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How to fail at MS Excel calculations and influence economic policy

Old 04-16-13, 09:04 PM
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How to fail at MS Excel calculations and influence economic policy

The results of a major scholarly article that helped pave the road to austerity in the US and Europe have been impugned. Apparently Harvard researchers improperly weighted and excluded data. They also made a mistake when calculating an average in Excel.

Influential economic study on austerity may be flawed at Reuters.com

A study by eminent Harvard economists Carmen Reinhart and Kenneth Rogoff first presented in 2008 said a country's gross domestic product growth begins to slow once its debt-to-GDP ratio reaches at least 90 percent. The research has been cited by officials in the United States, the European Union and elsewhere as justification for tackling deficits.

But researchers at the University of Massachusetts at Amherst, in a new study, say that the average real growth rate for countries with a public debt to GDP ratio of more than 90 percent "is actually 2.2 percent, not minus 0.1 percent as published in Reinhart and Rogoff."
Pollin told Reuters that the purpose of their work was not to prove that public debt levels did not matter. Rather it was to counter the idea that there was some sort of general rule - the Reinhart-Rogoff 90 percent threshold - "and once you go over that, you go over the abyss," he said.
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Old 04-16-13, 09:10 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Austerity research riddled with errors: Study at HuffingtonPost.com

The 2012 version of the pro-austerity budget plan of Rep. Paul Ryan (R-Wis.) cites Reinhart and Rogoff by name, and specifically refers to the 90-percent threshold.
Even before the errors cited in the new study came to light, many economists doubted Reinhart and Rogoff's conclusion that high debt causes low growth, given the glaring chicken-and-egg problem at the heart of the research. Did these countries have slow growth because they had high debt, or did they have high debt because they had slow growth?
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Old 04-16-13, 09:49 PM
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Re: How to fail at MS Excel calculations and influence economic policy

If we can decide environmental policy that way, why not economic policy?
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Old 04-16-13, 09:56 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Whoa, 2.2 percent growth! We're saved since we'll be growing our economy at about the same rate as Namibia.

I feel much better now.
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Old 04-16-13, 10:50 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Let's see...

Published result: -0.1% annual change in GDP (stagnation, slight contraction)
Corrected result: 2.2% annual change in GDP (below average growth)

That is undeniably a major error. If the error is confirmed, then the already flimsy argument for austerity is further weakened. Also, faux economic policy wonks such as Paul Ryan will have to find another questionable study to sell to the public.
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Old 04-16-13, 10:52 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Perhaps Michael Mann will publish one for him.
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Old 04-16-13, 10:58 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by Ghostbuster View Post
That is undeniably a major error.
Whether the economy is going to die quickly from a heart attack or slowly from cancer doesn't seem like the best of choices to me. But hey, you at least get a little more time with cancer!

Party!
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Old 04-17-13, 06:38 AM
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Re: How to fail at MS Excel calculations and influence economic policy

When have we had Austerity in the US. Seriously I don't think the pittance that the sequester means qualifies as Austerity. Those that love Big Government never stop trying to convince us we don't have a spending problem.
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Old 04-17-13, 06:40 AM
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Re: How to fail at MS Excel calculations and influence economic policy

Cutting the rate of acceleration of growth in government spending = austerity.
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Old 04-17-13, 06:48 AM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by RoyalTea View Post
Cutting the rate of acceleration of growth in government spending = austerity.
I love the way big spenders have figured out how to have their cake and eat it to. You cant even reduce the rate of growth even though the growth rates can be 2 to 3 times inflation. Oh and there is not enough B.S. waste to make a difference so don't even try to touch Big Bird.
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Old 04-17-13, 11:21 AM
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Re: How to fail at MS Excel calculations and influence economic policy

