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Editorial

Blame ideologues, not economists, for failed ‘austerity’ policies

Whether they intended to or not, Harvard economists Carmen Reinhart and Kenneth Rogoff provided much of the intellectual muscle behind the austerity movement that has dominated recent economic policy making in Europe — and motivated efforts by conservative Republicans to cut US government spending in slow economic times. Their research into government debt in dozens of countries indicated that, time and again, governments that ran up debt equaling 90 percent or more of their gross domestic product ended up sacrificing a significant amount of economic growth. They also published a bestselling book with the ironic title “This Time Is Different” — a commentary on how, time and again, leaders look on as speculative bubbles lead to banking crises that in turn lead to rising levels of government debt.

But however influential their work has been, it was flawed. In the course of researching a paper, University of Massachusetts economics graduate student Thomas Herndon asked Reinhart and Rogoff for a copy of their data set. When they obliged, he found that they had made a Microsoft Excel error that distorted their results. Corrected computations showed, by some accounts, that carrying very high debts — of over 90 percent of gross domestic product — wasn’t quite as ruinous as the two Harvard economists had computed.

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