
Reinhart-Rogoff Response to Critique - fretlessjazz
http://blogs.wsj.com/economics/2013/04/16/reinhart-rogoff-response-to-critique/
======
doktrin
> _...these strong similarities are not what these authors choose to
> emphasize._

This statement feels misleading, in that the similarities do not appear to be
as significant as they are implying. The table they provide very clearly shows
a significant difference between their 2010 findings and the HAP paper (-0.1
vs. 2.2 mean, a gap of over 2 percentage points).

> _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_

Taken literally, this makes no sense. No one has ever claimed the HAP results
were of a differing _order of magnitude_ to their own.

Given that this is a rebuttal to a research paper where numerical values are
in dispute, I would have thought they would use the term ("order of
magnitude") precisely, and not colloquially.

> _It is utterly misleading to speak of a 1% growth differential that lasts
> 10-25 years as small._

Perhaps, but if a 1% growth differential is significant (HAP), then a 2.9%
differential is _massive_ (2010 RR), compounding the scale of their error.

After all, their original 2010 work implied a mean 2.9% drop in the growth
rate once debt climbed above 90%. That paints a significantly different
picture than a decrease of 1 percentage point, resulting net positive growth
rate (2.2%) as opposed to negative (-0.1%).

While this is speculative on my part, I feel it's safe to say that had they
originally reported these (allegedly) "very similar" numbers ( > 2% vs -0.1
%), their findings would not have gotten the same wide circulation in certain
political circles that it did. Given that context, the whole " _...but the
numbers are kinda close..._ " argument falls a little flat IMHO.

~~~
jamesaguilar
Could one even _be_ off by an order of magnitude with economic growth numbers?
On a base of 2.2, that requires being off by 20%. You could never be off by an
order of magnitude because economies don't grow or shrink by 20% pretty much
ever.

~~~
knowtheory
But they're even wrong on that. Saying that -0.1 is like 2.2 is not correct.
The difference between -0.1 and 2.2 _is an order of magnitude_ (e.g. a
difference by a multiple of ten).

~~~
jamesaguilar
I guess no matter how you look at it, they are taking a totally wrong-headed
approach to their mistakes.

------
anigbrowl
(copied from my comment on the article)

The original paper concluded that debt overhang above 90% of GDP would result
on growth of -0.1%. This was based on three serious flaws – 2 of methodology,
one of spreadsheet programming. The corrected figure is 2.2%. To pretend that
this is not a big deal is disingenuous considering how widely the 2010 paper
was cited. It’s true that the 2012 paper is more accurate and also that higher
debt leads to lower growth, but to gloss over the severe flaws of the earlier
paper is misleading. I would respect Reinhart and Rogoff a lot more for simply
acknowledging the errors and repudiating their previous conclusion; instead
they essentially argue their errors ought to have been caught earlier.

~~~
gruseom
_and also that higher debt leads to lower growth_

Or that lower growth leads to higher debt. See Krugman's chart at
[http://krugman.blogs.nytimes.com/2013/04/16/reinhart-
rogoff-...](http://krugman.blogs.nytimes.com/2013/04/16/reinhart-rogoff-
continued/).

------
GabrielF00
This is an unsatisfying response. It doesn't answer the question of why
Reinhart and Rogoff chose to exclude certain high-debt years for certain
countries or why they chose the particular weighting mechanism that the
critics found problematic.

~~~
jeremyjh
It is _a_ response and that is all that is needed. The target audience for
this just needed _any_ rebuttal to paste into their streams to convince
themselves that no adjustment of beliefs is required.

~~~
cantankerous
I agree. The damage is already done. It's going to take a response tenfold the
magnitude of this publication to rebut it. Even then there's going to be
people citing it.

All granted that it's true that RR was so far off to begin with.

------
gruseom
Dean Baker's critique of this response is typically incisive:

 _[Herndon, Ash, and Pollin] found growth was slower in periods with debt
levels above 90 percent of GDP than below, but the gap was relatively small
and nowhere close to statistically significant. Furthermore, they found a much
bigger gap in growth rates around debt-to-GDP ratios of 30 percent. If we
think that [Reinhart and Rogoff's] methodology is telling us something
important about the world then the take-away should be that we want to keep
debt-to-GDP ratios below 30 percent._

[http://www.cepr.net/index.php/blogs/beat-the-press/quick-
tho...](http://www.cepr.net/index.php/blogs/beat-the-press/quick-thoughts-on-
reinhart-and-rogoffs-response)

~~~
tptacek
You buried the lede!

 _Note there is no entry in a debt-to-GDP ratio for assets, just liabilities.
So if we believe the R &R story, then we can increase the growth rate through
[auctioning off the California coastline]._

People are fixated on the lurid detail of the story; do the Google search and
see the "bad numbers! Excel spreadsheet! bad numbers!" roll by. The real
issue, which Matt Yglesias pointed out last year, is that the purported result
is hard to square with reality. Japan has the highest debt ratio in the world.
If they disposed of it tomorrow, they would not suddenly be the fastest
growing economy.

------
jacquesm
A Wolfe Simon worthy response.