It's almost as if Jon Bernstein predicted this thread perfectly:
I've seen some snark on twitter suggesting that no one who has recommended austerity, including those who specifically cited Reinghart-Rogoff as their reason, will flip as a result of this. That's probably correct! But only because it's extremely unlikely that very many people really relied on economics in the first place.
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Old 04-17-13, 01:27 PM
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Re: How to fail at MS Excel calculations and influence economic policy

debt to GDP ratio of more than 90 percent "is actually 2.2 percent, not minus 0.1 percent as published in Reinhart and Rogoff."
2.2% is still dreadful. Most won't flip because negative .1 or 2.2 are both bad news.
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Old 04-17-13, 04:35 PM
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Re: How to fail at MS Excel calculations and influence economic policy

2.2% isn't dreadful. It's not great, but it's nothing to sneeze at.
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Old 04-17-13, 05:25 PM
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Re: How to fail at MS Excel calculations and influence economic policy

The median GDP growth rate since 1933 is about 6.5%
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Old 04-17-13, 06:53 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by wendersfan View Post
2.2% isn't dreadful. It's not great, but it's nothing to sneeze at.
Check me if I'm wrong but anything less than 3% means GDP isn't outpacing inflation. So anything less than 3% is effectivly negative.
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Old 04-17-13, 08:15 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by Mabuse View Post
Check me if I'm wrong but anything less than 3% means GDP isn't outpacing inflation. So anything less than 3% is effectivly negative.
I was assuming we were referring to real GDP growth. If not, then yeah, it is pretty lousy.
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Old 04-17-13, 08:29 PM
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Re: How to fail at MS Excel calculations and influence economic policy

I wonder how fiscal conservatives would react if there had been a shift of 2.3 percentage points in the other direction. By that, I mean:

Published result: 4.5%
Corrected result: 2.2%

<iframe width="560" height="315" src="http://www.youtube.com/embed/q0POXW4V1_k" frameborder="0" allowfullscreen></iframe>
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Old 04-17-13, 08:31 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by wendersfan View Post
I was assuming we were referring to real GDP growth. If not, then yeah, it is pretty lousy.
You are correct.

But researchers at the University of Massachusetts at Amherst, in a new study, say that the average real growth rate for countries with a public debt to GDP ratio of more than 90 percent "is actually 2.2 percent, not minus 0.1 percent as published in Reinhart and Rogoff."
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Old 04-17-13, 08:51 PM
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Re: How to fail at MS Excel calculations and influence economic policy

The real GDP growth rate of the U.S. in 2012 was 2.2%. Did you like that?
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Old 04-17-13, 09:02 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by X View Post
The real GDP growth rate of the U.S. in 2012 was 2.2%. Did you like that?
I certainly didn't dislike it. The average real GDP growth since 1947 has been 3.2%, so I'll say again, 2.2% isn't great but it could be worse.
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Old 04-17-13, 10:06 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by wendersfan View Post
I certainly didn't dislike it. The average real GDP growth since 1947 has been 3.2%, so I'll say again, 2.2% isn't great but it could be worse.
I can agree with that. Like I said, a sudden heart attack being worse than a slow, lingering cancer. Although neither of which I would choose given alternatives.
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Old 04-17-13, 10:31 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Originally Posted by Ghostbuster View Post
I wonder how fiscal conservatives would react if there had been a shift of 2.3 percentage points in the other direction. By that, I mean:

Published result: 4.5%
Corrected result: 2.2%

<iframe width="560" height="315" src="http://www.youtube.com/embed/q0POXW4V1_k" frameborder="0" allowfullscreen></iframe>
My guess is that they would react the opposite of you. Partisans be partisans.
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Old 04-19-13, 10:03 PM
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Re: How to fail at MS Excel calculations and influence economic policy

The Excel Depression by Paul Krugman at NYTimes.com

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.

What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed. Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.

So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on.
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Old 04-24-13, 07:41 PM
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Re: How to fail at MS Excel calculations and influence economic policy

Paul Krugman is proof anyone can be an Economist. You don't even have to be right.
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Old 04-24-13, 09:56 PM
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Re: How to fail at MS Excel calculations and influence economic policy

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