Remember kids, economics is a SCIENCE

[Cain]

 

Via the BBC...

This week, economists have been astonished to find that a famous academic paper often used to make the case for austerity cuts contains major errors. Another surprise is that the mistakes, by two eminent Harvard professors, were spotted by a student.

It's 4 January 2010, the Marriott Hotel in Atlanta. At the annual meeting of the American Economic Association, Professor Carmen Reinhart and the former chief economist of the International Monetary Fund, Ken Rogoff, are presenting a research paper called Growth in a Time of Debt.

At a time of economic crisis, their finding resonates - economic growth slows dramatically when the size of a country's debt rises above 90% of Gross Domestic Product, the overall size of the economy.

Word about this paper spread. Policymakers wanted to know more.

And so did student Thomas Herndon. His professors at the University of Massachusetts Amherst had set his graduate class an assignment - pick an economics paper and see if you can replicate the results. It's a good exercise for aspiring researchers.

But no, he was correct - he'd spotted a basic error in the spreadsheet. The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).

Australia, Austria, Belgium, Canada and Denmark were missing.

Oops.

Herndon and his professors found other issues with Growth in a Time of Debt, which had an even bigger impact on the famous result. The first was the fact that for some countries, some data was missing altogether.

Reinhart and Rogoff say that they were assembling the data series bit by bit, and at the time they presented the paper for the American Economic Association conference, good quality data on post-war Canada, Australia and New Zealand simply weren't available. Nevertheless, the omission made a substantial difference.

Thomas and his supervisors also didn't like the way that Reinhart and Rogoff averaged their data. They say one bad year for a small country like New Zealand, was blown out of proportion because it was given the same weight as, for example, the UK's nearly 20 years with high public debt.

All sounds very scientific to me. 

[Q. G. Pennyworth]

Yeah UMass Amherst!

[Reginald Ret]

Sadly, and most likely, the student that found the error won't drop out and start studying something that isn't made of fairydust and wishes. He'll believe he will be the 'saviour of economics'

[Cardinal Pizza Deliverance.]

Almost every time people are told to have faith in something or trust something's value because it's official or approved or heavily researched or whatever other supposedly impressive qualifier . . . it turns out to be the same stupid half-assed shit as everything else is. And people buy it every single time.

Until someone comes along and proves them wrong and then the shit hits the fan for about ten seconds. After which a scapegoat is chosen to clean the shit up and repair the fan . . .

And everyone goes back to enjoying the tingle of smoke being blown up their asses.

[Eater of Clowns]

Will this stop academia from sniffing its own farts?  Nope.

I second Gogira's Go UMass.