The Excel Depression

http://www.nytimes.com/2013/04/19/opinion/krugman-the-excel-depression.html?hp

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"You've got to think about the 'big things' while you're doing small things, so that all the small things go in the right direction." (Alvin Toffler)

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"The story so far: At the beginning of 2010, two Harvard economists, Carmen Reinhart and Kenneth Rogoff, circulated a paper, "Growth in a Time of Debt," that purported to identify a critical "threshold," a tipping point, for government indebtedness. Once debt exceeds 90% of gross domestic product (GDP), they claimed, economic growth drops off sharply."

According to Krugman, their paper achieved an almost "sacred status" amongst self-proclaimed guardians of fiscal responsibility.

Unfortunately (or fortunately), their claim could not be substantiated by other economists using the same approach to the data analyzed. Nobody could prove that 90% was the tipping point for reversion to slow GDP growth!

Finally, researchers at the University of Massachusetts looked at the original spread sheet that Rogoff and Reinhart used and the mystery was solved: "First, they (Rogoff & Reinhart) omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error." So, as Krugman points out, if you correct for some of these errors, there is some correlation between high debt and slow growth, with no indication of which is causing which, and no sign of that 90% "threshold."

Krugman sees the Reinhart-Rogoff fiasco in a broader context: "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."

I see it as somewhat worse than that - it's an indictment of "economics" as a profession. Why can't that profession make up its mind whether spending into a "depression" (Krugman's term for what we were and "are" in) is the right or wrong thing to do. They can't even agree on that.