data, arbitrary "analysis" with no basis in
statistics or common sense (19 - IIRC - years of data from England were given
the same weight as one year of data from New Zealand), and an egregious
formula error that simply ignored several rows of data.

~~~
Toenex
_beyond, perhaps, the difficulty of reviewing Excel code_

This has always been one of my concerns when Excel is used much beyond
'electronic squared paper'. The interwoven data and code nature of the tool
makes testing and verification more difficult - certainly not impossible but
going against the grain of the tool. Excel is used by a diverse range of
people, many of whom have limited software skills and could do with a tool
that enforced the right behaviour.

Also I think this shows the need for openness when people make such important
claims based on data. Particularly in this case where all the data and
calculations could easily be zipped up and put on a website.

~~~
james1071
Agree-the fundamental problem is that formulae are copied from cell to cell.

It is so easy to make a mistake on a big spreadsheet.

A much better approach would be to write user defined functions.

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vacri
I don't really understand how this paper could be claimed to have 'destroyed
the economies of the world' when it's in the aftermath of the GFC. 'Not made
it better', sure, but bad fiscal practices causing deep financial problems
were there before 2010.

~~~
pekk
That argument would be based on the policies that the paper served to justify.

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rjempson
Nice headline, but I can't see what this has to do with Excel.

~~~
riffraff
among the issues in the original analysis there appear to be a messed up excel
formula (they excluded some rows from the calculation)

------
_account
Why not the 'Arithmetic Error Depression' in place of 'Excel'?

To accurate/concise for Krugman? Must be half a dozen articles about this I've
seen now and all have titles suggesting Excel made the error.

~~~
podperson
Again, it's not arithmetic that's the cause.

