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Grad Student Who Shook Global Austerity Movement

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Re: Grad Student Who Shook Global Austerity Movement

#51

Post by fyi80 »

dualogy wrote: post #31
iwwr wrote: post #6

So what is the alternative to lowering "consistently high public debt"? Monetize it? Default on it? Debt in itself is not a problem if the growth rate is the same or decreasing as a proportion of the economy. At the current rate, some obligations would have to be forfeited, either to the direct creditors, or to those promised social services. Strangling the economy further with high taxes only makes the problem worse…

> Monetize it? Default on it? Not that there is a difference in real terms...

The difference is in who suffers. How is it distributed among creditors, debtors, cash holders, wage earners, etc...

Re: Grad Student Who Shook Global Austerity Movement

#52

Post by dangerlibrary »

danso wrote: post #41

What do people think about the researchers' rebuttal in the WSJ? http://blogs.wsj.com/economics/2013/04/17/reinhart-rogoff-ad... I'm too much of a layperson in statistics and economics to tell, at this early in the morning without coffee, how much of this is eloquent backtracking BS: > So do where does this leave matters on debt and growth? Do Herndon et al. get dramatically different results on the relatively short…

The -0.1% mean growth rate was the silver bullet. It was everything - the only number anyone remembered or cared about after reading the paper.

Without that, it's another data point correlating economic growth and sovereign debt - and not a very interesting one, either.

Re: Grad Student Who Shook Global Austerity Movement

#53

Post by fyi80 »

squozzer wrote: post #38

What seems at issue -- besides whether an economist's work should be accepted at face value -- is under what conditions a country should borrow or impose austerity. Here's an analogy -- When times are good, governments frequently raise taxes, because hey, we can afford it. When times turn bad, governments frequently raise taxes, because hey, our tax base has eroded and we need it. It's a "heads I win, tails you lose"…

That's not what happens. The problem is:

When times are good, governments frequently LOWER taxes, because hey, we can raise the same revenue

When times turn bad, governments frequently LOWER taxes, because hey, people can't afford it.

borrow in bad times, pay back in good times, is well established. Governments are good at borrowing in bad times, but bad at paying back in good times. Look at late-90s US, when we briefly had a balanced budget, and instead of preparing for the bust, we rushed headlong into it.

Re: Grad Student Who Shook Global Austerity Movement

#54

Post by fyi80 »

fnordfnordfnord wrote: post #25
dade_ wrote: post #5

This story is a lesson on confirmation bias: Professors that immediately decide that the student is wrong, and must be convinced otherwise. The spreadsheet financial analysis that provided the expected results and therefore never checked for errors. A single study that gave economists, and clearly an awful lot of politicians, the confirmation they needed to strengthen their resolve in the face of opposition.

A single study that gave economists, and clearly an awful lot of politicians, the confirmation they needed to strengthen their resolve in the face of opposition. Confirmation bias, at least in the politicians' cases, it just provided them with extra confidence to proceed with their agenda. Well, it may have also lent them some legitimacy.

Lent, indeed. And now they default on those loans.

Re: Grad Student Who Shook Global Austerity Movement

#55

Post by fyi80 »

thomasz wrote: post #19
louischatriot wrote: post #4

Impressive that his two professors took 1 whole month to finally believe him, even though the article gives the impression that the error was obvious (a bad formula). Summary of the article: http://tldr.io/tldrs/5171189e1a18dac804000170/meet-the-28-ye...

It sounds like they grilled him until they got co-authorship for a paper with a with an uber high impact factor.

Is it good for your career to get high impact factor for a paper that admits that your most famous work was a fraud that destroyed the economy of several nations?

Re: Grad Student Who Shook Global Austerity Movement

#57

Post by ctdonath »

confluence wrote: post #18

You would be surprised how many things that exist around you are based around faulty models based on incorrect data - that's the problem with higher dimensional fields like economics and finance - it's hard to separate cause and effect and extract principal signals for an arbitrary phenomena, without getting bogged down in correlation hell. You have been warned - the further fields get from pure mathematics and isola…

who on earth thought austerity was ever a good idea?

Lots of sensible people.

The point of austerity is to stop spending money you don't have on stuff which does not clearly contribute to economic improvement. Every increase in debt must be balanced with a reasonable objective expectation that it will facilitate specific & significant increase in revenue greater than the debt and servicing thereof. If you've spent your paycheck, you buy rice & beans cooked at home instead of swiping the credit card on an expensive dinner out; if your car is out of gas, you borrow just enough to buy just enough get to work (or try walking/biking if at all sensible) instead of filling it up and heading out for an impromptu road trip.

National economics is of course complex and subtle, but the point is basic principles apply: if you don't have the money, don't borrow any unless not doing so will cost you much more, and unless you have a clear plan to pay it off. The Ryan plan (and plans of other austerity backers) is "stop spending money where it won't pay off", as in stop paying people to not work when they could, stop funding obscure/pointless/offensive projects/research/art which wastes money, stop hoping that prolific spending will change for the good.

Wealth is not durable. Spending $1,000,000 to create a $50,000/year job is stupid (and yes, there's a lot of that going on).

Re: Grad Student Who Shook Global Austerity Movement

#59

Post by tejaswiy »

dangerlibrary wrote: post #52
danso wrote: post #41

What do people think about the researchers' rebuttal in the WSJ? http://blogs.wsj.com/economics/2013/04/17/reinhart-rogoff-ad... I'm too much of a layperson in statistics and economics to tell, at this early in the morning without coffee, how much of this is eloquent backtracking BS: > So do where does this leave matters on debt and growth? Do Herndon et al. get dramatically different results on the relatively short…

The -0.1% mean growth rate was the silver bullet. It was everything - the only number anyone remembered or cared about after reading the paper. Without that, it's another data point correlating economic growth and sovereign debt - and not a very interesting one, either.

Related question: From what I understand, all the study is doing is that it's saying on an average countries with high debt / GDP have a slightly negative growth rate. But isn't that just one data point and not a justification for austerity itself?

Re: Grad Student Who Shook Global Austerity Movement

#60

Post by carbocation »

tejaswiy wrote: post #59
dangerlibrary wrote: post #52

Earlier quoted context omitted.

The -0.1% mean growth rate was the silver bullet. It was everything - the only number anyone remembered or cared about after reading the paper. Without that, it's another data point correlating economic growth and sovereign debt - and not a very interesting one, either.

Related question: From what I understand, all the study is doing is that it's saying on an average countries with high debt / GDP have a slightly negative growth rate. But isn't that just one data point and not a justification for austerity itself?

The original study said that. The new study said that their growth, while positive, is a bit less than those with less debt.

It's an association. It does not prove that there is causation, nor the direction of the causal arrow.

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