I encourage you to look at this paper: "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff" by Herndon, Ash and Pollin. Follow this link and click on "Download the paper here."
For you this paper is interesting because it is a good example of a critique of another researcher's analysis, much like the paper that I am asking you to write. They begin with a brief synopsis of the key points in the original paper, provide a whole section discussing the important practical implications of the paper, and then show their own re-analysis of the data tying it back to the practical implications. Your own paper should have a similar structure, but it will look rather different. First of all, the introduction of the Herndon, Ash & Pollin (HAP) paper is written assuming the reader is fairly familiar with the Reinhart & Rogoff (RR) paper as well as non-parametric statistics. Also, they have far more statistical re-analysis than I would expect in your paper.
HAP includes three main criticisms of RR. First, there is some omission of data in the calculations. Second, the analysis includes questionable assumptions. Third, HAP questions the interpretation that the relationship between debt ratio and GDP growth changes drastically at the 90% debt ratio point. Any one of these criticisms would be plenty for your own paper. HAP provides re-calculations and plots new graphs to illustrate the re-interpretation, as you should too.
Thinking about this subject in general (besides being a good paper example), both the HAP and RR papers are just two pieces in an ongoing dialog about the analysis and interpretation of this data. If you notice, the HAP paper includes not only the written PDF of the paper, but also the data, code, and explanations of the various files. Furthermore, they publish updates to the paper as corrections and clarifications arise. This is not quite a dialog yet, but it does reflect the idea that their work is never the "final" word.
This blog post by a research scientist at Berkeley discusses how a true dialog that includes analysts, journalists and policy makers could take place surrounding such data and analysis. Fernando Perez writes:
It's absolutely unacceptable that major policy decisions that impact millions worldwide had until now hinged effectively on the unverified word of two scientists: no matter how competent or honorable they may be, we know everybody makes mistakes, and in this case there were both egregious errors and debatable assumptions.
Not to sound redundant; but, these type of reports are terrifying when we look at the implications for small GDP countries like Greece and Iceland. A while back I was reading an article in Bloomberg about the banking riots in Athens and was stunned by the amount of violence that was taking place there because of the Grecian people's feelings of helplessness. My cousin Anurud's savings and loan collapsed shortly after the beginning of Europe's economic collapse. From the tone of the HAP paper it did not sound like the mistakes that RR made were simple or harmless. Loose coding is a huge problem in research and if we as a scientific community do not accept these practices for any purpose then perhaps they will be discontinued as a practice. Selective exclusion of available data is also a huge problem because if the researchers recognized that with the inclusion of this data the stylized fact which they were trying to show would not have been clear. (HAP) is very clear about the necessity of transparency for the establishment of a stylized fact and after researching the definition and examples it would seem that they are correct. Finally, RR's "unconventional weighting" although a bit over my head seemed to me that they were deliberately trying to change their data to match their hypothesis. Although it can be difficult to admit that we are wrong I believe that when there are literally lives depending on your research the pressure to do the right thing should definitely be stronger. Although we discussed this in depth in class it would seem that these issues that are continually being addressed in the scientific world need to be more stringently attended to. Although I am not suggesting Hammurabi's code of law be re-instituted I think that we can definitely "selectively weight" the harshness of punishment on the wide ranging impact of the crime.
ReplyDeleteI believe you can sum up the instance of austerity as one provided by sensationalism. While I do believe that austerity is not a bad policy move in general because governments should always be attempting to curb their debt, especially when they spend exorbitant amounts of money on needless bureaucratic nonsense; I also believe that policymakers often go a little "bonkers" when it comes to economic policy in times of economic hardship. The two overwhelmingly obvious problems of trillions in debt and policymakers need for an immediate solution likely lead to the large amount of austerity based policy which directly resulted from the RR study. It is important to not come to conclusions as aforementioned by Fernando Perez over one paper, especially before the science behind the original paper has not been verified by others in the scientific community. However, let us also not forget that policymakers are the people whom actually take ideas in government, such as austerity, and make them reality. I am not defending RR, especially if they performed dubious science, but I would argue that their over zealous conclusions should never even have been considered or applied so readily to the economic issue at hand by policymakers.
ReplyDeleteI'm surprised that people are going all up in arms about this, thinking a mistake about austerity means the other side is right. What people fail to realize with Keynes was that Keynes said 'save save save, spend spend spend the savings', not 'spend spend spend spend spend spend spend'. If you spend during a recession and you have no real money, just debt during the recession, you'll influx slightly, but the debt you've accumulated is still going to be there. Springing yourself into growth by spending debted money is a temporary fix. It's fake, and the markets tend to crash again anyway. The reason Greece took a nose dive was because they were in deep debt in the first place. Adding more debt isn't going to help, only delay the hurt.
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